Chapter+1+Solutions

Chapter+1+Solutions - Chapter 01 Introduction to Accounting...

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Unformatted text preview: 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 1-1. General purpose governments differ from special purpose governments primarily in terms of the scope of their legal powers and the range of services provided. General purpose governments typically have much more power over citizens and provide a much greater range of services than do special purpose governments. Examples of general purpose governments include states, counties, townships, cities, and villages. Special purpose governments typically include such special districts as those for police and fire protection, sanitation, and water, and organizations such as school districts and public colleges and universities. 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. 1-4. One should apply the criteria discussed in the section headed Determining Whether a Not-for-Profit Organization is Governmental . Essentially if an organization is a public corporation or body corporate and politic or has certain government-like characteristics described in this section, then it should be treated as a governmental organization and GASB standards should be followed. Otherwise, one would follow FASB standards. 1-5. Interperiod equity, whether current period revenues were sufficient to pay for current period services, is an important component of accountability. But, as noted in Chapter 1, accountability is the cornerstone of governmental financial reporting and is a broader concept than interperiod equity. See, for example, the discussion of fiscal and operational accountability in the answer to Question 1-6....
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This note was uploaded on 03/28/2012 for the course ACIS 4124 taught by Professor Dr.easterwood during the Spring '12 term at Virginia Tech.

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Chapter+1+Solutions - Chapter 01 Introduction to Accounting...

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