Question

1. What justifies the markedly different accounting and financial reporting practices of governments as compared with business organizations?
2. What are the differences that distinguish governments from business organizations?
3. What are some of the differences in accounting standards between governments and business organizations?

Answer 1

Accounting and financial reporting practices of government and business organizations are different.

Government financial reporting is the process whereby governments report their financial position and activities to the public at large.These reports are the standard that citizens, oversight bodies, and other stakeholders use to judge their government's efficiency, effectiveness, and overall financial condition.

In Business financial reporting Business managers, creditors, and investors read financial reports because these reports provide information regarding how the business is doing and where it stands financially. Indeed, these accounting reports are the only source of this information.

Difference between government and business organisations are given:-

1.“Government” refers to the system and institution of governing and managing a certain society or country, while “business” is a systemic organization of providing industries, services, products, and profits to people.
2.Governments have a wider jurisdiction compared to businesses. Governments also have numerous agencies that cater to public services. The institution provides a sense of equality as well as national identity. On the other hand, businesses provide people with opportunities to earn and make money with their skills and talents.
3.All businesses are under the government’s control. The government provides the business an opportunity and legality to earn profits in return for taxes. Government laws regarding trade, operations, and transactions are implemented and incorporated in many business laws. A certain corporation or business must adhere to the existing government rules and standards aside from their own business practices and concerns.
4.A government’s head or leader is elected depending on the nature or form of government in a society, which is usually stated in the nation’s Constitution. The head of a business is traditionally the owner or entrepreneur, unless another body dismisses the owner for various reasons.
5.A business gains profits by selling goods and services and making use of a market as its intended receivers (of goods and services). On the other hand, a government also earns profits implemented taxes imposed on eligible workers, businesses, and other various entities. Governments can also earn profits by imposing a transaction fee for a particular service in the various government agencies and offices. A government can also own businesses or corporations to increase its assets.

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