Week 2 Ind assignment

Topics: Financial statements, Generally Accepted Accounting Principles, Balance sheet Pages: 4 (1110 words) Published: December 29, 2014
CH. 1 Exercise 1-1
1. The traditional business model of accounting is inadequate for governments and not-for-profit organizations primarily because businesses differ from governments and not-for-profit organizations in that A. They have different missions

CH. 1 Questions
1. What is the defining distinction between for-profit businesses and not-for-profit entities, including governments? What are the implications of this distinction for financial reporting? The defining distinction is that for profit businesses focus on generating a profit every year, whereas government entities and not-for-profit organizations focus on improving and enhancing the quality of life in their communities.

3. How and why might the importance of the budget affect generally accepted accounting principles for external (general-purpose) reports? The importance of the budget might affect GAAP for external reports because financial statements report on how well the budget was managed and followed. Users of financial statements want to ensure that spending habits were in compliance with the approved budget. 4. What is meant by ‘‘interperiod equity,’’ and what is its consequence for financial reporting? Interperiod equity means current taxpayers should pay for the services they receive and not shift the payment burden to future taxpayers. As for financial reporting purposes, it means were revenues enough to cover expenditures. 5. Why may the ‘‘matching concept’’ be less relevant for governments and not-for-profits than for businesses? It may be less relevant because there is not a connection between revenues created and services provided. 7. Why is it difficult to develop accounting principles that are appropriate for governments within the same category (e.g., cities, counties) and even more difficult to develop them for governments within different categories? It may be more difficult if the government entities have little to nothing in common. 8. What is the significance for...
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