Governmental Accounting questions
with actual answers 100%.
Why is the budget a far more important document in both governments and not-for-profits than it is in
businesses? ANS -Governments and not-for-profits are "governed" by their budgets, whereas businesses
are governed by a martketplace. The budget is the key political and fiscal document of governments and
not-for-profits, which determines the entities resources and how it spends them. The consequintial
decision making of these entities is dictated by a budget and in government, this budget is not a
managerial document, but it is LAW.
What is the defining distinction between for-profit businesses and not-for-profit entities, including
governments? What are the implications of this distinction for financial reporting? ANS -The defining
distinction between for-profit businesses and not-for-profit entities, including governments, is that
businesses have PROFIT AS THEIR MAIN OBJECTIVE and the others have SERVICE AS THIER MAIN
OBJECTIVE. Therefore, the distinction in financial reporting is as follows: for-profit businesses report and
measure profitability and governments and not-for-profit entities measure how well its acheived its
objectives.
What is meant by "interperiod equity"? What is its consequence for financial reporting? ANS -
Interperiod Equity is the concept that taxpayers of today should pay for the services that they recieve
and not shift the payment burden onto the taxpayers of the future. Therefore, the government or not-
for-profit entity should determine and report the economic cost of the services performed (not just cash
costs) and the taxpayers' contribution in covering these costs.
Why may the "matching concept" be less relevant for governments and not-for-profits than it is for
businesses? ANS -The matching concept may be less relevant for governments and not-for-profits
because there may be NO CONNECTION between revenues generated and the services performed. For
example, services provided by a homeless shelter would not result in an increase in the amount of
donations that it recieves. But, then again, governments and not-for-profits are concerned with
measuring interperiod equity and for that reason the matching concept may be relevant.
What is the significance for financial reporting of the many restrictions that are placed upon a
government's resources? ANS -Governments must maintain an accounting system that assures that
restricted resources are not spent for innappropriate reasons. Statement users may need seperate
information on the restricted resources by category of restriction and the unrestricted resources. In
practice, this has let the government to adopt a system of FUND ACCOUNTING.
, Why is it difficult to develop accounting principles that are appropriate for governments within the same
category and even more difficult to develop them from governments within different categories? ANS -It
is difficult to develop accounting principles that are appropriate for governments within the same
category, etc., becuase even governments within the same category may engage in different types of
activites. For example, some cities operate a school system, while others do not. Governments that are
not within the same category may have little to nothing in common. For example, the government that
operates an airport shares little in common with one that operates a school system.
What is the significance for financial reporting of a governments power to tax? How does it affect the
governments overall financial strength? ANS -If the government has the power to tax, then it has control
and access to resources. Therefore, the fiscal well-being of a government entity cannot be determined
by solely its balance-sheet, but it also is evaluated by its available resources. For example, to determine
the fiscal condition of a city, it is important to consider the wealth of the residents and businesses within
the city and the city's willingness to tax that weath and earning capacity.
Why are measures of "service efforts and accomplishments" of more concern in government and not-
for-profits than they are in businesses? ANS -Measures of service efforts and accomplishments are of
more concern in government and not-for-profits because their objectives are to provide services. In
contrast, a businesses objective is to earn a profit and that is why they report their accomplishments by
reporting their profitability and government and not-for-profits must report on other measure of the
service efforts and accomplishments.
The traditional business model for accounting is inadequate for governments and not-for-profit
organizations primarily because businesses differ from governments and not-for-profits organzations in
that
A. they have different missions
B. they have few assets
C. their assets are intangible
D. Taxes are a major expenditure of businesses ANS -A.
If businesses are "governed by the market place" then governments are governed by
A. legislative bodies
B. taxes
C. budgets
D. state constitutions ANS -C.
with actual answers 100%.
Why is the budget a far more important document in both governments and not-for-profits than it is in
businesses? ANS -Governments and not-for-profits are "governed" by their budgets, whereas businesses
are governed by a martketplace. The budget is the key political and fiscal document of governments and
not-for-profits, which determines the entities resources and how it spends them. The consequintial
decision making of these entities is dictated by a budget and in government, this budget is not a
managerial document, but it is LAW.
What is the defining distinction between for-profit businesses and not-for-profit entities, including
governments? What are the implications of this distinction for financial reporting? ANS -The defining
distinction between for-profit businesses and not-for-profit entities, including governments, is that
businesses have PROFIT AS THEIR MAIN OBJECTIVE and the others have SERVICE AS THIER MAIN
OBJECTIVE. Therefore, the distinction in financial reporting is as follows: for-profit businesses report and
measure profitability and governments and not-for-profit entities measure how well its acheived its
objectives.
What is meant by "interperiod equity"? What is its consequence for financial reporting? ANS -
Interperiod Equity is the concept that taxpayers of today should pay for the services that they recieve
and not shift the payment burden onto the taxpayers of the future. Therefore, the government or not-
for-profit entity should determine and report the economic cost of the services performed (not just cash
costs) and the taxpayers' contribution in covering these costs.
Why may the "matching concept" be less relevant for governments and not-for-profits than it is for
businesses? ANS -The matching concept may be less relevant for governments and not-for-profits
because there may be NO CONNECTION between revenues generated and the services performed. For
example, services provided by a homeless shelter would not result in an increase in the amount of
donations that it recieves. But, then again, governments and not-for-profits are concerned with
measuring interperiod equity and for that reason the matching concept may be relevant.
What is the significance for financial reporting of the many restrictions that are placed upon a
government's resources? ANS -Governments must maintain an accounting system that assures that
restricted resources are not spent for innappropriate reasons. Statement users may need seperate
information on the restricted resources by category of restriction and the unrestricted resources. In
practice, this has let the government to adopt a system of FUND ACCOUNTING.
, Why is it difficult to develop accounting principles that are appropriate for governments within the same
category and even more difficult to develop them from governments within different categories? ANS -It
is difficult to develop accounting principles that are appropriate for governments within the same
category, etc., becuase even governments within the same category may engage in different types of
activites. For example, some cities operate a school system, while others do not. Governments that are
not within the same category may have little to nothing in common. For example, the government that
operates an airport shares little in common with one that operates a school system.
What is the significance for financial reporting of a governments power to tax? How does it affect the
governments overall financial strength? ANS -If the government has the power to tax, then it has control
and access to resources. Therefore, the fiscal well-being of a government entity cannot be determined
by solely its balance-sheet, but it also is evaluated by its available resources. For example, to determine
the fiscal condition of a city, it is important to consider the wealth of the residents and businesses within
the city and the city's willingness to tax that weath and earning capacity.
Why are measures of "service efforts and accomplishments" of more concern in government and not-
for-profits than they are in businesses? ANS -Measures of service efforts and accomplishments are of
more concern in government and not-for-profits because their objectives are to provide services. In
contrast, a businesses objective is to earn a profit and that is why they report their accomplishments by
reporting their profitability and government and not-for-profits must report on other measure of the
service efforts and accomplishments.
The traditional business model for accounting is inadequate for governments and not-for-profit
organizations primarily because businesses differ from governments and not-for-profits organzations in
that
A. they have different missions
B. they have few assets
C. their assets are intangible
D. Taxes are a major expenditure of businesses ANS -A.
If businesses are "governed by the market place" then governments are governed by
A. legislative bodies
B. taxes
C. budgets
D. state constitutions ANS -C.
