Chp_1_Homework - Chapter 01 - Introduction to Accounting...

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Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not-for-Profit Entities CHAPTER 1: INTRODUCTION TO ACCOUNTING AND FINANCIAL REPORTING FOR GOVERNMENTAL AND NOT-FOR- PROFIT ENTITIES Answers to Questions 1-2 Disagree. As discussed in this chapter, government and not-for-profit organizations serve different functions in society than do business organizations. Not surprising, then, the objectives of financial reporting for these organizations, as shown in Illustration 1-2, are quite different from the objectives of business reporting. The most striking difference is the need for government and not-for-profit organizations to report on accountability, in addition to financial performance. The different functions served and different reporting objectives lead to different accounting and reporting practices. 1-3 Illustration 1-1 depicts the standard-setting jurisdiction of the FASB, GASB and FASAB. As shown, the FASB has responsibility for setting accounting and financial reporting standards for business enterprises and nongovernmental not-for-profit organizations. The GASB has responsibility for setting standards for state and local governments and governmental not-for-profit organizations. The FASAB has responsibility for setting accounting and reporting standards for federal agencies and departments. 1-6 Disagree. The statement is incomplete. While it is true that GASB standards assist in assessing operational accountability of business-type activities, those standards assist in assessing both fiscal accountability and operational accountability of governmental activities. Specifically, governmental fund reporting standards promote fiscal accountability reporting by helping elected officials demonstrate that they have complied with spending restrictions related to the legally approved budget. Government-wide reporting standards for governmental activities help officials report on operational accountability —whether the government’s resources were utilized efficiently and effectively in meeting operating objectives. 1-8 Modified accrual accounting is used for preparing governmental fund financial statements since those statements focus on the flow of current (i.e., expendable) financial resources and whether resources were raised and expended in conformity with budget and other fiscal constraints.
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Chp_1_Homework - Chapter 01 - Introduction to Accounting...

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