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Wilson14 Preface PDF
Wilson14 Preface PDF
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Accounting for
Governmental and
Nonprofit Entities
Fourteenth Edition
Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis
Bangkok Bogot Caracas Kuala Lumpur Lisbon London Madrid Mexico City
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www.mhhe.com
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Susan C. Kattelus
Is a professor of accounting and Head of the Department of Accounting and Finance at
Eastern Michigan University. She received her BBA and Ph.D. from Michigan State
University and MSA from Eastern Michigan University. Professor Kattelus is a certi-
fied public accountant (Michigan) and a certified government financial manager.
Professor Kattelus has served on the Governmental Accounting Standards Advisory
Council as the academic representative of the American Accounting Association, (AAA)
President of the Government and Nonprofit Section of the AAA, and chair of the Non-
profit Task Force of the Michigan Association of CPAs (MACPA), she is currently a
board member of the MACPA. She has taught the public and nonprofit accounting course
for accounting majors and currently teaches the financial management for nonprofit
organizations course in the Nonprofit Management Graduate Certificate program.
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Dr. Kattelus has published articles in The Accounting Review; Research in Govern-
mental and Nonprofit Accounting; Journal of Government Financial Management;
Public Budgeting and Finance; Issues in Accounting Education; Journal of Account-
ing Education; and Journal of Public Budgeting, Accounting and Financial Manage-
ment, among others. She joined as an author on the 11th edition in 1999.
Jacqueline L. Reck
Is an associate professor and the James E. Rooks Distinguished Professor in Account-
ing of the School of Accountancy at the University of South Florida. She received a BS
degree from North Dakota State University, BS and MAcc degrees from the University
of South Florida, and her Ph.D. from the University of MissouriColumbia. She is a
certified public accountant (Florida).
Dr. Reck worked for state government for several years before joining academia.
Currently, she is active in several professional associations. In addition to teaching gov-
ernmental and not-for-profit accounting, Dr. Reck frequently presents continuing pro-
fessional education workshops and sessions. She has provided workshops on
governmental and not-for-profit accounting for local accounting firms and the state
auditor generals staff. Dr. Reck has received several teaching and research awards, is
currently the doctoral program coordinator for the School of Accountancy, and has
chaired or served on several doctoral dissertation committees.
Dr. Reck has published articles in The Journal of Accounting and Public Policy;
Research in Governmental and Nonprofit Accounting; Journal of Public Budgeting,
Accounting and Financial Management; and the Journal of Information Systems,
among others. She joins as author on the current edition.
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Preface
Welcome to the 14th edition of Accounting for Governmental and Nonprofit Entities.
This book continues to be the leading governmental and not-for-profit accounting text, in
part because of the tremendous contributions of Dr. Leon E. Hay, now retired. Dr. Hay
joined Professor R. M. Mikesell of Indiana UniversityBloomington in 1961 on the
third edition of this book, which was first published in 1951. Dr. Earl R. Wilson joined
with the ninth edition (1992) and Dr. Susan Kattelus with the 11th edition (1999) of the
text. Dr. Jacqueline Reck joins this edition of the text. Dr. Wilson and Dr. Kattelus have
followed Dr. Hays example by serving as President of the Government and Nonprofit
(GNP) Section of the American Accounting Association and as members of the Gov-
ernmental Accounting Standards Advisory Council, among other councils and boards.
Professors Wilson, Kattelus and Reck are active in many professional organizations.
Professors Kattelus and Reck regularly teach a GNP course at their universities. Drs.
Wilson and Hay are two of only eight people who have received the Enduring Lifetime
Contribution Award from the Government and Nonprofit Section of the American
Accounting Association.
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vi Preface
INNOVATIVE PEDAGOGY
For state and local government accounting, the authors have found that dual-track
accounting is an effective approach in showing the juxtaposition of government-
wide and fund financial statements in GASBS 34s integrated model of basic
financial statements. It allows students to see that each transaction has an effect on
the fund financial statements (that are designed to show fiscal compliance with the
annual budget), on the government-wide financial statements (that demonstrate
accountability for operational performance of the government as a whole), or both.
This approach better serves students who will design and use accounting informa-
tion systems, such as enterprise systems, to allow information to be captured once
and used for several purposes. Accounting for federal agencies as well as non-
governmental, not-for-profit entities closely parallels this approach as traditional
fund accounting may be appropriate for keeping track of resources with restricted
purposes, but citizens and donors also need to see the larger picture provided by the
entity as a whole.
