Nonaccountants tend to think, understandably, that there is only one way that organizations record transactions. If a government buys something and then pays the bill, one would expect that all governments universally would record that transaction or event the same way, at the same time. Not so; in fact, the same government, within its same set of financial statements, may record that simple purchasing and bill-paying transaction in as many as three different ways. Please resist the temptation to close this book, and read on as to how this could possibly be the case. Read the rest of this entry »

This chapter focuses on some of the underlying accounting principles and concepts that underlie all governmental accounting and financial reporting. In order to understand governmental financial statements, the reader needs to understand these basic concepts. Specifically, this chapter addresses the following areas: Read the rest of this entry »

Public corporations are created for the administration of public affairs and include instrumentalities created by the state, formed and owned in the public interest, supported in whole or in part by public funds, and governed by managers deriving their authority from the state. Other organizations are governmental organizations under the Guide’s definition if they have one or more of the following three characteristics: Read the rest of this entry »

A special word is needed about distinguishing governmental entities from not-for-profit organizations. As a rule, not-forprofit organizations are not covered by generally accepted accounting principles for governments. Not-for-profit organizations follow accounting principles prescribed by the FASB. For the most part, this distinction is fairly obvious. It does create some apparent discrepancies, such as a state university following governmental accounting principles while a private university follows accounting principles for not-for-profit organizations prescribed by the FASB. Even though the state university and the private university are basically in the same business, the state university follows GASB accounting rules and the private university follows FASB accounting rules. Read the rest of this entry »

Throughout this chapter there have been a number of references to accounting principles followed by governments and governmental entities compared to accounting principles applied to commercial enterprises and not-for-profit organizations. The reader should have a clear understanding of what types of entities are considered to be governments or governmental entities in order to be clear as to which types of accounting and financial reporting requirements are to be applied by any particular entity. Read the rest of this entry »

WHY IS GOVERNMENTAL ACCOUNTING AND FINANCIAL REPORTING DIFFERENT FROM COMMERCIAL AND NOTFOR-PROFIT ACCOUNTING AND FINANCIAL REPORTING?

• Assisting in evaluating the efficiency and effectiveness of the government. (This last category is sometimes referred to as service efforts and accomplishments reporting, which uses financial and nonfinancial information to assess whether the government’s “service efforts” actually result in “accomplishments.” This is currently a controversial area in government accounting. Not all interested parties believe that this is an area that should be part of the financial reporting required by the GASB under generally accepted accounting principles.) Read the rest of this entry »