Comment 39406

By zippo (registered) | Posted April 01, 2010 at 23:38:42

Grassroots: Helps to be clear on terminology. A "Not for profit" is an organization, in this case a Co-Op, who's stated primary purpose is something other than creating profits to be distributed to it's members. (that's a paraphrase of the legal definition). This does not mean that they don't have to make "Profit" in an accounting sense just like any other business.

Lets simplify and pretend that all the Dragon did that generated income was roast & sell coffee. On their statements you would see an entry for Sales, the money they got for the coffee they sold. Subtracted from that would be "cost of goods sold" which would include the price of the beans from their supplier, repairs to the roasting machine, wages to someone who just roasts or sells coffee, all the costs that apply directly to producing the product they are selling (coffee). The result of this subtraction = "Gross Profit" You subtract from that the other costs which are not coffee specific: Mortgage payments, property taxes, cost of toilet paper for the washroom, wages if you are paying anyone to do something other than roast coffee, etc. and you get a value called "Net Profit", or maybe if things went badly, "Net Loss" What makes it a "non profit" is that the "net profit", if any, must be used to further the goals of the organization as defined in their bylaws, not distributed to the members.

Sorry if this is stating the obvious, but there seemed to be some confusion

Comment edited by zippo on 2010-04-01 22:45:54

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