Governments may continue to prepare fund-based statements throughout the year
and convert to accrual-based government-wide statements at the end of the year until
they invest in information systems that can deliver real-time information for decision
making. We want students to think beyond being transaction-bookkeepers and aspire to
design and use the systems that will make government-wide financial information
available when managers and citizens need it. The City of Smithville Computerized
Continuous Problem is a teaching tool that develops these skills and perspective. The
authors feel so strongly that this general ledger software tool helps students understand
the material that we again provide it with the text. Students have enthusiastically told
us that they like learning by doing and that the City of Smithville problem helped
them to understand the concepts in the book.
TARGET AUDIENCE
The text continues to be best suited for senior and graduate accounting majors who
plan to sit for the certified public accountant (CPA) exam and then audit govern-
mental or not-for-profit entities. Public administration and other students who plan
to provide financial management or consulting services to government and not-for-
profit entities report that the text provides a more comprehensive set of competen-
cies than traditional public budgeting texts. Students in not-for-profit management
education programs find that the coverage of accounting, financial reporting, audit-
ing, taxation, and information systems for both governmental and not-for-profit enti-
ties provides the exposure they need to work across disciplines and sectors. Finally,
students preparing for the certified government financial manager (CGFM) exam
will also find chapters 1 through 12 useful for Examination 2. We encourage all stu-
dents who use this book to consider the challenge and rewards of careers in public
servicein federal, state, and local governments as well as nongovernmental, not-
for-profit organizations.
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Preface vii
SUPPLEMENT PACKAGE
These ancillary materials are prepared by the authors and are available on the Instruc-
tors Resource CD-ROM and/or the textbooks Web site, www.mhhe.com/business/
accounting/wilson14e.
Instructors Guide and Solutions Manual (including teaching and case analysis tips).
PowerPoint lecture presentations.
Test Bank (including a computerized version using Diploma software).
City of Smithville Instructors Version software, Instructors Utility Manual for the
City of Smithville, solution data files for Cases A and B, and solution page image
(.pdf) files for Cases A and B.
The City of Smithville Continuous Computerized Problema general ledger prac-
tice setpackaged free with each new copy of the textbook.
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Acknowledgments
We are thankful for the encouragement, suggestions, and counsel provided by many
instructors, professionals, and students in writing this book. They include the follow-
ing professionals and educators who read portions of this book and previous editions
in various forms and provided valuable comments and suggestions:
Mr. Robert Bramlett Ms. Melanie Nelson
Federal Accounting Standards Advisory California State UniversitySan Marcos
Board Dr. David OBryan
retired Pittsburgh State University
Dr. Kenneth W. Brown Dr. Suzanne M. Ogilby
Southwest Missouri State University California State UniversitySacramento
emeritus Dr. James Patton
Dr. Barbara Chaney Federal Accounting Standards Advisory
University of Montana Board and University of Pittsburgh
Mr. Jeremy Craig Dr. Terry K. Patton
Chesterfield, Missouri Governmental Accounting Standards
Ms. Rebecca Craig Board
St. Charles County, Missouri Ms. Janet Prowse
Mr. Michael Crawford University of Nevada, Las Vegas
Crawford & Associates Dr. Walter A. Robbins
Ms. Mary Foelster University of Alabama
American Institute of Certified Public Mr. Lawrence Roman
Accountants Cuyahoga Community CollegeEast
Ms. Marie Hunniecutt Campus
University of South Florida Dr. Relmond P. Van Daniker
Mr. J. Thomas Luter Association of Government Accountants
formerly, U.S. Department of the Mr. Jay Wahlund
Treasury Minot State University
Ms. Johanna Lyle Mr. James F. White
Kansas State University Harvard Extension School
Mr. Bruce K. Michelson Dr. William T. Wrege
U.S. Government Accountability Office Ball State University
Mr. Roger P. Murphy
Iowa State University
retired
We acknowledge permission to quote pronouncements and reproduce illustrations
from the publications of the Governmental Accounting Standards Board, American
Institute of Certified Public Accountants, International City/County Management
Association, and Crawford and Associates. Special thanks go to our spouses, Florence
J. Wilson and Albert F. Hohenstein, for their patience, understanding, and inspiration
in completing this book, and we dedicate it to them.
