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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Not‐For‐Profit Organizations: Perspective and Issues

Not‐for‐profit organizations have several characteristics that distinguish them from business enterprises. First, and perhaps foremost, not‐for‐profit organizations exist to provide goods and services without the objective of generating a profit. Rather than obtaining resources by conducting exchange transactions at a profit or from capital infusions from owners, a not‐for‐profit organization obtains most resources from others that share its desire to serve a chosen mission—an educational, scientific, charitable, or religious goal. Although not‐for‐profit organizations can be “owned” or controlled by another, the ownership interest is unlike that of business enterprises because the “owner” cannot remove resources from the entity for personal use or gain; the resources must be used for a mission‐related purpose. Examples of not‐for‐profit organizations are: churches and religious organizations, colleges and universities, healthcare organizations, libraries, museums, performing arts organizations, civic or fraternal organizations, federated fund‐raising organizations, professional and trade associations, social clubs, research organizations, cemeteries, arboretums, and zoos.

Specifically excluded from the list of not‐for‐profit organizations are organizations that exist to provide dividends, lower costs, or other economic benefits directly and proportionately to their members, participants, or owners, such as mutual insurance companies, ...

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