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Accounting for Governmental and Nonprofit Entities 15th Edition by Earl Wilson,Jacqueline Reck,Susan Kattelus
Edition 15ISBN: 978-0073379609Accounting for Governmental and Nonprofit Entities 15th Edition by Earl Wilson,Jacqueline Reck,Susan Kattelus
Edition 15ISBN: 978-0073379609 Exercise 2
"Governmental and not-for-profit organizations do not differ significantly from for-profit organizations and therefore should follow for-profit accounting and reporting standards." Do you agree or disagree with this statement Why or why not
Explanation
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Government Entity:
An entity, which undertakes public welfare activities through a legislative process.Rather than earning profits, sole focus is public welfare of its citizens.
For Profit Entity:
An entity established with objective to generate profit by the entity's owner through sale of goods or services to the public.
Differences between Governments and For Profit Organizations:
1.Differing Entity Purposes:
Governments exist to provide public welfare activities for its citizens while for profit entity exist to earn profits for the owner.
2.Different Sources of Revenue :
Almost all Governments collect revenue in the form of taxes from its citizens as individual tax or business entities tax, which is often perceived as great value and at fair price for its services.For profit organization, earn revenue from sale of its goods and service with varying prices to its customers.
3.Potential for longevity :
Government does not shut down or close its operations while for profit entities might go out of its business with its ability to collect taxes.Therefore, governments require different accounting to focus its operations from a long-term perspective for any likely term recovery of its investment in assets.
4.Different Stakeholders and its Relationship:
Government's stakeholders are its citizens, creditors and business as they collect taxes and borrow funds.Therefore, have an obligation to demonstrate its accountability to use of public funds.For profit entities stakeholders are its customers, employees, shareholders and creditor and therefore to provide information to its users.
5.Role of Budget:
For profit, entities prepare budgets for planning and control purposes only and not required to be made available to its creditors or investors.While Governments use budget as an expression of public policy with legislative authority to record spending of public funds.Therefore, a budget is very important tool in Government accounting for reporting it in its financial statements to demonstrate its accountability to its stakeholders.
Based on the above differences between government and for profit entities with reasons and therefore disagree with given statement that both government and non for profit entities could follow similar accounting and reporting standards due to differing functions of each of them.
Conclusion:
A Government entity exists to provide public welfare activities without earning profits for such activities.Revenue to governments is in form of tax collection.For profit, entities are established to earn revenue by way of sale of goods and services to its customers.
An entity, which undertakes public welfare activities through a legislative process.Rather than earning profits, sole focus is public welfare of its citizens.
For Profit Entity:
An entity established with objective to generate profit by the entity's owner through sale of goods or services to the public.
Differences between Governments and For Profit Organizations:
1.Differing Entity Purposes:
Governments exist to provide public welfare activities for its citizens while for profit entity exist to earn profits for the owner.
2.Different Sources of Revenue :
Almost all Governments collect revenue in the form of taxes from its citizens as individual tax or business entities tax, which is often perceived as great value and at fair price for its services.For profit organization, earn revenue from sale of its goods and service with varying prices to its customers.
3.Potential for longevity :
Government does not shut down or close its operations while for profit entities might go out of its business with its ability to collect taxes.Therefore, governments require different accounting to focus its operations from a long-term perspective for any likely term recovery of its investment in assets.
4.Different Stakeholders and its Relationship:
Government's stakeholders are its citizens, creditors and business as they collect taxes and borrow funds.Therefore, have an obligation to demonstrate its accountability to use of public funds.For profit entities stakeholders are its customers, employees, shareholders and creditor and therefore to provide information to its users.
5.Role of Budget:
For profit, entities prepare budgets for planning and control purposes only and not required to be made available to its creditors or investors.While Governments use budget as an expression of public policy with legislative authority to record spending of public funds.Therefore, a budget is very important tool in Government accounting for reporting it in its financial statements to demonstrate its accountability to its stakeholders.
Based on the above differences between government and for profit entities with reasons and therefore disagree with given statement that both government and non for profit entities could follow similar accounting and reporting standards due to differing functions of each of them.
Conclusion:
A Government entity exists to provide public welfare activities without earning profits for such activities.Revenue to governments is in form of tax collection.For profit, entities are established to earn revenue by way of sale of goods and services to its customers.
Accounting for Governmental and Nonprofit Entities 15th Edition by Earl Wilson,Jacqueline Reck,Susan Kattelus
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