CHAPTER 1: INTRODUCTION TO ACCOUNTING AND FINANCIAL

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CHAPTER 1: INTRODUCTION TO ACCOUNTING AND FINANCIAL

REPORTING FOR GOVERNMENT AND NOT-FOR-

PROFIT ENTITIES

OUTLINE

Number Topic Type/Task Status

(re: 18/e)

Questions:

1-1 Differences between types of organizations Identify Same 1-2 Distinguishing between general purpose and special purpose governments Identify Revised 1-3 Standards-setting bodies Identify Same 1-4 Not-for-profit financial reports Identify New 1-5 Relationship of interperiod equity and fiscal accountability Define/Compare New 1-6 Determining the purpose of the two types of accountability Determine Same 1-7 Primary reporting objectives for NFPs and governments Compare Same 1-8 Objective of federal financial reports Explain New 1-9 Federal government performance and accountability report Identify/Describe Same 1-10 NFP reporting of expenses Explain Same

Cases:

1-11 Research Case—Accountability Reporting Report New 1-12 Research Case—GASB Analyze Revised 1-11 1-13 Research Case—FASB Explain New 1-14 Research Case—FASB Analyze Same 1-15 Research Case—FASAB Summarize Same 1-16 Research Case—Federal Financial Reporting Objectives Analyze Same

Exercises/Problems:

1-17 Examine the CAFR Examine Same 1-18 Financial statement differences Differentiate Same 1-19 Various Multiple Choice Items 4, and 7 are new; other items are the same 1-20 Matching concepts and reporting characteristics or requirements for government and NFP organizations Classify Revised 1-21 Matching standards governing organizations Classify Revised

(Accounting for Governmental & Nonprofit Entities, 19e By Reck, Lowensohn, Neely, Wilson) (Solution Manual, For Complete File, Download link at the end of this File) 1 / 4

Chapter 01 - Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities

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CHAPTER 1: INTRODUCTION TO ACCOUNTING AND FINANCIAL

REPORTING FOR GOVERNMENT AND NOT-FOR-

PROFIT ENTITIES

Answers to Questions

1-1. Following is a list of some of the differences between business organizations and government/not-for-profit organizations.

General Problem Information: Differences between types of organizations

Learning Objective: 1-1

Topic: Differences Between Governmental and Not-for-Profit Organizations

Bloom’s Taxonomy: Remember

Accreditation Skills tag: AACSB: Communication, AICPA: BB Industry

Level of Difficulty: Easy

1-2. a. GP c. SP e. GP

• SP d. GP f. SP

General Problem Information: Distinguishing between general purpose and special

purpose governments

Learning Objective: 1-1

Topic: Differences Between Governmental and Not-for-Profit Organizations

Bloom’s Taxonomy: Remember

Accreditation Skills tag: AACSB: Communication, AICPA: BB Industry

Level of Difficulty: Easy

Business Organizations Government/Not-for-for profit Organizations Providers of resources expect either repayment or economic benefits proportionate to the resources provided.Many providers of resources do not expect repayment or economic benefits proportionate to the resources provided.Primary operations are undertaken to provide goods or services at a profit.Primary operations are not undertaken to provide goods or services at a profit or profit equivalent.There are defined ownership interests that can be sold, transferred, or redeemed; or entitle the owner to a share of remaining resources at liquidation.There are no defined ownership interests. 2 / 4

Chapter 01 - Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities

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1-3. Illustration 1-1 shows the standard-setting jurisdiction of the FASB, GASB and FASAB.As shown, the FASB has responsibility for setting accounting and financial reporting standards for business entities and nongovernmental not-for-profit organizations. The GASB has responsibility for setting standards for state and local governments and government not-for-profit organizations. The FASAB has responsibility for setting accounting and reporting standards for the federal government and its agencies and departments.

General Problem Information: Standards-setting bodies

Learning Objective: 1-2

Topic: Sources of Financial Reporting Standards

Bloom’s Taxonomy: Remember

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Easy

1-4. The required financial statements for a not-for-profit (NFP) organization applying the FASB standards are (1) Statement of financial position or a balance sheet, (2) Statement of activities, and (3) Statement of cash flows.

Although not a required statement, NFPs are also required to provide information on the relationship between functional expenses and natural expenses. The FASB allows NFPs to provide that information using a separate financial statement, a schedule in the notes, or displayed on the statement of activities.

General Problem Information: Financial reporting of not-for-profit organizations

Learning Objective: 1-6

Topic: Financial Reporting for Not-for-Profit Organizations

Bloom’s Taxonomy: Remember

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Easy

1-5. Interperiod equity is whether current period revenues are sufficient to pay for current period services, and it is considered an important component of accountability. Failure to pay for current period services means that the financial burden is being passed to future year taxpayers who may not receive any benefit from the past services. Interperiod equity is closely related to fiscal accountability in that fiscal accountability is intended to help ensure that the government is raising and spending resources in compliance with laws and regulations, which would include the legally approved budget. Providing information on whether the government is meeting budgetary requirements helps in assessing whether the government is “living within its means” (achieving interperiod equity) during the current reporting period.

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Chapter 01 - Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities

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General Problem Information: Relationship of interperiod equity and fiscal

accountability

Learning Objective: 1-3

Learning Objective: 1-4

Topic: Objectives of Financial Reporting; Financial Reporting of State and Local Governments

Bloom’s Taxonomy: Analyze

Accreditation Skills tag: AACSB: Analytical Thinking, AICPA: BB Critical Thinking

Level of Difficulty: Medium

1-6. The purpose of operational accountability is to assess whether the government has used its resources efficiently and effectively in meeting its operating objectives. The purpose of fiscal accountability is to assess the short-term flow of current financial resources.Government-wide financial statements are primarily focused on providing information to assess operational accountability, while fund financial statements are focused on providing information to assess fiscal accountability.

General Problem Information: Determining the purpose of the two types of

accountability

Learning Objective: 1-4

Topic: Financial Reporting of State and Local Governments

Bloom’s Taxonomy: Understand

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Easy

1-7. The primary financial reporting objective for not-for-profit organizations is to provide decision-useful financial information to resource providers, such as donors, members, and creditors. The primary financial reporting objective for a government organization is accountability, but other objectives include providing useful information for economic, social, and political decisions. Thus, the reporting focus for the two types of organizations differs in that the not-for-profit organization financial reports are to focus on providing information that is useful in making decisions; while the government organization financial reports are to focus primarily on providing information that can be used to assess whether public resources were raised and used for their intended purposes.

General Problem Information: Primary reporting objectives for NFPs and governments

Learning Objective: 1-3

Topic: Objectives of Financial Reporting

Bloom’s Taxonomy: Understand

Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting

Level of Difficulty: Medium

1-8. The FASAB indicates that federal financial reports are to help meet the needs of both external and internal users. As such, financial reports are prepared to provide information that is useful in assessing accountability, efficiency, effectiveness and the results of providing and spending federal resources.

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