The Importance of Financial Accounting

for Non-Profit Organizations

Jennifer Cassandra Rumendong (2013048)
Universitas Atma Jaya Makassar, Makassar, Indonesia
*Corresponding author. Email: jenniferumendong@gmail.com

ABSTRACT
In accordance with the Statement of Financial Accounting Standards (PSAK) 45 of 2011
concerning non-profit organizations, states that non-profit organizations must also and have
the right to prepare financial reports and report to users of financial statements. Accounting is
an activity carried out to produce an information system in the form of financial reports
needed by various parties, both internal and external parties of the organization. Someone
who runs a business with the main purpose of helping people's social life is called a
sociopreneur. Sociopreneurs are believed to be able to bring about changes for the better for
society, especially in Indonesia. With a social mission to empower the community,
sociopreneurs can provide employment for the unemployed and lower class people so that
they can reduce the number of poor people in Indonesia, and further to increase the
independence of the community.
Keywords : financial accounting, non-profit accounting, sociopreneur

INTRODUCTION Poverty Line) in Indonesia in September

2011 reached 29.89 million people (12.36
Accounting is basically an activity
percent), a decrease of 0 .13 million people
that processes financial transactions into
(0.13 percent) compared to the poor
financial information that is ready for use.
population in March 2011 which amounted
Activities carried out in the accounting
to 30.02 million people (12.49 percent).
process include:
This means that the condition of the
1) record keeping, Indonesian people is relatively improving.
But the figure of 29.89 million people is a
2) classification, big number. This reflects the uneven
3) summary, welfare of the Indonesian people.

4) reporting and Sociopreneurs are one of the

5) analysis of financial data from
an organization.
Based on data published by the
Central Bureau of Statistics (2012: 1) the
number of poor people (population with
per capita spending per month below the
solutions to reduce poverty in Indonesia.
Sociopreneurs with their social and
entrepreneurial spirit try to empower
people who are unemployed or people who
have an income below per capita. Human
Resources (HR) in Indonesia are very
abundant but lack human resource

