Cash-basis accounting is simple and ideal for smaller nonprofits with limited resources and minimal funding sources. Accrual-basis accounting is more complex, GAAP-compliant and used by larger nonprofits. It helps generate donor confidence and satisfies regulatory requirements.

For-profits (just as the name implies) focus their energy and efforts on turning a profit. They want to make money and a lot of it. Meanwhile, nonprofit organizations use a fund accounting system that shifts the focus away from profit and instead centers on accountability.

In accounting for non-profit organizations, instead of maintaining a Capital A/c, these organizations maintain Capital Fund or General Fund A/c. They credit this account with the surplus, life membership fees, donations, legacies, etc.