Describe the differences in cash flow statements required by GASB standards when

Question

Describe the differences in cash flow statements required by GASB standards when compared with cash flow statements required by FASB standards.

The Village of Watkins Glenn operated an educational program for at-risk middle school children. Businesses and nonprofit organizations sponsor the children and pay the registration fee.The following cash receipts were collected:

Registration 310,000

Cash loan from bank       65,000

The following cash disbursements were made:

Payroll taxes 30,600

Labor 102,800

Insurance 12,400

Interest 3.050

Purchase school bus 62,000.

Prepare the journal entries to record revenues and disbursements if the city treats the program as an enterprise fund

Prepare the journal entries to record revenues and disbursements if the city treats the program as a special revenue fund.

Explanation / Answer

PART 1

Differences in cash flow statements required by GASB standards and required by FASB standards are as follows-

1. FASB has three cash flow reporting categories, viz - Operating, Investing and Financing.
But
GASB has four cash flow reporting categories, viz - Operating, Investing, Capital & Related financing and Non capital financing.

2. GASB requires direct method of cash flow
But
FASB allows both direct and indirect method of cash flow.

3. GASB offers more accurate and Transparent representation of financing activities compared with FASB

PART 2

ENTERPRISE FUND

SPECIAL REVENUE FUND

JOURNAL Date Particulars Debit Credit Cash $ 310,000.00 Operating Revenue - Charge for Services $ 310,000.00 Cash $    65,000.00 Long term notes payables $    65,000.00 Operating Expenses - Payroll tax $    30,600.00 Operating Expenses - Wages $ 102,800.00 Operating Expenses - Insuarance $    12,400.00 Non-Operating Expenses - Interest $      3,050.00 Equipment - Bus $    62,000.00 Cash $ 210,850.00

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