Created mBy:mAmSolutio
n
Solution Manual for Government And Not For Profit Accounting C
m m m m m m m m m
oncepts And Practices 9th Edition Michael H. Granof|Latest Update
m m m m m m m m
d Version 2024. A+
m m m
https://www.stuvia.com/user/asolution
,Created mBy:mAmSolutio
n
Chapter 1 m
The Government and Not-For-Profit Environment
m m m m
QuestionsmformReview mandmDiscussion
1. Themcriticalmdistinctionmbetweenmfor-profit mbusinessesmand mnot-for-
profitsmincludingmgovernmentsmismthat mbusinessesmhavemprofit masmtheirmmainmmotivemwhereasmthem
othersmhavemservice.mAmprimarympurposemof mfinancialmreportingmismtomreport monmanmentity‘smaccom
plishmentsm—
how mwellmit machieved mitsmobjectives.mAccordingly,mthemfinancialmstatementsmof mbusinessesmmeasu
m
remprofitability,mtheirmkeymobjective.mFinancialmreportsmof mgovernmentsmand mothermnot-for-
profitsmshould mnot mfocusmonmprofitability,msincemit mismnot mamrelevant mobjective.mIdeally,mtherefore,mt
heymshould mfocusmonmothermperformancemobjectives,msuchmasmhow mwellmthemorganizationsm met mthei
rmservicemgoals.mInmreality,mhowever,mthemgoalmof mreportingmonmhow mwellmtheymhave machieved msuch
goalsmhasmprovenmdifficult mtomattainmand mthemfinancialmreportsmhavemfocused mmainlymonmfinanciall
m
y-mrelated mdata.
2. Governmentsmand mnot-for-
profitsmarem―governed‖ mbymthembudget,mwhereasmbusinessesmaremgoverned mbymthemmarketplace.mT
hembudget mismthemkeympoliticalmand mfiscalmdocument mof m governmentsmand mnot-for-
profits.mIt mdeterminesmhowmanmentitymobtainsmitsmresourcesmand mhowmit mallocatesmthem.mIt mencapsul
atesmmost mkeymdecisionsmof mconsequencemmadembymthemorganization.mInmamgovernment mthembudget
ismnot mmerelymammanagerialmdocument;mit mis mthemlaw.
m
3. Owingmtomthemsignificancemof mthembudget,mconstituentsmwantmassurancemthat mthementi
tymachievesmitsmrevenuemestimatesmand mcompliesmwithmitsmspendingmmandates.mTheymexpect
themfinancialmstatementsmtomreport monmhowmthembudget mwasmadministered.
m
4. Interperiod mequitymismthemconcept mthat mtaxpayersmof mtodaympaymformthemservicesmthat mthe
ymreceivemand mnot mshift mthempayment mburdenmtomtaxpayersmof mthemfuture.mFinancialmreportingmm
ust mindicatemthemextent mtomwhichminterperiod mequitymhasmbeenmachieved.mTherefore,mit mmust mdete
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and mreport muponmthemeconomicmcostsmof mthemservicesmperformed m(not mmerelymthemcashmcosts)mand m
of mthemtaxpayers‘mcontributionmtoward mcoveringmthosemcosts.
5. Themmatchingmconcept mmaymbemlessmrelevant mformgovernmentsmand mnot-for-
profitsmthanmformbusinessesmbecausemtheremmaymbemnomconnectionmbetweenmrevenuesmgenerated m
and mthemquantity,mqualitymormcost mof mservicesmperformed.mAnmincreaseminmthemdemand mfor,mormco
st mof,mservicesmprovided mbymamhomelessmsheltermwould mnot mnecessarilymresult minmanm increaseminmt
hemamount mof mdonationsmthat mit mreceives.mOf mcourse,mgovernmentsmand mnot-mfor-
profitsmaremconcerned mwithmmeasuringminterperiod mequitymand mformthat mpurposemthemmatchingmco
ncept mmaymbemverymrelevant.
6. Governmentsmmust mmaintainmanmaccountingmsystemmthat massuresmthat mrestricted mresource
smaremnot minadvertentlymexpended mforminappropriatempurposes.mMoreover,mstatement musersmmaymn
eed mseparateminformationmonmthemrestricted mresourcesmbymcategorymof mrestrictionmand mthemunrestr
icted
resources.mInmpractice,mthesemrequirementsmhavemled mgovernmentsmtomadopt mamsystemmof m―fund‖ ma
ccountingmand mreporting.
7. Evenmgovernmentsmwithinmthemsamemcategorymmaymengageminmdifferent mtypesmof mactivitie
s.mFormexample,msomemcitiesmoperatemamschoolmsystemmwhereasmothersmdomnot.mThose mthat maremnot
withinmthemsamemcategorymmaymhavemrelativelymlittleminmcommon.mFormexample,mamstatemgovernm
m
ent msharesmfew mcharacteristicsmwithmamcity.
8. If mamgovernment mhasmthempowermtomtax,mthenmit mhasmcommand mover,mand maccessmto,mresourc
es.mTherefore,mitsmfiscalmwell-
beingmcannot mbemassessed mmerelymbymmeasuringmthe m assets m that m it
―owns.‖ m Form example,m them fiscalm conditionm of m am citym should mincorporatemthemwealthmof mthem
residentsmand mbusinessesmwithinmthemcity,mtheirmearningmcapacity,mand mthemcity‘smwillingnessmtomex
ploit mitsmtaxmbase.
