[salena786]

I am confused about some of the rules for Governmental accounting statement of cash flows. There are about 7 rules given under Becker that list the differences between the statement of cash flows for government accounting and commercial accounting. I do not understand the logic behind these statements, if anyone could please explain it better I’d really appreciate it.

1) Interest income/cash receipts are reported as investing instead of operating.

2) Interest expense/cash payments are reported as financing (capital or non capital) instead of operating

3) Capital assets purchased are financing instead of investing

4) Cash inflows/outflows concerned with equity are investing; —> What does that mean?

I can’t seem to form a logical explanation to how these make sense. If anyone could please explain them it would help a lot!

[Anonymous]

Edit: Totally misread this post.

[jas0n092]

FAR - 85 8/12/14
AUD- 95 11/8/14
BEC- TBD 1/17/15
REG TBD May 2015

[salena786]

Sorry, I edited the post ARCPA2B

[Determined CPA]

I have a flashcard on this at home so will post later – I just memorize (which apparently I haven't done yet lol)

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Anonymous]

Whenever you look at this remember to always first tell yourself that making a profit is not the goal of a government. Governments are funded through tax dollars, fees, bond/loan debt, federal grant funds pretty much anything that isn't related to equity or sales transactions. There are no shareholders.

Hence, things such as interest income/expense are going to be non-operating because a government incurs interest income through investing and they have interest expense through paying interest on say a bond issuance.

For capital assets think of a city. A capital asset a city would own is a road or a street which is used for the public good. Then, we all pay taxes on those roads/streets thus giving the city revenue they will need to maintain those streets (a form of financing).

Hope this helps

[salena786]

Thank you Brooks303, your explanation really cleared up a lot. I am still a bit confused but I have a much better understanding than before. I would appreciate any extra notes determinedcpa, thanks a lot!

[Anonymous]

In someway it is really similar to IFRS.(where int received is considered as investing and int paid is viewed as financing). Think in this way. Why do you receive those interest payment? Because earlier you purchased bond from other company. Where do you record bond purchase? In investing section! So that's why they think interest received should be classified as investing as opposed to operating.

Hope it helps

[Author]

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