Overview of government accounting
Government accounting refers to the different accounting systems that the different entities in the public sector use. Government Accounting Standards Board (GASB) set the accounting standards to be used by the state and local government. The role of the Governmental Accounting Standards Board (GASB) is to set up and improve the accounting standards of state and local government. It also ensures that financial reporting gives accurate and reliable information to the users. It also educates and guides the public, auditor's users and issuers of the financial reports. Comparison of governmental accounting with for-profit financial accounting Governmental accounting and for-profit financial accounting apply the same basic principles, but there are some characteristics of governmental accounting that make it differ with for-profit financial accounting. These differences include: The goals
The main goal of the public entity is to ensure that it provides the necessary to its citizens unlike the for-profit entities which have to make a profit to survive. For-profit businesses have to cover the cost of goods or services they provide to give a profit to the shareholders who are the providers of capital. The government gets its revenue from the taxpayers who do not expect profit on the taxes paid, but they expect to be provided with the essential services. When there is excess revenue it is not reported as net profit. In governmental accounting usually some sources of revenue have no direct relationship with the expenditures. Capital invested by the citizens in terms of taxes is supposed to ensure the provision of public services. In addition, the term "net worth" has a different meaning in a government unit and in a profit making entity. The usage of the accounting results
The use of the accounting report of the public entity is different from the use in the private sector where the main aim of the entity is to make a profit. In the public entity the accounting reports are used to show accountability and ensure there was proper authorization in the use of funds hence the public entity must have budgetary accounts which must be complied with. On the other hand, in the for-profit entities one of the tools used in the financial planning is the budget, and there is no statutory obligation for these entities to comply with these budgets. Another difference is the fact that, in government accounting separate funds are employed. Government entities are involved in ever-increasing activities which are usually not related. The government entity therefore has to maintain different accounts. On the other hand, for-profit entities carry out related activities and therefore, need to only maintain one set of accounts for its different transactions. Government reporting and reporting entity
As per (GASB) a reporting entity can be defined as a primary organization owned by the government and whose financial accountability lies with the government, and other entities whose exclusion of the government would lender the financial statements of such entities incomplete due to the importance of their relationship with the government. The reporting entity has the responsibility of ensuring that the data presented is accurate complete fair and includes all the relevant disclosures. The management of the reporting entity has the responsibility of ensuring that it has maintained the appropriate internal controls which guarantees that the assets are not misused stolen or lost. The management has also to ensure compliance of accounting data so that the financial statements prepared can be as per generally accepted accounting principles. The reporting entity also needs to be audited annually as per Arizona statutes. Auditing of a government entity should be conducted by the Office of the Auditor General. In this overview of government accounting am going to use a Comprehensive Annual Financial...
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