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empowerment, so that there are still many
people who have not achieved prosperity.
Sociopreneurs try to build a
business with a social mission, which is to
empower the community so that people
can increase their ability to achieve a
better condition. Sociopreneurs provide
jobs for the unemployed and the lower
class so that they can have an income that
can meet their needs. If the sociopreneur
business can develop and progress,
automatically the lives of the people who
are members of the company will be in a
better position and the number of poor
people in Indonesia will decrease over
time.
An example of a successful
sociopreneur in Indonesia is Dea Valencia,
Dea is a graduate of Multimedia Nusantara
University, Tangerang. Dea has long had
the dream of being able to bring batik to
the international market. In 2011, her
concern for people with disabilities made
Dea invite them to work together. In the
Batik Kultur business, Dea is assisted and
fully supported by her employees, the
majority of whom are people with
disabilities. Batik Kultur Dea is successful
not only domestically but also abroad such
as Australia, the United States, England,
Japan, the Netherlands, Germany, and
many other countries. Dea is able to reap a
turnover of up to billions of rupiah from
her batik business.
Formulation of the problem
To avoid widening the problem, the author
will only discuss matters relating to:
1. Definition of Non-Profit Organizations
2. Comparison between Public and
Commercal Sector Organizations
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3. Characteristics of Non-Profit
Organizations
4. Purpose of Non-Profit Organizations
5. Characteristics of Non-Profit
Organizations
6. Classification of Non-Profit
Organizations
7. Financial Statements of Non-Profit
Organizations
LITERATURE REVIEW
Definition of Non-Profit Organization
According to Kurniasari (2011)
states that a non-profit organization or
non-profit organization is an organization
whose main objective is to support an
issue or subject in attracting public
attention for a non-commercial purpose,
without any concern for profit-seeking
matters (monetary). ).
Non-profit organizations are
divided into two major groups, namely
non-profit government entities and non-
profit non-government entities. Non-profit
organizations differ significantly from
commercial organizations or profit-
oriented organizations by customers,
donors and volunteers, governments,
members of organizations and employees
of non-profit organizations. Non-profit
organizations make human resources their
most valuable asset, because all activities
of this organization are basically of, by,
and for humans. The establishment of a
non-profit organization in carrying out its
activities is not solely influenced by profit
(profit). All of its activities are not
intended to collect profits, but in its
journey a non-profit organization can
benefit from good financial performance
which is called a surplus because cash
inflows exceed cash outflows. Obtaining
this surplus is needed by non-profit
organizations whose function is to enlarge
the scale of their service activities and to
renew damaged facilities.
A non-profit organization is an
organization that does not aim at
cultivating profits by offering a resolution
that the intent or purpose of the
organization concerned is not for profit.
All of its activities are not aimed at
gathering profit, but in its journey the non-
profit organization turns out to be legally
good financially, that is, it can experience
a surplus because cash inflows exceed cash
outflows. The surplus is needed by non-
profit organizations to enlarge the scale of
their service activities and to renew
damaged facilities. If the surplus is
enjoyed by the management in the form of
tantiem, gratuities, salaries, bonuses,
business travel allowances, loans for
founders/administrators (equivalent to
dividends in commercial entities) or
enjoyment (luxury cars, residential houses,
golf memberships and so on), then the
nature the organization turned into a
commercial organization (Hoesada, 2012:
3).
A. Comparison between Public and
Commercial Sector Organizations
Public sector organizations differ
from commercial sector organizations in
terms of their uniqueness, namely
(Nordiawan, 2006: 2):
1. Executed not for financial gain
2. Collectively owned by the public
3. Ownership of resources is not described
in the form of tradable shares
4. Decisions related to policies and
operations are based on consensus
However, public sector organizations have
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similarities with commercial sector
organizations, including (Nordiawan,
2006: 2):
a) Both are an integral part of a national
economic system that together use
resources, both financial, capital and
human resources. Both of them trade with
each other and need each other.
b) Both of them face limited economic
resources to achieve their goals.
c) Both have the same pattern of financial
management starting from planning to
controlling where the use of accounting is
a necessity.
d) In some cases, both have the same
product output. For example, the
government provides transportation in the
form of Damri buses while there are also
private parties engaged in the
transportation sector and providing bus
facilities for the community such as Steady
Safe.
B. Characteristics of Non-Profit
Organizations
Based on PSAK 45 page 2
paragraph 01, where an organization can
be classified as a non-profit organization if
it meets the following criteria:
1. The resources of a non-profit entity
come from donors who do not expect
repayment or economic benefits
commensurate with the amount of
resources provided.
2. Producing goods and/or services
without the aim of generating profits, and
if a non-profit entity generates profits, then
the amount is not distributed to the
founders or owners of the non-profit
entity.
3. There is no customary ownership in
business entities, in the sense that
ownership in non-profit entities cannot be
sold, transferred, or redeemed, or such
ownership does not reflect the proportion
of the distribution of resources of the non-
profit entity upon liquidation or dissolution
of the non-profit entity.
C. Purpose of Non-Profit Organizations
Non-profit organizations have
specific goals related to the interests of the
general public and do not prioritize profit
or profit in carrying out their activities.
The main objectives of non-profit
organizations are education, social
services, political protection and recreation
(Nariasih: 17)
D. Characteristics of Non-Profit
Organizations
According to Anthony and Young
(2003: 53) non-profit organizations have
the following distinctive characteristics:
a. The absence of profit measure
b. Different tax and legal consideration
c. A tendency to be service organizations
d. Greater constraints on goals and
strategies
e. Less dependence on clients for financial
support
f. The dominance of professionals
g. Differences in governance
h. Importance of political influences
i. A tradition of inadequate management
control
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E. Classification of Non-Profit
Organizations
Wilson and Cattelus (2002: 530)
provide an explanation of other not-for-
profit organizations including:
a) cemetery organizations
b) civic organizations, fraternal
organizations
c) labor unions,
d) libraries, museums,
e) cultural institutions,
f) performing arts organizations,
g) political parties,
h) private schools,
i) professional and trade associations,
j) social and country clubs,
k) research and scientific organization,
l) religious organizations.”
F. Financial Statements of Non-Profit
Organizations
Financial statements are the main
part in analyzing a company. Meanwhile,
according to Hamidu (2013) financial
statements are a record of a company's
financial information in an accounting
period that can be used to describe the
company's performance and part of the
financial reporting process. Financial
reports are also reports that convey
financial information that is trusted to
interested parties (Hamidu, 2013).
According to PSAK No. 45 (Revised
2011), the main objective of financial
reports is to provide relevant information
to meet the interests of resource providers
who do not expect repayment, members,
creditors and other parties who provide
resources to non-profit entities. According
to PSAK 45, non-profit organizations need
to prepare at least 4 (four) types of
financial reports as follows:
a. Statement of Financial Position
b. Activity Report
c. Cash flow statement
d. Notes on Reports
Finance
Accounting for NGOs must refer to
standard standards that have been prepared
by the Financial Accounting Standards
Board of the Indonesian Institute of
Accountants, namely Statement of
Financial Accounting Standards No. 45
concerning Financial Reporting of Non-
Profit Organizations (PSAK No. 45). NGO
non-profit organizations are required to
communicate the organization's ability to
provide services on an ongoing basis, by
providing information on assets, liabilities
and net assets in the statement of financial
position (balance sheet). The ability to
manage the resources that NGO non-profit
organizations have received from donors is
also communicated through activity
reports and cash flow reports. PSAK No.
45 regulates the financial reporting of non-
profit organizations including NGOs. With
the existence of reporting standards, the
reports of NGO organizations are expected
to be easier to understand, have relevance,
and have high comparability (Bastian,
2007a: 85).
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CONCLUSION
1. A non-profit organization is an
institution or a group of individuals that
has the goal of empowering the
community and working together to
achieve social goals, but the activities
undertaken are not focused on earning
profit / seeking wealth. Even though non-
profit organizations are not profit-oriented
organizations, they still need financial
statements to calculate the value of assets,
liabilities and equity owned by these non-
profit organizations.
2. Preparation of financial reports for non-
profit organizations in addition to
providing information regarding the use of
funds, as well as a form of accountability
to the public in enabling them to assess the
efficiency and effectiveness of the use of
organizational resources, to monitor the
performance of the operational
management of non-profit organizations,
to provide a basis for planning activities in
the future future (organizational
continuity)
3. Financial reports of non-profit
organizations can provide useful
information for providers and potential
providers of resources, as well as users and
other potential users in making rational
decisions regarding the allocation of
organizational resources.
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