Case 1. Identify How Local Governments Are Different From Business Organizations.

The cash basis of accounting records revenues when cash is received and expenses when cash is paid out. The accrual basis of accounting records revenues when they are earned and expenses when resources are used.

As money is spent statements are updated to reflect the accounts affected by the spending. Managers use these financial statements, such as an income statement or balance sheet, to check the progress of plans and programs. Management uses the information provided by financial statements to monitor financial resources and activities. The income statement shows the results of the organization's operations over a specific period, such as revenues, expenses, and profit or loss. The balance sheet shows what the organization is worth (assets) at a particular point and the extent to which those assets were financed through debt (liabilities) or owner's investment (equity) (Bank of America, 2007).

The accrual basis of accounting uses the adjusting process to recognize revenues when earned and expenses when incurred. The cash basis of accounting recognizes revenues when cash is received and records expenses when cash is paid. An example of accrual basis of accounting is if a company is insuring a building. The insurance company bills the company $600 every six months. If each bill is for six months of coverage, then under the accrual method, the company would not record a $600 expense in January and a $600 expense in July. It would instead record a $100 expense each month for the whole year.

b) What is the relationship between net income on the income statement and the equity section on a balance sheet?

The balance sheet (BS) is significant to a business due to its ability to provide a “snapshot” of a company’s assets and liabilities at any given time. This financial document is a cursory representation of a business’s health. The use of comparative BS whether it be yearly, quarterly, or monthly provides the interested parties a tool to observe trends that are positive, negative, or neutral to a company’s financial health (Finkler, Jones, and Koyner,2013) .

Income statements and balance sheets were reviewed to summarize the following key points that could

Accrual basis accounting is the measurement of resources provided by revenues and the measure of expenses. The difference of these two measurements is net income or net loss if expenses are greater than revenues related to providing goods and services to customers. (Spiceland, Intermediate Accounting, 2011, pp. 6-7)

The main aim of this assignment is to present an exploration of two major parts of financial statements i.e. Statement of Comprehensive income and statement of financial position. This is done by comparing elements of Balance Sheet and income statement of two separate companies and discussing similarities and difference of Presentation and Disclosures of these two separate organizations.

Separately, the balance sheet reports a company’s financial position while the income statement reports a company’s fiscal year profits and losses. The balance sheet measures a company’s financial position by reporting its assets, liabilities, and owner’s (shareholder’s) equity. The income statement measures a company’s financial performance by reporting its revenues, expenses, and net income/loss. When combined, they serve two vital purposes: (1) expand the accounting equation and (2) enable analysis using ratios to determine industry position or potential material misstatements. The increase or decrease in owner’s (shareholder’s) equity on the balance sheet is a direct result of the net

The company, Colgate-Palmolive has a different mission from the City of Dallas. As a business, Colgate-Palmolive is profit driven, but that is not the case for the City of Dallas. This differences in mission is reflected in their respective financial statements. Starting with the balance sheet, which is called statement of net position for governmental entities, the elements are different. For example, in the balance sheet of Colgate-Palmolive, there are three distinct categories namely: assets, liabilities, and equity. However, in the statement of net position for the City of Dallas, the categories are: assets, liabilities, and net position. The stockholders’ equity that exists in the balance sheet of Colgate-Palmolive does not exist in the statement of net position of the City of Dallas because the city is owned by everybody. There is no trading of the shares of ownership for the city in the stock exchange market like it is done for business entities. Also, the basis of accounting for the city and Colgate-Palmolive are different. The city uses modified accrual basis for its fund accounts, which are consolidated into government-wide statements that are prepared using full accrual. However, Colgate-Palmolive prepares all its accounts and financial statements with the same basis of accounting, the accrual

State governments and federal governments are the only two types of government that influence our lives. The hierarchy of our government starts with subdivisions of the pyramid such as counties,school districts,townships, and cities but what runs all them is the state and what runs the state the people of washington D.C. the federal government. Each level of the pyramid has the power to draft legislation

Accrual accounting is a system of accounting that is based on the accrual principal accounting. This principal requires revenue to be recognized and recorded when earned. Expenses are to be recorded when they occur. The accrual basis of accounting is used by most companies. Very small businesses and individuals use cash basis accounting.

Exhibit 2 and 3 showed the balance sheet and income statement of the Archdiocese of New Orleans. There are error in the balance sheet and income statement. In this balance sheet, shareholder equity was not mentioned, so it is very difficult to calculate the return on equity and debt to equity ratio. This information is very important, the organization need it to pay its debt in future. There are little ambiguities in the current assets and liabilities figure (doubtful receivables).

Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look at these statements to make sure their investment will return a profit for them. This paper will look at four different companies and their balance sheets and income statements. The companies are Eastman Chemical Company, Covenant Transportation

Accrual accounting is an accounting method that is utilized to size the performance and of a company by recognizing circumstances regardless of when cash transactions occur. They are documented by matching revenues to expenses at the time in which the transaction occurs rather than when a payment is processed. This method allows the current cash credits and debits to be combined with future expected cash flows to give a more accurate picture of a company 's current financial state. It is ideal to use this method of accounting if an organization has a revenue of more than five million per year. While the accrual method shows the flow of business income and debts more accurately, the downside to this method of accounting is that financial advisers may be blindsided as to what cash reserves are available, which could ultimately result in some serious cash flow obstacles. A common example that I have seen used which helps me understand is when your income ledger may show thousands of dollars in sales, while in reality your bank account is empty because your customers haven 't paid you yet. Cash Basis accounting is when revenues are documented when cash is received and expenses are recognized when paid. The cash basis of accounting is usually utilized by small companies with a revenue of less than one million annually. The cash method provides a more accurate picture of how much actual cash your business has. Cash basis accounting is allowed for tax purposes only for smaller