Comparison of Financial Statements Term Paper

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Publicly and privately-held companies are run very differently. They each have different laws and statutes to obey, different policies and procedures for operation, and different accountability measures. This difference shows in an examination of a government CAFR, that of the city of Housong, compared to the corporate CAFR of Southwest Airlines.

Both CAFRs summarize the organization's expenditures and revenues. Each category is, of course, divided into more specific sections; for example, Southwest's revenue is divided into passengers, freight, and other sources of income. Their expenditures include equipment, fuel, insurance, and employee salaries and benefits. Houston has a similar expression of its expenditures and revenue: it lists what the City is spending its money on (employee salaries and benefits, claims and settlements, and maintenance fees for equipment and property) as well as where the City is getting its income -- property taxes, hotel and other city taxes, and licenses and permits, for example. The two entities are similar in that both statements demonstrate several sources of revenue and several ways that the money is spent, whether on employees, property, or operating costs.

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Both CAFRs also detail each organization's debt payments and the amount of interest going toward loan agreements. Both have debt, borrowed from other entities, and as such the interest on these notes is part of their expenditures and budget. Each CAFR goes into detail about how much interest is being paid on long-term loans. These similarities do not tell the whole story, though. There are many differences between the two statements.

One obvious difference between the two statements is Houston's source of income through taxes. A large portion of Houston's CAFR is dedicated to showing how much and what type of taxes were levied and collected by the city. There are not only property taxes, but also hotel occupancy taxes. The city of Houston obviously receives a large part of its income from taxes on its residents; taxes are a required cost for residents and as such they are not going to fluctuate,….....

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