This thesis analyzes the accounting and legal framework for nonprofit organizations in the Republic of Croatia and selected European Union countries (Germany, Italy, Spain, Belgium, Ireland, and the Netherlands) with the aim of assessing the degree of harmonization of these systems within the EU. Nonprofit organizations, which operate in various sectors of society and whose primary goal is the public good, require a specific approach to accounting and financial reporting, differing from profit-oriented entities. The research shows that, despite certain efforts toward harmonization, significant differences in accounting regulations exist among EU countries, posing challenges for nonprofit organizations operating across borders. A particular focus is placed on the case study of the Croatian association "Naš san njihov osmijeh," which revealed that the current financial reporting system often fails to provide sufficient information about the achieved goals and the organization's contribution to society. Comparisons with practices in countries like Ireland and Italy, which include mandatory non-financial reporting, highlight the need for regulatory adjustments in Croatia to make financial reports more transparent and reflective of the actual effectiveness of nonprofit organizations. The conclusions emphasize the importance of harmonization of accounting regulations at the EU level to facilitate cross-border operations of nonprofit organizations, improve transparency, and ensure greater efficiency in achieving social objectives. The thesis also offers proposals for improving regulations and financial reporting in Croatia's nonprofit sector.