[DOCUMENT TITLE]
SOLUTION MANUAL FOR GOVERNMENT AND NOT FOR PROFIT
ACCOUNTING CONCEPTS AND PRACTICES 9TH EDITION
MICHAEL H. GRANOF LATEST EDITION 2026 A+
Page 1 of 927
, [DOCUMENT TITLE]
chapter 1
the government and not-for-profit environment
QUESTIONS FOR REVIEW AND DISCUSSION
1. the critical distinction between for-profit businesses and n o t-for-profits
including governments is that businesses have profit as their main motiv e
whereas the others
have service. a primary purpose of financia l reporting is to report on an
entity‗s accomplishments — how well it achieved its objectives.
accordingly, the financial statements of businesses measure profitability,
their key objective. financial reports of governments and other not-for-
profits should not focus on profitability, since it is not a relevant
objective. ideally, therefore, they should focus on other performance
objectives, such as how well the organizations met their service goals. in
reality, however, the goal of reporting on how well they have achieved
such goals has proven difficult to attain and the financial reports have
focused mainly on financially- related data.
2. governments and not-for-profits are ―go verned‖ by the budget, whereas
businesses are governed by the marketplace. the budget is the key political
and fiscal document of governments and not-for-profits. it determines
how an entity obtains its resources and h o w it allocates them. it
encapsulates most key decisions of consequence made by the
organization. in a government the budget is not merely a managerial
document; it is the law.
1-1
Page 2 of 927
, [DOCUMENT TITLE]
3. owing to the significance of the budget, constituents want assurance
that the entity achieves its revenue estimates and complies with its
spending mandates. they expect the financia l statements to report on
how the budget was administered.
4. interperiod equity is the concept that taxpayers of today pay for the
services that they receive and not shift the payment burden to taxpayers
of the future. financial reporting must indicate the extent to which
interperiod equity has been achieved. therefore, it must determine and
report upon the economic costs of the services performed (not merely
the cash costs) and of the taxpayers‗ contribution toward covering
those costs.
5. the matching concept may be less relevant for governments and not-for-
profits than for businesses because there may be no connection between
revenues generated and
2-2
Page 3 of 927
, [DOCUMENT TITLE]
the quantity, quality or cost of services performed. an increase in the
demand for, or cost of, services provided by a homeless shelter would
not necessarily result in an increase in the amount of donations that it
receives. of course, governments and not- for-profits are concerned with
measuring interperiod equity and for that purpose the matching concept
may be very relevant.
6. governments must maintain an accounting system that assures that
restricted resources are not inadvertently expended for inappropriate
purposes. moreover, statement users may need separate information on
the restricted resources by category of restriction and the unrestricted resources.
in practice, these requirements have led governments to adopt a system
of ―fund‖ accounting and reporting.
7. even governments within the same category may engage in different
types of activities. for example, some cities operate a school system
whereas others do not. those that are not within the same category
may have relatively little in common. for example, a state government
shares few characteristics with a city.
8. if a government has the power to tax, then it has command over, and
access to, resources. therefore, its fiscal well-being cannot be assessed
merely by measuring the assets that it ―owns.‖ for example, the fiscal
condition of a city should incorporate the wealth of the residents and businesses
within the city, their earning capacity, a nd the city‗s willingness to
exploit its tax base.
9. many governments budget on a cash or near-cash basis. however, the
cash basis of accounting does not provide adequate information with
which to assess interperiod equity. financial statements that satisfy the
objective of reporting on interperiod equity may not satisfy that of
reporting on budgetary compliance. moreover, statements that report on
either interperiod equity or budgetary compliance are unlikely to provide
sufficie nt information with which to assess service efforts and
accomplishments.