Although we are extremely careful in checking the text and end-of-chapter material,
it is possible that errors and ambiguities remain in this edition. As readers encounter
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Acknowledgments ix
such, we urge them to let us know so that corrections can be made. We also invite every
user of this edition who has suggestions or comments about the material in the chap-
ters to share them with one of the authors, either by regular mail or e-mail. The authors
will continue the service of issuing Update Bulletins to adopters of this text that
describe changes after the book is in print. These bulletins can be downloaded from the
text website at www.mhhe.com/business/accounting/wilson13e or either of the authors
websites:
Dr. Earl R. Wilson
School of Accountancy
University of MissouriColumbia
303 Cornell Columbia, MO 65211
wilsonea@missouri.edu
http://www.missouri.edu/~accterw
Dr. Susan C. Kattelus
Department of Accounting and Finance
Eastern Michigan University
406 Owen Ypsilanti, MI 48197
Susan.kattelus@emich.edu
http://people.emich.edu/skattelus
Dr. Jacqueline L. Reck
School of Accountancy
University of South Florida
4202 East Fowler Avenue, BSN 3403
Tampa, FL 33620 jreck@coba.usf.edu
http:www.coba.usf.edu/departments/
accounting/faculty/reck
December 2005
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Brief Contents
Preface v 16 Accounting for Colleges and
1 Introduction to Accounting and Financial Universities 00
Reporting for Governmental and Not-for- 17 Accounting for Health Care
Profit Entities 00 Organizations 00
2 Principles of Accounting and Financial
Reporting for State and Local Govern- GLOSSARY 00
ments 00 GOVERNMENTAL AND
3 Governmental Operating Statement NOT-FOR-PROFIT
Accounts; Budgetary Accounting 00 ORGANIZATIONS 00
4 Accounting for Governmental Operating
INDEX 00
ActivitiesIllustrative Transactions and
Financial Statements 00
5 Accounting for General Capital Assets
and Capital Projects 00
6 Accounting for General Long-Term
Liabilities and Debt Service 00
7 Accounting for the Business-Type
Activities of State and Local
Governments 00
8 Accounting for Fiduciary Activities
Agency and Trust Funds 00
9 Financial Reporting of State and Local
Governments 00
10 Analysis of Governmental Financial
Performance 00
11 Auditing of Governmental and Not-for-
Profit Organizations 00
12 Accounting and Reporting for the
Federal Government 00
13 Budgeting and Costing of Government
Services 00
14 Accounting for Not-for-Profit
Organizations 00
15 Not-for-Profit OrganizationsRegulatory,
Taxation, and Performance Issues 00
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Table of Contents
Preface v Appendix: Summary Statement of Governmental
Accounting and Financial Reporting Principles 00
Chapter 1 Key Terms 00
Introduction to Accounting and Financial Selected References 00
Reporting for Governmental and Not-for- Questions 00
Profit Entities 00 Cases 00
Exercises and Problems 00
What Are Governmental and Not-for-Profit
Organizations? 00 Chapter 3
Distinguishing Characteristics of Governmental and Governmental Operating Statement
Not-for-Profit Entities 00 Accounts; Budgetary Accounting 00
Sources of Financial Reporting Standards 00
Determining Whether a Not-for-Profit Organization Is Classification and Reporting of Revenues and
Governmental 00 Expenses at the Government-wide Level 00
Objectives of Financial Reporting 00 Reporting Direct and Indirect Expenses 00
Financial Reporting of State and Local Governments Program Revenues and General Revenues 00
Comprehensive Annual Financial Report 00 Reporting Special Items and Transfers 00
Expanding the Scope of Accountability Structure and Characteristics of the General Fund;
Reporting 00 Classification and Description of Operating
Overview of Chapters 2 through 17 00 Statement Accounts 00
GASB Statement No. 34 Principles and Standards 00 Governmental Fund Balance Sheet and Operating
Analysis of Governmental Financial Statements; Statement Accounts 00
Financial Statement and Performance Audits 00 Budgetary Accounts 00
Accounting and Financial Reporting for the Federal Terminology and Classification for Governmental
Government and Not-for-Profit Organizations 00 Fund Budgets and Accounts 00
A Caveat 00 Classification of Appropriations and
Key Terms 00 Expenditures 00
Questions 00 Classification of Estimated Revenues and
Cases 00 Revenues 00
Exercises and Problems 00 Budgetary Accounting 00
Recording the Budget 00
Chapter 2 Budgetary Control of Revenues 00
Principles of Accounting and Financial Budgetary Control of Encumbrances and
Reporting for State and Local Expenditures 00
Governments 00 Accounting for Allotments 00
Computerized Accounting Systems 00
Activities of Government 00
Accounting for Government-wide Operating
Governmental Financial Reporting Entity 00
Activities 00
Integrated Accounting and Financial Reporting
Appendix: Accounting for Public School
Model 00
Systems 00
Government-wide and Fund Financial Statements 00
Key Terms 00
Fiscal Accountability and Fund Accounting 00 Selected References 00
Fund Categories 00 Questions 00
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xii Contents
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Contents xiii
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xiv Contents
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Contents xv
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xvi Contents