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ACCT 407 1 Accounting 4070 Chapter 1. ACCT 407 2 1. Importance of Public Sector Combined federal, state, and local government spending is – $2.4 Trillion.

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Presentation on theme: "ACCT 407 1 Accounting 4070 Chapter 1. ACCT 407 2 1. Importance of Public Sector Combined federal, state, and local government spending is – $2.4 Trillion."— Presentation transcript:

1 ACCT 407 1 Accounting 4070 Chapter 1

2 ACCT 407 2 1. Importance of Public Sector Combined federal, state, and local government spending is – $2.4 Trillion – $8,397 per person in the USA Government operations constitute about 30% of the GNP

3 ACCT 407 3 1. Importance of Public Sector Types of governmental units – 50 states – 3,000 counties – 19,000 municipalities – 17,000 townships – 14,000 school districts – 35,000 special districts

4 ACCT 407 4 2. Why Study Gov’t Accounting? Informed citizen Certification exams Jobs

5 ACCT 407 5 3.Characteristics of Businesses, Governmental units, and NPOs Terms – businesses – nonbusinesses – governmental units – not-for-profit organizations, nonprofit organizations, NPOs, NGOs

6 ACCT 407 6 3.Characteristics of Businesses, Governmental units, and NPOs Operating objectives different Legal authorization causes differences in – revenues – expenditures  gov’t accounting different from business accounting

7 ACCT 407 7 3.Characteristics of Businesses, Governmental units, and NPOs Gov’ts organized to serve the citizenry General absence of profit motive Taxation is principal sources of revenue Impact of the legislative process Stewardship for resources Benefits not proportional to resources provided Absence of transferable ownership Power to tax citizens for revenues

8 ACCT 407 8 3.Characteristics of Businesses, Governmental units, and NPOs Governmental NPO – All public corporations – Others if one or more of following characteristics: Popular election or appointment (by gov’t) of controlling majority of the governing body Net assets reverting to a government in dissolution Power to enact and enforce a tax levy

9 ACCT 407 9 3.Characteristics of Businesses, Governmental units, and NPOs Similarities – production and distribution of goods and services using scarce resources – obtaining resources from external sources – owning or controlling supplies of resources – incurring obligations – paying taxes and being subject to laws and regs – being financially viable

10 ACCT 407 10 3.Characteristics of Businesses, Governmental units, and NPOs Differences – profit motive – source of resources – purpose of expenditures – restrictions imposed on expenditures

11 ACCT 407 11 4. Sources of Standards FAF – Financial Accounting Foundation – FASB – Financial Accounting Standards Board – GASB – Governmental Accounting Standards Board FASAB – Federal Accounting Standards Advisory Board

12 ACCT 407 12 4. Sources of Standards GAAP Hierarchy Summary (AU §411) Click Here to View Click Here to View

13 ACCT 407 13 5. Objectives of Reporting For federal government (FASAB) – recommends accounting & financial reporting standards to OMB, Department of Treasury, and GAO – to provide budgetary integrity operating performance evaluation stewardship adequate systems and controls

14 ACCT 407 14 5. Objectives of Reporting For not-for-profit entities (FASB) – to provide information to present and potential resource providers and others in making rational decisions about allocating resources

15 ACCT 407 15 5. Objectives of Reporting For state and local governmental units (GASB) – to provide accountability Dual reporting system used – government wide – funds – measurement of efficiency and effectiveness

16 ACCT 407 16 6.Measurement Focus and Basis of Accounting Measure focus (what’s measured) – total economic resources – current financial resources Basis of accounting (how accounted for) – accrual basis of accounting – modified accrual basis of accounting

17 ACCT 407 17 6.Measurement Focus and Basis of Accounting Total economic resources measurement focus and accrual basis of accounting used for – government-wide financial statements – proprietary funds – fiduciary funds Revenues recognized when earned Similar to business accounting

18 ACCT 407 18 6.Measurement Focus and Basis of Accounting Current financial resources measurement focus and modified accrual basis of accounting used for – government funds Revenues recognized when – measurable and available – recognition criteria revenues - can be used to pay current period obligations expenditures - paid out of current financial resources Long-term assets and debt not recognized

19 ACCT 407 19 7. Financial Statements Governmental-wide financial statements – Statement of Net Assets – Statement of Activities Fund financial statements Examples – Illustrations 1-4 through 1-13

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