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Finance & Accounting
Pages 3 (753 words)
Name Professor’s name Course Date Finance and Accounting The different environments of accounting in government and the private sector cause the differences in the reporting between the government and the private sector. The core objective of government agencies is not the profit motive but the need to provide public goods and services (Bourn 53).
To begin with, the government does not prepare their financial statements using the generally accepted accounting standards that are used by the private sector. The government does not therefore prepare the income statements, balance sheet and cash flow statements as done by the private organizations (IPSAS 61). This makes it difficult to reveal the inability of public institutions to show their level of bankruptcy. Governments instead start to adopt the use of international public sector accounting standards to show consistency in their reporting (Kohler &Wright 96). Furthermore, the government only uses the cash basis of transactions and not the accrual basis (Berger 163). This relives them from having a large proportion of creditors making them hide the poor financial positions. More still, the treatment of acquisitions of fixed assets is different for both the government and the private businesses (Fourie & Opperman 279). In the case if the governments, purchases of fixed assets are considered as an expense and do not therefore, appear in the statements that are prepared by the governments. On the side of private business, such transactions are capitalized and depreciation expenses deducted when reporting the financial performance. ...
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