Problem 1. There are four basic financial statements for a for-profit business.
Those statements are an income statement, a statement of owners' equity, a balance sheet, and a cash flow statement. In contrast, the two basic financial statements for each of the governmental funds of a state or local government are a balance sheet and a statement of revenues, expenditures, and changes in fund balances. Using the General Fund of a local government as an example, address the following. Discuss two or three of the differences of the balance sheet for that fund as compared to a balance sheet of a for-profit business. Also discuss two or three of the differences of the statement of revenues, expenditures, and changes in fund balance for that fund as compared to an income statement of a tor-profit business.
Problem 2. As the newly elected chief financial official of Fairly New City, you have certain decisions to make regarding the financial reporting of the city. You quickly realize that the city's financial reporting is subject to Governmental Accounting Standards Board (GASB) Statement 34 but a Comprehensive Annual Financial Report (CAFR) has never been produced during the city's fifteen years of existence. Draft brief comments that you will make to the city council to explain the benefits of preparing a CAFR for the city especially considering the need for the financing of infrastructure. Also, prepare a brief summary of the types of information that you will want your staff to gather to include in the Statistical section of the report.
Problem 3. Describe the proper accounting for the revenue recognition for each of the following three scenarios. Within your answer, for example, state if revenue should be recorded, when the revenue {if any) should be recorded, and the type of restriction (if any) that should be reflected. Include additional explanations too if you feel that will strengthen your response.
a) Lisa informed her church mater that she had named the church in her will and later provided a written copy of the will to that organization. The will stated that upon her passing, the money received by the church was to be used to establish a scholarship fund with only the earnings available to pay for one scholarship each year.
b) A skilled carpenter made much needed repairs to the roof for a private not for-profit free of charge. The not-for-profit would have had to pay $2,200 for this service if not donated.
c) Numerous contributors made pledges ranging from $50 to $400 during a public radio station's annual fund drive. The total pledged was 540,000 and was for current collection (not part of multi-year pledges). The use of the money is to be at the sole discretion of the station's management for operations, debt repayment, or capital assets. From past experience with the fund drives, it is expected that 5% of the pledges will not be collected.
The book I am using is:
Wilson. Accounting for Governmental and Nonprofit Entities, 15th Edition. McGraw-Hill Learning Solutions, 2010.