Question

1. How can you distinguish accounting in government organizations with the accounting in business organizations considering the recording of revenues, expenses, assets and liabilities and the preparation of financial statements? ( A minimum of five differences in detail)
2. Private purpose trust funds and agency funds are fiduciary funds that account for resources held by a government unit in a trustee capacity. How could you differentiate these two types of funds? ( A minimum of five differences in detail)
A. How do you differentiate fund accounting from the accounts of business organization and why government accounting is called fund accounting?

Answer 1

1. Accounting government organization provides details of receipt, transfer and expenditure of public funds. On the other hand accounting in business organization provides information regarding financial position of business and operating results to businessmens.

2. In government organization cash basis of accounting is followed. Business organization i.e. in commercial organizations cash as well as accrual basis of accounting is followed.

3. Accounts maintained in government organization based on rules and provisions of the government. And in commercial organizations Accounts maintained on the basis of principles of GAAP.

4. In government entities financial statements used in their reporting is a) Statement of activities b) Statement of cash flows c) statement of net asset.

In business organizations balance sheet used for their financial reporting purpose.

5. Revenue of government is through taxes and government organization is not operate on the principle of profit or loss. Business organization are operate only the principle for profit or loss.

6. Double entry accounting system used in business organization. In government organization mostly single entry is used.

7. In Government organization budgets are prepared for estimation of expenditure, sources of fund's to Meet the expenditure.

In business organization costing system is used to find out cost of production.