Governmental and Not for Profit entities follow a different form of accounting. An accounting form that is modified and tailored to fit the needs and goals of the entity; hence the modified accrual basis. Since governmental and not for profit entities are not focused on generating revenues, the assets they purchase and liabilities they are in debt to are treated and classified differently. The following is a brief description on how governmental and not for profit entities distinguish, recognize and classify assets.
Special items and extraordinary items may sound similar and their definition may be very close to one another, but in fact they are different. Let us define special items first. Special items are those that are unusual OR infrequent (but not both). On the other hand extraordinary items are those that are both unusual AND infrequent. This “OR”, “AND” can make a world of difference in determining the nature of the event, its significance and the method in which it should be recognized.
In understanding the above definitions and the differences between the two types of items, it is noteworthy to mention that an extraordinary item is ALWAYS special; while a special item is NEVER extraordinary.
Accounting is commonly referred to as the language of business. It is a language of numbers, filled with debits and credits that portray the financial story of an entity. There are different categories or genres of accounting per se. Financial accounting is for profit oriented entities. Governmental accounting is for governmental and not for profit entities. Managerial accounting is for internal and is mainly concerned with production. Federal income tax accounting is for both personal and corporate taxes.