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Governmental accounting systems are different from business accounting systems, Why? Funds used in state and local government accounting and financial reporting are classified into three categories: (1) governmental funds, (2) proprietary funds, and (3) fiduciary funds. What measurement focus is used for each of these three categories, and what types of assets and liabilities are reported for each measurement focus? Revenues and expenditures are reported in governmental funds, and revenues and expenses are reported in proprietary funds. How do revenues and expenditures in governmental funds differ from revenues and expenses in proprietary funds? Why are a municipality’s general capital assets and general long-term liabilities accounted for through nonfund accounts rather than within one of its governmental funds, such as the General fund? In what funds and nonfund accounts are (a) capital asses and (b) long-term liabilities accounted for? Under what circumstances should a government use a Special Revenue Fund? A Capital Projects Fund? A Debt Service Fund?
Expert Answer
Q2-1: Governmental accounting system is different from business accounting system on following ways,
A. Cash Basis accounting is followed in case of government accounting where as both cash and accural basis accounting followed in business accounting system.
B. The objective of Government accounting is to know the position of public fund.where as the objective of business accounting is to know the profit or loss and the financial position of the business organisation.
C. There are two level of accounting system in government accounting i.e. central level and operating level but there is no such level maintained on business accounting.
D. The business accounting is followed the rules and principles of Generally Accepted Accounting Principles(GAAP) where as Government accounting follow the rules and provisions of government.
E. In case of business accounting the auditing task done by a professional auditor where as in case of Government accounting the audit task done by Auditor General Office.
