Accounting for Representation

Accounting for Representation

Project description
Read the case study about City of Yorba Linda, California at page 750 in Merchant and Van der
Stede (2012), Management Control Systems, Prentice Hall1. After reading the case study, answer
the following questions:

1. The City of Yorba Linda uses fund accounting. What is fund accounting and what are its
strengths and weaknesses as compared to standards accrual accounting for use in a
municipality such as Yorba Linda?

2. Did the City of Yorba Linda expect to have a good year in fiscal year 1991�1992? How do
you judge?

– Please write total word count not exceed 770 words (exclude references)

– Please use following sources as main reference for answering the question (I will attached both file).

1. Merchant and Van der Stede (2012), Management Control Systems, Prentice Hall. Chap. 17
2. Granof and Khumawala (2011), Government and Not?for?Profit Accounting. Chap. 2 p. 37?44;
Chap. 11 p. 473?481

sample answer

Government and not-for-profit organizations use fund accounting. Fund accounting system places emphasis on the financial accountability rather than profitability. It seeks to show how the appropriated money was used as opposed to how much profit was generated. Under this accounting system, fund is taken as the self-balancing accounts maintained for specific purposes as per the regulations and the laws or other special limitations and restrictions (Stickney 2010, Pg. 56). On the other hand, accrual accounting uses the accrued revenue and expense in determining the profitability of the organization.  The main differentiating element between fund and financial accounting are the measurement focus and basis of accounting. The measurement determines the transaction that will be recorded while basis of accounting determines when the transaction would be recorded (Ruppel, 2010, Pg. 23-28).

While fund accounting utilises modified accrual basis of accounting the financial accounting makes use of accrual accounting basis. In terms of measurement, fund accounting uses flow of the current financial resources method while financial accounting uses flow of the economic resources method. The municipalities, governments and NGO’s use the fund accounting to instil accountability in the management of the appropriated amount of money. Budgeting is the most used control method in governments. Fund accounting helps in budgeting by offering the information, which will help the managers keep the funds within the allocated amount and in compliance with the sources of the fund. Governments and municipalities use fund accounting to evaluate each project and activities undertaken…………………..

Reference list

Bogui, F. (2009).Handbook of governmental accounting. Boca Raton: CRC Press.

Granof and Khumawala (2011), Government and Not?for?Profit Accounting. Chap. 2 p. 37?44; Chap. 11 p. 473?481.

McCarthy, J., Shelmon, N. & Mattie, J. (2012).Financial and Accounting Guide for Not-for-Profit Organizations.Hoboken: John Wiley & Sons.

Merchant and Van der Stede (2012), Management Control Systems, Prentice Hall. Chap. 17

Ruppel, W. (2010). Governmental accounting made easy. Hoboken, N.J: Wiley.

Stickney, C. (2010). Financial accounting : an introduction to concepts, methods, and uses. Mason, OH: South-Western/Cengage Learning.

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