Financial Analysis of City of Cincinnati

Introduction3

Discussion3

Difference between the Accounting of Government with the Commercial Entity4

Revenue4

Expenses4

Profit4

Ownership & Equity5

Reporting Entity5

Management's Discussion and Analysis6

Conclusion7

References8

Financial Analysis of City of Cincinnati

Introduction

Purpose and structure of governments is primarily different from the commercial enterprises in many ways. Government is supposed to overlook a wide range of activities. Their objectives, purposes, expenditures, procedures, stakeholders and revenue generating characteristics vary from commercial enterprises (Cincinnati, 2013). Governments are more likely concerned with the budgets, whereas, commercial entities are mainly focuses on increasing the profitability. United States of America have different set of accounting standards to address the need of governmental entities or commercial entities.

This report elucidates the concept of accounting and reporting standards from the perspective of government. It describes the main differences between the accounting of government and accounting of a business enterprise. In addition, financial report of “City of Cincinnati” Ohio for the year ended 31st December, 2002 is also evaluated on the basis of reporting entity and the management discussion and analysis section.

Discussion

Accounting of Government is composed of different accounting standards that a public sector entity uses. GASB (Government Accounting Standard Board) propose specific standards to be followed in the reporting and accounting of the local governments and the states. Role of GASB is to ensure the improvement of accounting standards for the state & local governments. The underlying principle behind the accounting of commercial entities and the accounting of governments is same, but they may vary from each other on the basis of different grounds.

Difference between the Accounting of Government with the Commercial Entity

It is essential to understand how governmental accounting varies from that of profit enterprises. Following are the main differences between the accounting of government and the accounting of a profit enterprise.

Revenue

Government may generate its revenue from the sale of public entities (privatization) and taxes (duties, sales tax etc). Government reports their revenue in the form of taxes that it collects under the head of various revenue sections. Whereas commercial enterprise raise their revenues from the sale of goods and services. Governments do not directly link its revenue with the sales of goods; however revenue generation of a commercial enterprise depends entirely on the sales of good. Classification of the tax sources can be seen in the financial statement of the City of Cincinnati.

Expenses

Expenses section of government includes all those expenses that are incurred on the welfare maximization of ...