Advanced Accounting
Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
Question
Chapter 15, Problem 1UTI
To determine

Concept introduction

The key part of a business is the government. The governmental funds are termed as the general funds. Accounting and financial reporting becomes more important with increasing economy. There are two types of financial organizations in this category, governmental and not-for-profit entities. Budgeting helps to obtain optimal resource allocations to those entities and manage them efficiently.

The way financial measurement focus and the economic resources measurement focus differ. The impact of these two focuses on the presentation of financial information. The reason that the addition of reporting under the economic resources focus provide added value to the understating of operation of government.

Expert Solution & Answer
Check Mark

Explanation of Solution

Consider the following transactions.

Salaries paid, $20,000.

For a governmental organization using the flow of the financial measurement focus, the salary is accounted as the expenditure. The entry of salary in journal is as follows.

    DateA/C TitlePost Ref.DebitCredit
    Expenditure$20,000
    Cash$20,000
    To record the payment of the salaries

In case of government side statement using the flow of economic measure focus, the salary is accounted as the expense and the journal entry will be as follows.

    DateA/C TitlePost Ref.DebitCredit
    Salary Expense$20,000
    Cash$20,000
    To record the payment of the salaries

The fundamental difference between both the focuses is that the financial resource measurement focus, only discuss the cash or asset that are expected to be converted to cash within the accounting period or in a specific period near the accounting period.

While the progress of economic resource measurement focus discusses all the assets that are accessible to the organization, not only in cash form but soon to be in cash asset as well.

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Which of the following is true regarding the government-wide financial statements? a. The government-wide financial statements include the statement of net position and the statement of activities. b. The government-wide financial statements are to be prepared using the economic resources measurement focus and the accrual basis of accounting. c. The government-wide financial statements include information for governmental activities, business-type activities, the total primary government, and its component units. d. All of the above are true.
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  • Which of the following is true regarding the government-wide financial statements?a. The government-wide financial statement includes a statement of cash flows.b. The government-wide financial statements are prepared on the financial resources measurement focus for governmental activities and the economic resources measurement focus for business-type activities.c. The government-wide financial statement includes a statement of net position.d. Infrastructure assets must be depreciated on the statement of activities.
    Which of the following best identifies the purpose of the government-wide financial statements? Multiple Choice   To provide an overview of how government would operate as a business-type entity. To provide detailed financial information on how the government’s financial performance compares to the prior reporting period. To provide an overview of the total government’s financial information.                                                                       To To provide detailed financial information about different funds of government.
    Explain to a nonfinancial audience explaining how increasing scrutiny and demand for accountability by the public has influenced reporting for governmental entities.  Explain why governments use fund accounting. Analyze the importance of budget and control of government resources. Explain how the GASB revenue and expense recognition model may improve the usefulness of the information governments report to the public. Format references according to APA guidelines.
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