Why is it difficult to develop accounting principles that are appropriate for governments within the same category (e.g., cities, counties) and even more difficult to develop them for governments within different categories?
Accounting Principles for Governments and the Balance Sheet
Instructions: Provide complete answers to the following two problems.
Why is it difficult to develop accounting principles that are appropriate for governments within the same category (e.g., cities, counties) and even more difficult to develop them for governments within different categories?
Upon examining the balance sheet of a large city, you notice that the total assets of the general fund far exceed those of the combined total of the city’s ten separate special revenue funds. Moreover, you observe that there are no funds for public safety, sanitation, health and welfare, and general administration—all important functions of the government.
Why do you suppose the city hasn’t attempted to ‘‘even out’’ the assets in the funds?
Why does it not maintain funds for each of its major functional areas?
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