Fundamentals of Governmental Accounting and Reporting

Chapter 1The Governmental Environment and GAAP

Learning objectives

• Recognize the unique aspects of the governmental accounting environment.
• Identify which organizations must follow GASB standards.
• Recognize authoritative guidance on generally accepted accounting principles (GAAP).

Governmental accounting versus for-profit accounting

The practice of state and local government accounting can be succinctly distinguished from that of for-profit accounting, which is already familiar to many of us. Several elements of governmental accounting are very distinct from for-profit accounting. One core difference is that the purpose of government is not to make a profit but to provide services to the citizenry. There are different users of the financial statements than in the for-profit sector. The accounting is different — there is even a different standards-setting board, the GASB, which typically issues new rules each year. Like the FASB, however, the GASB is subject to the auspices of the Financial Accounting Foundation (FAF).

This course focuses on the fundamentals of governmental accounting. Governmental accounting is the composite activity of analyzing, recording, summarizing, reporting, and interpreting the financial transactions of governments.

Governmental environment

Key environmental differences between government and business

The state and local governmental environment is different in several ways from the business environment. These differences influence financial reporting ...