The basis of accounting used by not-for-profit organizations in their external financial reports is

A) Industry-specific basis of accounting.

B) Cash basis of accounting.

C) Modified accrual basis of accounting.

D) Accrual basis of accounting.

The correct answer here is A) industry specific basis of accounting.

Explanation:

The term nonprofit accounting means a unique way of recording and reporting the business transactions which are taken up by the nonprofit organizations. There are various basis of accounting, which a non for profit organization can use like cash basis (where income and expenses are recognized when they occurred, and this type of accounting is more suitable for smaller nonprofits organizations), accrual basis (where income and expenses are recorded when they are earned not received), modified cash basis (is a mixture of both cash and accrual basis of accounting). But when a not for profit organization is preparing their external financial report, the basis of accounting would be industry specific.