WHY IS GOVERNMENTAL ACCOUNTING AND FINANCIAL REPORTING DIFFERENT FROM COMMERCIAL AND NOTFOR-PROFIT ACCOUNTING AND FINANCIAL REPORTING?

• Use of fund accounting for control purposes. Users of governmental financial statements are accustomed to the government reporting information about its funds, particularly the major (or more important, larger) funds. As we will see later in this book, sometimes governments are legally required to set up separate funds for certain sets of transactions, whereas other times governments set up funds for their own control and financial reporting purposes. Regardless of the reason, reporting information by fund is now unique to the governmental environment. Readers familiar with not-for-profit accounting may recall that notfor-profit organizations were formerly required to present fund information in their financial statements. Financial reporting for not-for-profit organizations was changed several years ago to eliminate the need to report fund information, although some not-for-profit organizations continue to use fund accounting for internal control purposes.
• Dissimilarities between similarly designated governments. This aspect of governmental accounting highlights that comparing the financial statements of two different governments at the same level—such as the financial statements of two counties—may be the equivalent of comparing apples to oranges. The range of services provided to constituents as well as the sources of revenues from which those resources are obtained may vary greatly between two entities that are both called “counties.”

Taken From : Governmental Accounting Made Easy

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