Question

Compare and contrast capital assets of governmental entities to capital assets of for-profit businesses. Are the same type of assets used by both? Are there any categories of capital assets that one has that the other doesn't? How does the accounting and general treatment compare? Are there any considerations of a governmental entity that may not apply to for-profit business?

Answer 1

1.

There is difference between how a governmental entity records a capital asset and how a for profit entity does:

Government:

Majorly capital assets are not current financial resources for government entities. However, a government capital asset when purchased is recorded as an expenditure rather than asset. They are recorded as capital assets only in the government wide financial statements.

For profit entity:

Capital assets are recorded as assets in the balance sheet either purchased or constructed.          

2.

Usually, assets are same for both type of entities only accounting treatments are different but capital assets can be different it in particular industry or area only government owned assets are present and no for-profit entity is present.

  3.

Accounting treatment are different for both types of firms, government entities follows GASB or Government Accounting Standards Board whereas for profit entities follows GAAP or Generally Accepted Accounting Principles

Financial statements of government entity include

• Statement of activities
• Statement of cash flows
• Statement of net assets

Financial statements of for-profit entity include Balance sheet, Profit and loss account, statement of cash flow and others.

4.

Government organizations needs to prepare a CAFR, Comprehensive Annual Financial Report this report is not required by for profit entities.