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Accounting – Critical Tool in Business and Government In Business: Accrual Basis Emphasis on the earning of revenues and the incurring of expenses. Primary.

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Presentation on theme: "Accounting – Critical Tool in Business and Government In Business: Accrual Basis Emphasis on the earning of revenues and the incurring of expenses. Primary."— Presentation transcript:

1 Accounting – Critical Tool in Business and Government In Business: Accrual Basis Emphasis on the earning of revenues and the incurring of expenses. Primary users of financial statements are creditors and investors.

2 In Government: Modified Accrual Basis Emphasis on sources of revenue and where these revenues are spent. Primary users of financial statements are government entities and the public. Fund Accounting Governmental accounting systems should be developed and operated on a fund basis. Many types of funds are used in such a system.

3 Internal Controls Internal controls are essential in both business and government entities to ensure accurate accounting records through checks and balances and to enhance efficiency. Effective internal controls help create financial transparency.

4 Audit Function Internal Audits Internal audits are performed by auditors within an entity in an effort to ensure accuracy and financial transparency. Independent Audits Independent (external) audits are performed by auditors outside an entity in an effort to validate the accuracy and financial transparency claimed by the entity being examined.

5 Financial Analysis and Planning Funds received must be managed properly – Invest idle funds – Prioritize projects using methods such as NPV – Cost/Benefit analysis – Especially early on, emphasis must be on infrastructure – Encourage participation by business community – Government cannot be expected to provide everything

6 Budgeting Budgeting is critical, in both business and government entities. In government, budgeting is a main focal point, as it should be the goal of a governmental body to provide its services as effectively and efficiently as possible. The focus is on performing a duty at or below the budgeted cost as opposed to maximizing revenues and minimizing expenses in order to maximize net income and shareholder wealth.

7 Funding Sources Investors – Businesses or individuals investing in projects Lenders – Banks like the International Finance Corporation, World Bank, and private lenders funding projects along with private investors or other lenders. Grants – Governments, corporations, and foundations often give grants to developing countries. Taxes – Internal funding source

8 A Few Words about Taxes $%&#*& (Here are some repeatable ones) Taxes—The good, the bad, and the ugly The good: If used properly, taxes generate much needed money with little “pain” per person. The bad: Taxes can be raised to the point where they retard economic growth. The ugly: Government addiction to tax increases, inefficiency, and… BIG government


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