Accounting for Nonprofit and Governmental Entities
Nonprofit and Governmental: Some clients ask about accounting for nonprofit entities and governmental entities. Discuss the reporting requirements for each and how they differ from a for-profit entity.
A.Explain how to address compliance with Government Accounting Standards (GAS) in nonprofit and governmental financial statements. Support your response with academic source(s).
B. Explain how the analysis of nonprofit and governmental financial statements differs from analysis of traditional financial statements. Provide academic examples to support your response.
C. Compose example financial statements for your company as a nonprofit entity and as a governmental entity. Ensure all information is entered accurately and the statements are compliant with GAS.
Non-Profit and Governmental Financial Compliance
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Milestone 4: Non-Profit and Governmental Financial Compliance
In government and non-profit organizations, it is essential to adopt the Government Accounting Standards (GAS) as it facilitates comparability, transparency, and comparability of the information covered in the financial statements. In non-profit organizations, one should be guided by the stipulations laid in the Financial Accounting Standards Board's (FASB) Accounting Standards Codification (ASC) 958. The FASB statement no. 117 serves as a guide for financial statement reporting in non-profit entities. To this end, such entities are required to categorize their net assets as well as provide information about the restrictions that have been placed by their donors. FASB 117 requires a nonprofit to declare the level of restrictions placed in each of its funds, report the financial status of each of its funds in line with the generally accepted accounting principles (GAAP) standards, use the cash-basis and accrual-basis accounting, and present a comprehensive accounting of all donations in financial statements including the cash flow statements among others (Bottiglieri, Kroleski, & Conway, 2011). The required financial statement for a non-profit in line with the GAAP standards is balance sheets, statements of cash flows, income statements, and statement of functional expenses.
In governmental organizations, the preparation of financial statements is guided by the comprehensive guidelines outlined in the Government Accounting Standard Board (GASB) Statement No. 34 when they are preparing financial statements. GASB Statement No. 34 dictates that a governmental organization should declare its financial statement in accordance with GAAP standards by including a statement of net position, a statement of activities, and a statement of cash flows. The specific accounting standard that government should adhere to is the modified accrual basis of accounting, which recognizes revenue when measurable and available (Anders, 2020), and expenditures when incurred and is different from the accrual basis used by non-profit entities. Additionally, governmental entities are subject to external audits conducted by independent auditors to ensure compliance with GAS and other regulatory requirements. These audits provide assurance to stakeholders that financial stateme...