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Brilliant_brown [7]
2 years ago
11

Accounting and financial reporting for state and local governments use, in different places, either the economic resources measu

rement focus and the accrual basis of accounting or the current financial resources measurement focus and the modified accrual basis of accounting. Discuss the differences in measurement focus and basis of accounting related to (a) the conceptual differences, (b) differences in revenue recognition, (c) differences in expense/expenditure recognition, (d) differences in recognition of fixed assets, and (e) differences in the recording of long-term debt.
Business
1 answer:
Agata [3.3K]2 years ago
7 0

The differences in measurement focus and basis of accounting related:

<h3>What is Accrual Accounting?</h3>

Accrual accounting is the process of recording the transactions whenever the expenses or revenues are incurred. This helps the employees not to miss the transactions that occur daily. The revenue recognition will be appropriate under this method.

(A) Differences in conceptual differences :

The economic resources measurement focus measures all economic resources, including capital assets and long-term debt.

The current financial resources measurement focus measures financial resources and does not recognize long-term assets and liabilities. The accrual basis of accounting recognizes revenues When earned and expenses when incurred. (when goods or services are used).

The modified accrual basis of Accounting recognizes revenues when measurable and available to finance Expenditures of the current period. The modified accrual basis of accounting recognizes expenditures generally when the fund liability is incurred except for payments of interest on long-term debt Which are recognized when due.

(B) Differences in Revenue Recognition:

Under accrual accounting revenues based on exchange transactions are recognized when earned. Revenues based on non-exchange transactions are recognized according the provisions of GASB Statement 33.

Under modified accrual accounting, revenue recognition is modified to require that the amount be measurable (determinable) and available to finance expenditures of the current period.

(C) Differences in Expense/Expenditure Recognition:

Under accrual accounting, expenses are recognized when incurred. Expenses are often matched with revenues those expenses generate, in the case of exchange transactions. Accruals are required for interest and other expenses, regardless of when cash is to be transferred.

Under modified accrual accounting, expenditures (not expenses) are recorded generally when goods or services are received.

(D) Differences in recognition of fixed assets:

Under the economic resources measurement focus and accrual accounting, fixed assets are capitalized and depreciated .

Under the current financial resources measurement focus and modified accrual accounting, fixed assets are not capitalized or depreciated; rather fixed assets are charged to expenditures when received.

(E) Differences in the recording of long-term debt:

Under the economic resources measurement focus and accrual accounting, long-term debt is recorded as a liability; repayments are recorded as a reduction of that liability.

Under the current financial resources measurement focus and modified accrual accounting, long-term debt is not recorded as a liability.

Learn more about Accrual Accounting on:

brainly.com/question/25817056

#SPJ4

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4.50%

Explanation:

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Current ROE = Net Income / Equity = $21,000 / $280,000 = 7.50%

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Change in ROE = 12% - 7.50%

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