The common goal of accountants is to record business transactions, analyze financial data and produce financial statements. However, the rules and regulations that steer accountants in government and the private sector can be different. It is important for accountants in each sector to be aware of the issues pertaining to each.
Financial Standards Accounting Board
The Financial Standards Accounting Board, or FASB, is the accounting rules-setting organization for private and public corporations in the U.S. It has no jurisdiction over governmental entities. FASB determines the rules that are contained within the Generally Accepted Accounting Principles, or GAAP, which is the set of accounting rules and regulations that guide the accounting profession.
Governmental Accounting Standards Board
The accounting performed by governmental entities is overseen by the Governmental Accounting Standards Board, or GASB. The GASB and FASB are both umbrella groups of the Financial Accounting Foundation. The GASB is independent from any governmental entity but is permitted to lobby Congress and other government organizations under the auspices of the Financial Accounting Foundation.
The missions of for-profit accounting and governmental accounting are vastly different. For-profit accounting professionals focus primarily on the profitability of the firm. For-profit financial statements are produced to demonstrate net profit and net worth. However, governmental accountants focus on the accountability of government funds. The majority of revenue generated by the government is acquired through tax collection, which places a high emphasis on the accountability of those funds.
The accounting treatment of capital assets is one the most important principles of both types of accounting. Capital assets are treated differently by governmental accounting professionals than by for-profit corporations. A capital asset in business is analyzed to determine its revenue-producing potential. A capital asset in government is analyzed to determine its ability to provide services to the governmental entity's constituents.