Chapter 17, Problem 1UTI

To determine

Introduction: The GASB is the board that provides the guideline to the governmental units about proper accounting of transactions. As per GASB, the accounting for funds of a governmental unit is different from that of private units.

To compare: Basis of accounting for governmental activities and business activities.

Explanation of Solution

Governmental activities refer to the activities that are undertaken for the welfare of the people and the benefit of society.

Business activities refer to the activities that are performed with a purpose to generate revenue.

Basis of accounting for both can be compared as:

Governmental Activities	Business Activities
The GASB is the board that provides the guideline to record governmental activities.	GAAP is followed to record the business-type activities.
Three major statements are prepared when a governmental unit records such activities.	Four major financial statements are prepared when business records such activities.
The statement of activities is the statement that is prepared only by the governmental units for such activities.	A statement of retained earnings and cash flow statement is prepared only by the business to record such activities.
Inflows and outflows from governmental activities may be unassigned or assigned for a specific purpose.	Inflow and outflow of cash are incurred from specific activities but can be used anywhere.