Chapter 1 Solutions

Chapter 1 Solutions - CHAPTER 1 Introduction to Accounting...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
C HAPTER 1 Introduction to Accounting and Financial Reporting for Governmental and Not- for-Profit Organizations 1-1. T HE SOLUTION TO THIS AND THE FIRST EXERCISE OF C HAPTERS 2 THROUGH 9 WILL DIFFER FROM STUDENT TO STUDENT ASSUMING EACH HAS A DIFFERENT CAFR. 1-2. 1) O RGANIZATIONAL P URPOSES : W HILE THE PURPOSE OF A COMMERCIAL BUSINESS IS TO GENERATE A PROFIT FOR THE BENEFIT OF ITS OWNERS , GOVERNMENTS EXIST FOR THE WELL BEING OF CITIZENS BY PROVIDING PUBLIC SERVICES WHETHER OR NOT THE SERVICES ARE PROFITABLE UNDERTAKINGS . 2) S OURCES OF R EVENUES : G OVERNMENTS DERIVE MANY OF THEIR RESOURCES FROM TAXES . I NDIVIDUALS AND BUSINESSES PAY TAXES TO AVOID PENALTY , NOT VOLUNTARILY BECAUSE THEY PERCEIVE GOVERNMENT SERVICES TO BE OF VALUE AND FAIRLY PRICED . S INCE TAXES DO NOT INVOLVE AN EARNINGS PROCESS , THE TIMING OF THE RECOGNITION OF TAX REVENUE IS NOT ALWAYS CLEAR . 3) P OTENTIAL FOR L ONGEVITY : B ECAUSE THE U.S. AND STATE CONSTITUTIONS GRANT STATE AND LOCAL GOVERNMENTS THE ABILITY TO TAX , GOVERNMENTS VERY RARELY GO OUT - OF - BUSINESS . T HIS LONG TERM VIEW OF OPERATIONS CHANGES THE FOCUS OF ACCOUNTING FROM ONE OF NEAR TERM RECOVERY OF AMOUNTS INVESTED IN ASSETS TO A LONGER - TERM FOCUS ON THE SUSTAINABILITY OF SERVICES AND THE ABILITY TO MEET FUTURE DEMAND . 4) R ELATIONSHIP WITH S TAKEHOLDERS : T AXES ARE CREATED THROUGH THE LEGISLATIVE PROCESS BY OFFICIALS ELECTED BY THE CITIZENS . B ECAUSE CITIZENS AND BUSINESSES ARE THEN REQUIRED TO PAY THESE TAXES , GOVERNMENTS HAVE AN OBLIGATION TO DEMONSTRATE ACCOUNTABILITY FOR THESE PUBLIC FUNDS . 5) R OLE OF THE B UDGET : G OVERNMENT BUDGETS ARE EXPRESSIONS OF PUBLIC POLICY AND OFTEN CARRY THE AUTHORITY OF LAW , PREVENTING PUBLIC OFFICIALS FROM SPENDING OUTSIDE THEIR BUDGETARY AUTHORITY . T HE INCREASED IMPORTANCE OF BUDGETS IS REFLECTED IN GOVERNMENT FINANCIAL REPORTS BY A REQUIRED REPORT COMPARING BUDGETED AND ACTUAL AMOUNTS . 1-3. T HE THREE STANDARDS SETTING BODIES IN QUESTION ARE THE G OVERNMENTAL A CCOUNTING S TANDARDS B OARD (GASB), THE F EDERAL A CCOUNTING S TANDARDS A CCOUNTING A DVISORY B OARD (FASAB), AND THE F INANCIAL A CCOUNTING S TANDARDS B OARD (FASB). T HE GASB SETS ACCOUNTING AND FINANCIAL REPORTING STANDARDS FOR STATE AND LOCAL GOVERNMENTAL ORGANIZATIONS , INCLUDING THOSE NOT - FOR - PROFIT ORGANIZATIONS THAT ARE DETERMINED TO BE STATE AND LOCAL GOVERNMENTS . T HE FASAB ESTABLISHES ACCOUNTING STANDARDS FOR THE FEDERAL GOVERNMENT AND ITS AGENCIES UNLESS OBJECTED TO BY ONE OF THE " PRINCIPALS " ( THE DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET , THE COMPTROLLER GENERAL OF THE UNITED STATES , AND THE SECRETARY OF THE TREASURY ). W HEN THE " PRINCIPALS " APPROVE , THE FASAB
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/19/2012 for the course ACCT 2302 taught by Professor Smith,s during the Spring '09 term at HCCS.

Page1 / 6

Chapter 1 Solutions - CHAPTER 1 Introduction to Accounting...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online