What is the accounting equation for non profit organisation?

The accounting equation for a non-profit organisation is almost the same as in the case of the profit-oriented organisation. Let’s first briefly understand what accounting equation and non-profit organisation are:

Accounting Equation

Accounting equation is an equation that depicts the relationship between assets, liabilities and capital of an entity.

Assets = Liabilities + Capital

As per this equation, the total assets of an entity are equal to the sum of its total liabilities and total capital. This equation holds good in every situation.

Non-Profit Organisation

A Non-Profit Organisation is an entity which exists for purposes other than for profit. Such organizations exist and operate for charitable purposes, promotion of culture and sports and welfare of society. The accounting for Non-profit organisation is slightly different from For-profit organisations. In the case of a non-profit organisation, the capital account is known as the capital fund.

Accounting Equation for non-profit organisations

The Accounting equation for a non-profit organisation is as follows:

Assets = Liabilities + Capital fund.

The difference is only in name. In the case of non-profit organizations, the capital is known as a capital fund. Rest everything is the same. The accounting equation will be prepared as normally prepared for business concerns.