Essay On Government and Non Profit Entity

Essay On government and Non Profit entity
Essay On government and Non Profit entity
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1ReferencesIntroductionEssay On government and Non Profit entity
Introduction
Accounting is a process of recording, analyzing, classifying, summarizing and
interpreting financial information. When this process is undertaken by the governmental entity it
is known as the accounting system of governmental entity. The difference in the accounting
system creates a difference between the accounting system of private and governmental entity. In
private sector the main goal is profit maximization where as the responsibility of the
governmental entity is fiscal accountability.
The aim of the governmental accounting is to carry out the financial work of the
governmental entity smoothly, efficiently and on time. They have to keep everything systematic
and accessible and in documentary form for audit purpose. The books of accounts are the source
for analyzing the performance, making important decision and for budgetary control. The
governmental entities have to keep the records as per the accounting standards of GAAP
(Barragato, 2019). Their books for account can be asked for analyzing the asset, liabilities,
expenditure and revenue by an important entity or government. In the United States the
governmental accounting system is prepared as per the accounting standards to be fair and have
full disclosure about the financial position and also the operations of the governmental entities
(Kaya,2016). Their accounting is based on the accrual or modified accrual system. US follows cash
and accrual concept in budgeting. GAAP for governmental entities are set by the Governmental
Accounting Standards Board, or as it is commonly called, the GASB. GASB is controlled by the
Financial Accounting Foundation (FAF), which is a not-for-profit organization. FASB and
GABS are same but structurally and economically FASB sets accounting principles that are used
by publicly traded companies (Rajib & Hoque, 2016).

2ReferencesIntroductionEssay On government and Non Profit entity
Ad valorem property taxes
The specific revenue like the property tax or sales tax are limited to debt service or
general long term debt. When the taxes are restricted for debt service it should be reported
directly as revenue in the debt service fund and not in the general fund. But at time according to
the legal requirement the restricted ad valorem property tax should be first reported to the
general fund. It can be said that accounting of the entire property tax should be in the general
fund and then it should be reported in the debt service fund making it easy to understand the
splitting the tax revenue into two funds. By reading the financial statement it can be clear how
much property tax revenue was recognized in the year. According to the accrual basis of
accounting the property tax are receivable at the fiscal year end and if not collected until more
than the sixty days after the year end are recoded as deffered revenue (McCluskey & Franzsen, 2017).
Encumbrances
An Encumbrance are those funds that are reserved when a purchase requisition is in
process and encumbered. The funds are placed aside when the requisition is processed. These
funds are not spent nor can it be used for other transaction. Encumbrance accounting benefits in
budget overspending. As a general planning tool it can used for predicting the cash flow (Smith,
2019).
The formula used to determine funds available is:
Funds Available = Budget - Actuals - Encumbrances
When the payment is done to the vendor, the encumbrance is reversed and the funds appear
under the Actual funds balance instead of as an Encumbrance balance. For example- I have a
budget of 10000 for consumable purchases and if I place a requisition for 1000 for consumable