9. Manymgovernmentsmbudget monmamcashmormnear-
cashmbasis.mHowever,mthemcashmbasismof maccountingmdoesmnot mprovidemadequateminformationmwith
https://www.stuvia.com/user/asolution
n
Solution Manual for Government And Not For Profit Accounting C
m m m m m m m m m
oncepts And Practices 9th Edition Michael H. Granof|Latest Update
m m m m m m m m
d Version 2024. A+
m m m
https://www.stuvia.com/user/asolution
,Created mBy:mAmSolutio
n
Chapter 1 m
The Government and Not-For-Profit Environment
m m m m
QuestionsmformReview mandmDiscussion
1. Themcriticalmdistinctionmbetweenmfor-profit mbusinessesmand mnot-for-
profitsmincludingmgovernmentsmismthat mbusinessesmhavemprofit masmtheirmmainmmotivemwhereasmthem
othersmhavemservice.mAmprimarympurposemof mfinancialmreportingmismtomreport monmanmentity‘smaccom
plishmentsm—
how mwellmit machieved mitsmobjectives.mAccordingly,mthemfinancialmstatementsmof mbusinessesmmeasu
m
remprofitability,mtheirmkeymobjective.mFinancialmreportsmof mgovernmentsmand mothermnot-for-
profitsmshould mnot mfocusmonmprofitability,msincemit mismnot mamrelevant mobjective.mIdeally,mtherefore,mt
heymshould mfocusmonmothermperformancemobjectives,msuchmasmhow mwellmthemorganizationsm met mthei
rmservicemgoals.mInmreality,mhowever,mthemgoalmof mreportingmonmhow mwellmtheymhave machieved msuch
goalsmhasmprovenmdifficult mtomattainmand mthemfinancialmreportsmhavemfocused mmainlymonmfinanciall
m
y-mrelated mdata.
2. Governmentsmand mnot-for-
profitsmarem―governed‖ mbymthembudget,mwhereasmbusinessesmaremgoverned mbymthemmarketplace.mT
hembudget mismthemkeympoliticalmand mfiscalmdocument mof m governmentsmand mnot-for-
profits.mIt mdeterminesmhowmanmentitymobtainsmitsmresourcesmand mhowmit mallocatesmthem.mIt mencapsul
atesmmost mkeymdecisionsmof mconsequencemmadembymthemorganization.mInmamgovernment mthembudget
ismnot mmerelymammanagerialmdocument;mit mis mthemlaw.
m
3. Owingmtomthemsignificancemof mthembudget,mconstituentsmwantmassurancemthat mthementi
tymachievesmitsmrevenuemestimatesmand mcompliesmwithmitsmspendingmmandates.mTheymexpect
themfinancialmstatementsmtomreport monmhowmthembudget mwasmadministered.
m
4. Interperiod mequitymismthemconcept mthat mtaxpayersmof mtodaympaymformthemservicesmthat mthe
ymreceivemand mnot mshift mthempayment mburdenmtomtaxpayersmof mthemfuture.mFinancialmreportingmm
ust mindicatemthemextent mtomwhichminterperiod mequitymhasmbeenmachieved.mTherefore,mit mmust mdete
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and mreport muponmthemeconomicmcostsmof mthemservicesmperformed m(not mmerelymthemcashmcosts)mand m
of mthemtaxpayers‘mcontributionmtoward mcoveringmthosemcosts.
5. Themmatchingmconcept mmaymbemlessmrelevant mformgovernmentsmand mnot-for-
profitsmthanmformbusinessesmbecausemtheremmaymbemnomconnectionmbetweenmrevenuesmgenerated m
and mthemquantity,mqualitymormcost mof mservicesmperformed.mAnmincreaseminmthemdemand mfor,mormco
st mof,mservicesmprovided mbymamhomelessmsheltermwould mnot mnecessarilymresult minmanm increaseminmt
hemamount mof mdonationsmthat mit mreceives.mOf mcourse,mgovernmentsmand mnot-mfor-
profitsmaremconcerned mwithmmeasuringminterperiod mequitymand mformthat mpurposemthemmatchingmco
ncept mmaymbemverymrelevant.
6. Governmentsmmust mmaintainmanmaccountingmsystemmthat massuresmthat mrestricted mresource
smaremnot minadvertentlymexpended mforminappropriatempurposes.mMoreover,mstatement musersmmaymn
eed mseparateminformationmonmthemrestricted mresourcesmbymcategorymof mrestrictionmand mthemunrestr
icted
resources.mInmpractice,mthesemrequirementsmhavemled mgovernmentsmtomadopt mamsystemmof m―fund‖ ma
ccountingmand mreporting.
7. Evenmgovernmentsmwithinmthemsamemcategorymmaymengageminmdifferent mtypesmof mactivitie
s.mFormexample,msomemcitiesmoperatemamschoolmsystemmwhereasmothersmdomnot.mThose mthat maremnot
withinmthemsamemcategorymmaymhavemrelativelymlittleminmcommon.mFormexample,mamstatemgovernm
m
ent msharesmfew mcharacteristicsmwithmamcity.
8. If mamgovernment mhasmthempowermtomtax,mthenmit mhasmcommand mover,mand maccessmto,mresourc
es.mTherefore,mitsmfiscalmwell-
beingmcannot mbemassessed mmerelymbymmeasuringmthe m assets m that m it
―owns.‖ m Form example,m them fiscalm conditionm of m am citym should mincorporatemthemwealthmof mthem
residentsmand mbusinessesmwithinmthemcity,mtheirmearningmcapacity,mand mthemcity‘smwillingnessmtomex
ploit mitsmtaxmbase.
9. Manymgovernmentsmbudget monmamcashmormnear-
cashmbasis.mHowever,mthemcashmbasismof maccountingmdoesmnot mprovidemadequateminformationmwith
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