10. measures of service efforts and accomplishments are more significant in
governments and n o t-for-profits because their objectives are to provide
service. by contrast, the objective of businesses is to earn a profit.
therefore, businesses can report on their accomplishments by reporting
on their profitability. governments and not-for-profits must report on
3-3
Page 4 of 927
SOLUTION MANUAL FOR GOVERNMENT AND NOT FOR PROFIT
ACCOUNTING CONCEPTS AND PRACTICES 9TH EDITION
MICHAEL H. GRANOF LATEST EDITION 2026 A+
Page 1 of 927
, [DOCUMENT TITLE]
chapter 1
the government and not-for-profit environment
QUESTIONS FOR REVIEW AND DISCUSSION
1. the critical distinction between for-profit businesses and n o t-for-profits
including governments is that businesses have profit as their main motiv e
whereas the others
have service. a primary purpose of financia l reporting is to report on an
entity‗s accomplishments — how well it achieved its objectives.
accordingly, the financial statements of businesses measure profitability,
their key objective. financial reports of governments and other not-for-
profits should not focus on profitability, since it is not a relevant
objective. ideally, therefore, they should focus on other performance
objectives, such as how well the organizations met their service goals. in
reality, however, the goal of reporting on how well they have achieved
such goals has proven difficult to attain and the financial reports have
focused mainly on financially- related data.
2. governments and not-for-profits are ―go verned‖ by the budget, whereas
businesses are governed by the marketplace. the budget is the key political
and fiscal document of governments and not-for-profits. it determines
how an entity obtains its resources and h o w it allocates them. it
encapsulates most key decisions of consequence made by the
organization. in a government the budget is not merely a managerial
document; it is the law.
1-1
Page 2 of 927
, [DOCUMENT TITLE]
3. owing to the significance of the budget, constituents want assurance
that the entity achieves its revenue estimates and complies with its
spending mandates. they expect the financia l statements to report on
how the budget was administered.
4. interperiod equity is the concept that taxpayers of today pay for the
services that they receive and not shift the payment burden to taxpayers
of the future. financial reporting must indicate the extent to which
interperiod equity has been achieved. therefore, it must determine and
report upon the economic costs of the services performed (not merely
the cash costs) and of the taxpayers‗ contribution toward covering
those costs.
5. the matching concept may be less relevant for governments and not-for-
profits than for businesses because there may be no connection between
revenues generated and
2-2
Page 3 of 927
, [DOCUMENT TITLE]
the quantity, quality or cost of services performed. an increase in the
demand for, or cost of, services provided by a homeless shelter would
not necessarily result in an increase in the amount of donations that it
receives. of course, governments and not- for-profits are concerned with
measuring interperiod equity and for that purpose the matching concept
may be very relevant.
6. governments must maintain an accounting system that assures that
restricted resources are not inadvertently expended for inappropriate
purposes. moreover, statement users may need separate information on
the restricted resources by category of restriction and the unrestricted resources.
in practice, these requirements have led governments to adopt a system
of ―fund‖ accounting and reporting.
7. even governments within the same category may engage in different
types of activities. for example, some cities operate a school system
whereas others do not. those that are not within the same category
may have relatively little in common. for example, a state government
shares few characteristics with a city.
8. if a government has the power to tax, then it has command over, and
access to, resources. therefore, its fiscal well-being cannot be assessed
merely by measuring the assets that it ―owns.‖ for example, the fiscal
condition of a city should incorporate the wealth of the residents and businesses
within the city, their earning capacity, a nd the city‗s willingness to
exploit its tax base.
9. many governments budget on a cash or near-cash basis. however, the
cash basis of accounting does not provide adequate information with
which to assess interperiod equity. financial statements that satisfy the
objective of reporting on interperiod equity may not satisfy that of
reporting on budgetary compliance. moreover, statements that report on
either interperiod equity or budgetary compliance are unlikely to provide
sufficie nt information with which to assess service efforts and
accomplishments.
10. measures of service efforts and accomplishments are more significant in
governments and n o t-for-profits because their objectives are to provide
service. by contrast, the objective of businesses is to earn a profit.
therefore, businesses can report on their accomplishments by reporting
on their profitability. governments and not-for-profits must report on
3-3
Page 4 of 927
