Financial statements depicting information about profits, revenues, assets are very common. However, the government maintains public money, which need to be accounted for, with utmost care. The financial statements providing information about the money handled by the government are called government financial statements.
Government keeps an account of the public money by a process called fund accounting. Fund accounting throws light on the amount of cash, which has been used up and the amount of cash, which is available for usage. The process of fund accounting is used for non profit organizations also. The process of fund accounting necessitates the assembling of familiar data together. Thereafter accounting of the public money is carried out.
Government uses public money for the purpose of fulfilling a social cause, for the improvement of amenities, for offering better services to the citizens. Ideally, if the government earns profit, it tends to reduce the burden of tax on the citizens.
Government Financial Statements Vs Non Profit Financial Statements:
The government financial statements are made once a year. The non profit organizations function in a more or less similar manner. The matters of the non profit making organizations are looked into by the government. The main objective of the government is to maintain least difference between surpluses and deficits. As the financial activities of the government are conducted on a large scale, working out government financial statements are very tiresome. Every transaction has to be closely watched and a record has to be maintained about the same. The non profit financial statements are made as per standards laid down by –
Financial Accounting Standards Board or FASB
Accrual Basis Accounting
Generally Accepted Accounting Principles or GAAP
The non profit making bodies find a place between the government and the companies belonging to the private sector.
Last Updated on : 26th June 2013