I attaching my files
| JET JE CE RIVET @ chenzebudc x [Bl GrandCanyor x | [i StudentPortz x | © Word|M Rr 268 of 384 MODULE 25 Government and Nonprofit Accounting Learning Objectives: mu Understand fund accounting m Understand the accounting equation m Understand financial statements m Understand debits and credits This module explains the basic concepts of accounting and provides background for the next module on financial statement analysis. It is not necessary for beginning students to understand debits and credits in order to read financial statements or understand what accountants might be explaining. However, we will explain the basic concept of debits and credits. Accounting is the recording, tracking, and reporting of all transactions in an organization. The chart of accounts is used to position each transaction in the rig PEC RE | EE I IB Student Port CARR 246 3 ADM626Clc X @ chenzebuds x [I Grand Canyor x | [I StudentPort: x | © Word|M 268 of 384 o oon T an ransacto amore on 1m chart of accounts is used to position each transaction in the right place so that the reporting of the organization's finances is accurate and comprehensive. Accounting is a field that requires years of study; however, everyone can gain an elementary understanding of a government unit's finances. The accounting profession has standards, and for government, those standards are main- tained by the Government Accounting Standards Board (GASB). Government entities in the United States pay close attention to the GASB, as it provides guidance to all state and local gov- ernment entities about managing their finances. Fund Accounting Fund accounting, the sorting and tracking of all the sources and uses of funding, is what govern- ments and nonprofits use to track all their transactions. This type of accounting is very different from private sector accounting, which may not separate the sources and uses of funding into different categories. In the nonprofit world, net assets are divided among three fund categories: unrestricted, tem- porarily restricted, and permanently restricted. In the government world, net assets are divided among many fund categories, the most common being government funds, proprietary, and LN FL] EVN +R | JET JE CE RIVET @ chenzebudc x [Bl GrandCanyor x | [ StudentPoriz x | © Word| Micros x | Ey FlyingTogeth: x CRC Cre 269 of 384 Z fiduciary. Within these three categories are further divisions. The government funds category includes operating and capital funds, the proprietary funds category often includes utilities and TI golf courses, within fiduciary funds, one often finds pension and health benefit funds. V4 The Accounting Equation The accounting equation is the basis of double-entry bookkeeping. It represents the relationship among assets, liabilities, and net assets. Finances are recorded by using an equation that was [| first introduced in 15th-century Italy: Assets = Liabilities + Net Assets An accounting system based upon this equation can ensure that a government's books are balanced and that any financial transaction is present in detail. The Balance Sheet or the Statement of Financial Position C A balance sheet or statement of financial position is the summary of the financial balances held by an organization at a specific point in time, and it lists assets, liabilities, and net assets. Assets are the tangible things bought with revenues (part of net assets), like taxes and contribu- tions, or through borrowing. Any debts incurred in this way are liabilities. Put another way, assets are the uses of funding, and liabilities and net assets are the sources of funding. The bal- ance sheet is referred to as “a snapshot of the organization.” It is calculated at one Sipelnt in time, rE EYEE. TTT [REET | JE I SR VEZ HEIR REF ETT RO Tl | Je SR SR el CARR rv 269 of 384 usually at the end of the fiscal year. Often, organizations will balance the books every month, and this action is called the trial balance. Organizations and government entities have all kinds of assets, and these are divided into two categories: current and long-term (or fixed). CURRENT ASSETS m Cash m Accounts receivable m Marketable securities m Prepaid expenses LoNG-TERM OR FIXED ASSETS m Buildings m Land m Investments ( Liabilities are also divided into two categories: current and long-term. CURRENT LIABILITIES m Accounts payable m Salaries payable = (= STE CRN RA] [JR JE IVES HE x [ GandCanyor x | [I StudentPorte’ X | € Word| Mico: x | By FyingTogeth X | + NM CARR 270 of 384 LoNG-TERM LIABILITIES m Mortgages payable m Notes payable C Net assets is the difference between assets and liabilities. Income Statement or Statement of Activities: The Statement of Revenues, Expenditures, and Changes in Net Position An income statement or statement of activities is a profit-and-loss statement, and it is the second financial statement produced after the balance sheet. It reports all the revenues, expenses, and net income for the entire year. In government accounting, there are usually sev- eral funds. One, called the general fund, is the day-to-day operating fund and the fund in which most revenues and expenses are recorded. Statement of Cash Flows The statement of cash flows explains how cash is used in the organization. This statement is divided into three parts: operations, investments, and financing. It is concerned with the flow of cash into and out of the government. It provides information about a government's liquidity and solvency, and examined over time, it provides an understanding of changes in assets, liabilities, and net assets. = [nT RCPEY RA]