SPPTChap017
Chapter 17
Governmental
Entities:
Introduction and
General Fund
Accounting
McGraw-Hill/Irwin
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objective 17-1
Understand and explain the basic differences between governmental and private sector accounting.
17-2
Overview
Governmental entities have operating objectives different from those of commercial entities. As a result, governmental accounting is different from accounting for commercial enterprises. 17-3
Overview
Nature of governmental entities
1.
Collect resources and make expenditures to fulfil societal needs
2.
Absence of profit motive except for some activities 3.
Have legal authorization for their existence, conduct revenue-raising through the power of taxation, and have mandated expenditures they must make to provide their services
4.
Control mechanism – Use of comprehensive budgetary accounting
17-4
Overview
Nature of governmental entities
5.
Accountability for the flow of financial resources is a chief objective
6.
Typically are required to establish separate funds to carry out various missions; each fund is an independent accounting and fiscal entity
7.
Many fund entities do not record fixed assets or long-term debt in their funds
8.
An important objective of governmental financial reporting is accountability
17-5
History of Governmental Accounting
History
Before 1984, directed by the Municipal Finance
Officers Association (MFOA)
In 1934, the first statement on local governmental accounting published
In 1968, Governmental Accounting, Auditing, and Financial Reporting (GAAFR) was published
The GAAFR is periodically updated to include the most recent governmental reporting standards
17-6
History of Governmental Accounting
History
1974 –The American Institute of Certified Public
Accountants (AICPA) published an industry audit guide, in which it stated that “except as modified in this guide, they [GAAFR]
Governmental
Entities:
Introduction and
General Fund
Accounting
McGraw-Hill/Irwin
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objective 17-1
Understand and explain the basic differences between governmental and private sector accounting.
17-2
Overview
Governmental entities have operating objectives different from those of commercial entities. As a result, governmental accounting is different from accounting for commercial enterprises. 17-3
Overview
Nature of governmental entities
1.
Collect resources and make expenditures to fulfil societal needs
2.
Absence of profit motive except for some activities 3.
Have legal authorization for their existence, conduct revenue-raising through the power of taxation, and have mandated expenditures they must make to provide their services
4.
Control mechanism – Use of comprehensive budgetary accounting
17-4
Overview
Nature of governmental entities
5.
Accountability for the flow of financial resources is a chief objective
6.
Typically are required to establish separate funds to carry out various missions; each fund is an independent accounting and fiscal entity
7.
Many fund entities do not record fixed assets or long-term debt in their funds
8.
An important objective of governmental financial reporting is accountability
17-5
History of Governmental Accounting
History
Before 1984, directed by the Municipal Finance
Officers Association (MFOA)
In 1934, the first statement on local governmental accounting published
In 1968, Governmental Accounting, Auditing, and Financial Reporting (GAAFR) was published
The GAAFR is periodically updated to include the most recent governmental reporting standards
17-6
History of Governmental Accounting
History
1974 –The American Institute of Certified Public
Accountants (AICPA) published an industry audit guide, in which it stated that “except as modified in this guide, they [GAAFR]