Purchase Solution

Governmental Accounting Information

Not what you're looking for?

Ask Custom Question

1. There are four basic financial statements for a for-profit business.
Those statements are an income statement, a statement of owners' equity, a balance sheet, and a cash flow statement. In contrast, the two basic financial statements for each of the governmental funds of a state or local government are a balance sheet and a statement of revenues, expenditures, and changes in fund balances. Using the General Fund of a local government as an example, address the following. Discuss two or three of the differences of the balance sheet for that fund as compared to a balance sheet of a for-profit business. Also discuss two or three of the differences of the statement of revenues, expenditures, and changes in fund balance for that fund as compared to an income statement of a tor-profit business.

2. As the newly elected chief financial official of Fairly New City, you have certain decisions to make regarding the financial reporting of the city. You quickly realize that the city's financial reporting is subject to Governmental Accounting Standards Board (GASB) Statement 34 but a Comprehensive Annual Financial Report (CAFR) has never been produced during the city's fifteen years of existence. Draft brief comments that you will make to the city council to explain the benefits of preparing a CAFR for the city especially considering the need for the financing of infrastructure. Also, prepare a brief summary of the types of information that you will want your staff to gather to include in the Statistical section of the report.

3. Describe the proper accounting for the revenue recognition for each of the following three scenarios. Within your answer, for example, state if revenue should be recorded, when the revenue {if any) should be recorded, and the type of restriction (if any) that should be reflected. Include additional explanations too if you feel that will strengthen your response.

a) Lisa informed her church mater that she had named the church in her will and later provided a written copy of the will to that organization. The will stated that upon her passing, the money received by the church was to be used to establish a scholarship fund with only the earnings available to pay for one scholarship each year.

b) A skilled carpenter made much needed repairs to the roof for a private not for-profit free of charge. The not-for-profit would have had to pay $2,200 for this service if not donated.

c) Numerous contributors made pledges ranging from $50 to $400 during a public radio station's annual fund drive. The total pledged was 540,000 and was for current collection (not part of multi-year pledges). The use of the money is to be at the sole discretion of the station's management for operations, debt repayment, or capital assets. From past experience with the fund drives, it is expected that 5% of the pledges will not be collected.

The book I am using is:
Wilson. Accounting for Governmental and Nonprofit Entities, 15th Edition. McGraw-Hill Learning Solutions, 2010.

Purchase this Solution

Solution Summary

Answers to finance questions that involve the difference in financial statements between for profits and governmental entities, the importance and need for a CAFR, and revenue recognition for governmental entities.

Solution Preview

1. In considering the balance sheet for a general fund versus a for profit business a few key differences will be pointed out. The primary difference will be the equity section of a balance sheet. A for profit business will have shareholder or owners equity. In a governmental entity, there is no shareholder or owners equity, so the equity section of the balance sheet will represent what is typically called "fund balance." This is basically the leftover 'savings' of the governmental entity during the year after taxes and revenues have been received and expenses recorded. It really isn't equity and isn't owned by anyone, so that is a distinct difference in for profit and governmental.
Another difference is assets and depreciation. Typically when an auditor prepares year end reports they do perform some depreciation calculations and provide reporting to show the likeness to the for profit world. However, on a standard governmental balance sheet, there is no recording of assets and accumulated depreciation. Since a governmental entity does not pay tax, there is no benefit to depreciation or the capitalization of assets.
Another important point to make is that a governmental balance sheet will follow a different format; it will just look different, than for profit statements.
There can also be receivable accounts for taxes which are expected based on assessments in the current year or grant funds not paid, but there is no true accounts receivable on the balance sheet because there are no sales to be collecting from. The only fund that may have something more like a for-profit business is an enterprise fund since it is operated more like a for profit business.
When considering the statement of revenues and expenditures with the income statement of a ...

Purchase this Solution

Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Understanding Management

This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.

Operations Management

This quiz tests a student's knowledge about Operations Management

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.