Question

What is the purpose of governmental reporting? Why do budgets get incorporated into the accounting information system? What major differences did you identify under modified accrual? Do these differences make sense based on your understanding of governments?

Answer 1

The basic purpose of government reporting is to provide relevant information to facilitate decision making.

Budgets get incorporated in the accounting information system to ensure that revenues exceed the appropriations, and there exists a surplus. In case a budgetary deficit arises, additional appropriations are enacted by the legislative process.

Major differences identified under modified accrual are: Modified accrual is a combination of both cash basis and full accrual basis of accounting. Here, revenues are recognised when they are available and measurable, whereas expenditures are recorded on a full on accrual basis since they are always measurable when incurred. It is used by government agencies since they have goals different from that of profit and non-profit entities. It helps the government focus on short-terms financial assets and liabilities.

Ofcourse, it makes sense if we are talking about the government since it is not a private organisation managed by individuals on a private basis for the purpose of making profits. It is a representative of how the economy should work as a whole, and how can better facilities, infrastructure, roads, parliament can be provided to the citizens of the nation. Thus, the parameters to evaluate the government is rightly unique.