This week we are going to discuss some differences between for-profit businesses and governmental entities as well as not-for-profit organizations. We are also going to discuss the different standards that may apply to these different entities.
In this regard, think for a moment of one or more of the hospitals in your local area, and perhaps you will see these different types of entities. For instance, perhaps one or more of those hospitals is operated by a for-profit chain. Or perhaps one or more of those hospitals is operated by a local government such as Cook County in Illinois. Or perhaps one or more of those hospitals is operated by a not-for-profit entity such as a religious order.
Although each of those hospitals has an ultimate goal of helping people with medical issues, the so-called “bottom-line” for each entity may be far different. For the for-profit entity, for instance, the net income earned and the cash available for its investors may be critical. For the local government, in contrast, just trying to break even may be important. For the not-for-profit entity, the hospital might even be able to operate at a loss if people will make sufficient financial contributions.
Because the financial aspects are so different between these three potential types of operations, different rules have had to be developed to properly account and report for them. Our discussions this week will address these aspects.
