Essay about Chapter 1 Governmental and Nonprofit Accounting: Answer Key

2552 Words Jul 10th, 2012 11 Pages
CHAPTER 1
Governmental and Nonprofit Accounting:
ENVIRONMENT AND CHARACTERISTICS


ANSWERS TO QUESTIONS


QUESTION 1-1


a. The similarities of accounting for profit-seeking and G&NP organizations include:

1. Double-entry system of accounts.
2. Most accounting mechanics, e.g., basic transaction documents, journals, ledgers, charts of accounts.
3. Where a G&NP organization has a business-type activity, e.g., a municipal electric utility, the accounting largely parallels that for a similar private business (e.g., electric utility).

b. Among the unique aspects of G&NP organization accounting are:

1. Fund accounting—designed to separate resources according to the purposes for which they may be used and to
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Emphasis in this environment is therefore upon acquiring and using appropriable financial resources—cash flow, working capital, and budgetary position—rather than the determination of net income or earnings per share.

b. Sources of financial resources. Profit-seeking organizations generally rely on equity investors, debt issuances, and profits from the sale of goods and services to its customers to generate financial resources. In contrast, G&NP organizations do not have “investors,” and generally do not have a profit motive. G&NP organizations generally rely on the receipt of taxes and donations as their primary sources of financial resources although they also rely, to some degree, on proceeds from debt issuances. Grants and subsidies from governments are primary sources of financial resources for many G&NP organizations as well. Bureau of the Census statistics indicate that resources received from senior levels of government actually exceed taxes for many local governments.
Question 1-5 (Continued)

c) Evaluating Performance and Operating Results. Profit-seeking organizations rely on profits from the sale of its goods or services to continue to operate. The operations of a profit-seeking organization generally are evaluated based on the amounts of profits (or its net income) over a period of…

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