Question

Write a 700- to 1,050-word paper that analyzes the differences between generally accepted accounting principles for public and private colleges and universities. Explain why it is important to identify whether the institution is public or Private. Clarify which of the two-public or private-follow the same reporting guidelines as nongovernmental not-for-profit organizations. Analyze, in general terms, the financial statements that must be prepared by a private college or university and those that must be prepared by a public college or university Identify the major format differences in financial reporting for public and private colleges and universities. Formulate an opinion about which statement provides more transparent information regarding revenues and on the amounts of restricted resources.

Answer 1

Educational institutions play a key role in this society . Educational institutions are established in various ways. Some of the institutions are established under the Government sector while some of them are established by the not-for- profit organisations or NGO's . These organistions are run by the societies under co-operative society act. These institutions do not run behind profits. Private educational institutions are funded for getting profits.These organisations are purely profit motive organisations like other business organisations.

As per the FASB (Finanacial Accounting Standards Board) established during the year 1973 and GASB (Government Accounting Standards Board) established during the year 1984 both public and private educational organisations have to follow same reporting guidelines as non governmental not for profit organisations.Today in the present scenario education has become a commercial business. In order to control and co-ordinate, some of the boards like FASB and GASB have come up to bring modifiications in the educational accounting system. Generally, this educational accounting system is accrual based.

The main drawbacks of the present day education accounting system are -

High publicity, hype creation, collecting lots of donations from the parents of the students ,even from those who cannot afford to pay and are below poverty line, attracting parents by quoting some offers like concession and some of them offer free education in the beginning to join in the college but later on demand the fee. The above listed drawbacks are in concern with the junior or degree colleges while coming to professional instituitons like engineering and medical colleges,management courses like PGDM and MBA etc management seats are sold above the prescribed fee in the name of building fund,development activities of the colleges.This amount is maintained confidential without showing it in the accounts.So, the account maintaind by the private or public colleges should be transparent.Government sector organisations are totally dependant on grant in aid by the government.Generally, government controls the entire accounting system.

To ensure financial discipline in educational institutions financial awareness, financial information and financial advice are needed .

Generally educational institutions accounting system is as follows:

Receipts and payments accounts: This is nothing but cash book. All the receipts debited to the cash book and all the payments credited to the cash book. This account starts with opening balance and closes with closing balance. This account shows cash and bank balances of the institutions.

Income and expenditure account: This is an important statement for these institutions. For the preparation of this statement to find out surplus or loss of the institution. This is like profit and loss account . All the revenue expenses like salaries to faculty& rent related to educational institutions are debited to the income and expenditure account and credited to all the revenue income like tuition fee, admission fee. The surplus amount is transferred to capital fund .In case deficit occurs that amount will be deducted from capital fund .

Balance sheet: Balance sheet is a statement showing assets and liabilities of the institutions. This balance sheet shows potentiality of the institution.

Funds flow statement :In co-ordination with receipts and payments account funds flow statement is also prepared by some of the big organisations to control the source and expenditure.

Some private organisations prepare accounts like business organisationsi.e,profit and loss account,Balance sheet .But Government intends to impose uniform accounting system for all the types of institutions. Imposing uniformity in accounting system lots of fraud and other illicit accounts can be eradicated. Auditing also becomes easier. Auditing should be mandatory for all educationsl institutions accounts and should be published openly for the public.

Auditing should be credidble with an authentic auditing team. Chartered accountants of India give a report to the central government what steps to be taken by the governement for controlling the irregularities in the accoun ting system of educational institutions.The government also considers the auditing team advices and suggestions for the formulation of new educational policy.World wide educational system is not under the same roof. It is necessary to have   global education system and accounting system.

The content analysis of NAAC reports of universities and colleges was done to find out the observations of review members. These were further classified into (i) strengths, (ii) weaknesses, (iii) opportunities, (iv) challenges and (v) recommendations for quality enhancement.

The conclusion based on evidences shows that accounting education, as a whole is still in need to reform so that it proved to be more effective in reducing unemployment and to face the present challenges of global economy in the field of business and industry.