Accounting, by Its Nature, Requires a Set Term Paper

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Accounting, by its nature, requires a set of standards that are exactly the same industry-wide. If there were not established rules for determining revenues, profits, expenses, and other influences on a company's bottom line, there would be no way to evaluate a corporation's effectivity, production, or potential. A lack of established standards would also mean that no two companies could be honestly compared, since their accounting methods could be so significantly different that their financial statements showed vastly different accounting methods.

In light of these potential discrepancies in reporting methods, the bodies that govern accounting have established Generally Accepted Auditing Standards, or GAAS. Generally These principles are required to be applied in all accounting situations, and they are extensive enough so that almost every possible scenario has a standard response. Interest owed in Houston is reflected on a financial statement in the exact same way that interest owed in New York City is.

Government, however, is different for a variety of reasons. Government -- federal, state, and local -- has many of the same accounting reports as private industry -- revenue, expenses, interest, salaries, pensions.

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However, government accounting is more complex due to the variety of revenue sources and expenditure time-frames (among other variables) that come with government operation. Occasionally government-mandated standards themselves conflict with Generally Accepted Accounting Principles themselves (Apostolou and Crumbly 1:41). Government is managed by funds, which have separate accounting reports for each fund, despite there being a need for a comprehensive report of the entire government's balances (i.e., even if one fund is perfectly balanced, the government budget as a whole might not be).

Reports detailing expenditures and revenues with a cash basis may be prepared for these individual funds with little variation. Comprehensive annual financial reports help with the task of compiling this information for the government entity as a whole, including its individual funds. However, these reports, if left on a simple cash basis, "ignore the long-term assets and liabilities of government,….....

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