Brief report Government and not for Profit Accounting - Case Study Example

Some governments set up independent bodies to formulate guidelines that are followed in the process of financial reporting. These bodies come up with rules and regulations that are followed by these entities. These independent bodies also determine which institutions are supposed to submit financial reports. This paper aims at illustrating a good understanding of the need for financial reporting by the government and private entities. This is going to be achieved by discussing the importance of regulation of financial reporting by government and not-for-profit entities.

The regulation of financial reporting serves the purpose of acting as a check and balances system. The system is meant to limit the powers of the government on spending public finances, raising taxes to cover government spending. Regulation on financial reporting also helps shed light on government plans of public money expenditure (Ruppel, 2009 p201). This requires the government to state the amount of finances it holds and the nature of its intended expenditure. The purpose of government financial reporting is to provide information that facilitates decision making by different institutions.

These institutions are citizens of that country, citizen representatives and private business entities. Intergovernmental agencies can also be described as parties that benefit from government financial reporting. . The purpose of these objectives is to give information that facilitates decision making by various institutions with stakes (Earnst & Young, 2011 p 523). Accountability is the main objective of government financial reporting because it transfers responsibility from citizens to another body.

The analysis of accountability is met when financial reporting facilitates the use of financial data in determining the extent of current expenditure supported by current income. There are two basic types of budgets that are used by both governments and corporate entities. These include capital budgets and annual operating budgets. Government annual operating budgets are expenditure appropriations for a specific fiscal year and estimated revenues. Capital budgets constitute the expenses incurred in fixed asset acquisition and government construction projects like laying down of infrastructure.

Governments record these budgets as a means of compliance or control (Hussey, 2010 p174). Not-for-profit entities are those organizations or institutions whose activities are focused on other objectives other than making a profit. They include non-governmental organizations involved in charity work and other community based projects that the government cannot fulfill adequately. Not-for-profit entities face a challenge when it comes to financial reporting as laid down by ASSB. This is because they lack the same financial structure and background like the government.

Not-for-profit entities do not have revenue-generating sources like the government, which means they cannot adopt the same budgetary procedures like the government. Their main source of operating funds comes from grants and donations, from charitable