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20 Cards in this Set

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-Governmental and not-for-profit organization financial reporting is designed to demonstrate the accountability of each organization for the stewardship of the resources in their care.
-In accounting for public funds, both governments and NFP organizations seek to demonstrate their operational accountability for the entity taken as a whole and their fiscal responsibility for specific funding.
-Accountability Issues: focused on providing efficient and effective delivery of services w/ either public or private resources shielded from taxation.
-Financial statements focus on (1) Timeliness, (2) Consistency, and (3) Comparability. Relevance is difficult to achieve.
Fund Accounting
-Like legal restrictions, enables service and mission-driven organizations to easily monitor and report compliance with spending purposes (fund restrictions), spending limits (budget), and other fiscal accountability issues.
-Foundational to governmental and NFP organizations.
-External fund reporting is only allowed for governmental units.
-NFP organizations may use them for internal accounting.
Governmental Accounting Principles and Standards
-The Governmental Accounting Standards Board (GASB), which is the governmental counterpart of the FASB, establishes accounting and reporting standards for governments. Hierarchy of GAAP as it relates to governments was established by GASB 55 as follows:
1. GASB Statements and Interpretations
2. GASB Technical Bulletins, AICPA Industry Audit Guides, and AICPA Statements of Position
3. AICPA Practice Bulletins
4. GASB Implementation Guides
-The Governmental Finance Officers Association (GFOA) is similar to AICPA, provides optional reporting guidance.
Government Accountability Office
-(GAO) prescribes "government auditing standards" (Yellow Book standards) for audits of governmental organizations and federal assistance programs.
-Federal financial assistance is primarily awarded to governments and NFP organizations and is frequently subject to audits under the Single Audit Act which requires compliance w/ government auditing standards.
-Like a checkbook, it is a sum of money or other resource segregated for the purpose of carrying on a specific activity or attaining certain objectives in accordance w/ specific regulations, restrictions or limitations, constituting an independent fiscal and accounting entity.
-Each fund is a self-balancing set of accounts.
-Governmental accounting is generally tested w/in the context of one of three themes: (1) Fund Structure, (2) Fund Accounting, (3) External Reporting.
Fund Structure
-GASB 34 defines a fund structure for governments. Eleven fund types are classified into the following three generic categories: (1) Governmental Funds, (2) Proprietary Funds, (3) Fiduciary Funds.
-Fund F/S's should be separately presented for governmental, proprietary, and fiduciary funds to report additional and detailed information about the primary government.
External Reporting
-GASB 34 establishes minimum reporting requirements to be in compliance with GAAP. Includes fund-based and government-wide presentations supported by notes to the F/S's and a variety of required supplementary information.
-Presentation of a reconciliation of fund F/S's to government-wide F/S's to fully integrate reporting objectives is also required.
Government-Wide Presentations
-Consolidated F/S's. Full accrual accounting with an economic resources measurement focus.
-Convert disaggregated fund-based F/S's into a single set.
-Financial activity of the primary government is classified in the following two ways: (1) Government activities, (2) Business-type activities.
Major Fund F/S's
-Like segment reporting.Major funds are presented using the basis of accounting and measurement focus unique to each category of fund. These are reconciled to the Government-wide Presentations.
-Only major funds (as defined by the GASB) are presented. Non-major funds are displayed in the aggregate.
Governmental Fund Reconciliation
-Governmental fund F/S's are reconciled to the governmental activities section of the government-wide presentation.
1. Fiduciary Funds: excluded from the government-wide presentation.
2. Enterprise Funds: carried into the business-type activities section of the government-wide F/S's, generally w/ no reconciling items.
3. Internal Service Funds: often merged w/ governmental activities and displayed in the government-wide financials.
Governmental Funds
-Modified accrual accounting, current financial resources measurement focus. Often have a budgetary focus. Main F/S is the statement of revenues, expenditures, and changes in the fund balance. Fund Types include:
1. *General Fund: account for ordinary operations of a governmental unit which is financed from taxes and other general revenues. All accounts are of a "current" nature, no fixed-asset or long-term debt accounts.
2. Special *Revenue Funds: account for revenues from specific taxes or other earmarked sources that (by law) are restricted or committed to finance particular activities of government. *And
3. Debt *Service Funds: account for the accumulation of resources and the payment of interest and principal on all "general obligation debt." Resources of the fund are restricted, committed, or assigned to debt service expenditures.
4. Capital *Projects Funds: account for resources restricted, committed, or assigned for the acquisition or construction of major capital assets.
5. *Permanent Fund: used to report resources that are legally restricted to the extent of income, and not principal, may be used for purposes supporting the reporting government's programs.
Governmental Funds F/S's
-Current only, current financial resources measurement focus.
1. Balance Sheet: Current Assets - (Current Liabilities) = Fund Balance
2. Statement of Revenues, Expenditures, and Changes in Fund Balance: Revenues - (Expenditures) ± Other Financing Sources (Uses) = Net Change in Fund Assets
Proprietary Funds
-Full accrual accounting, economic resource measurement focus. Treat like a customer, not a citizen. Account for business-type activities and their accounting is similar to commercial accounting. Include:
1. Internal *Service Funds: account for goods and services provided by designated departments on a (cost reimbursement) fee basis to other departments and agencies w/in a single government unit or to other government units. Customers of the internal service fund are primarily internal.
2. *Enterprise Funds: account for the acquisition and operation of governmental facilities and services that are intended to be primarily (over 50%) self-supported by user charges. Customers are primarily external. Required when any one of 3 criteria are met: (1) activity of the fund is financed by debt secured by a pledge of fee revenue, (2) laws require collection fees adequate to recover costs, (3) pricing policies are established to produce fees to recover costs.
Proprietary Funds F/S's
-Carry everything, fixed assets and long-term debt. Economic resources measurement focus.
1. Statement of Net Assets: All Assets - (All Liabilities) = Net Assets (not fund balance).
2. Statement of Revenues, Expenses, and Changes in Fund Net Assets: Operating Revenue - (Operating Expenses) ± Non-Operating Revenue (Expenses) = Change in Net Assets.
Fiduciary (Trust) Funds
-Full accrual accounting, economic resource measurement focus. Trust accounts. Account for assets received where the government acts in the capacity of a trust agency fund. Types:
1. *Pension (and Other Employee Benefit) Trust Funds: account for resources of defined benefit plans, defined contribution plans, post-employment benefit plans, and other long-term employee benefit plans.
2. *Agency Trust Funds: account for resources in the temporary custody of a governmental unit.
3. *Private Purpose Trust Funds: designated funds for all other trust fund arrangements under which principal and income are for the benefit of specific individuals, private organizations, or other governments.
4. *Investment Trust Funds: account for external investment pools.
Proprietary Funds F/S's
-Carry everything, fixed assets and long-term liabilities.
1. Statement of Fiduciary Net Assets: All Assets - (All Liabilities) = Net Assets (not fund balance)
2. Statement of Changes in Fiduciary Net Assets: Additions - (Deductions) = Change in Net Assets.
Measurement Focus and Basis of Accounting
-The measurement focus of a fund or fund type is complemented by the basis of accounting used.
-The modified accrual basis of accounting is used to accomplish the current financial resources measurement focus.
-The accrual basis of accounting is used to complement the economic resources measurement focus.
-The use of a measurement focus and basis of accounting in government funds different from those used in the government-wide F/S's are the source of the reconciling items between their respective F/S's.
Balance Sheet- Measurement Focus
-Measurement focus refers to how to recognize transactions in the F/S's. Governs where transactions appear.
1. Current Financial Resources (GRaSPP): seeks to value and report fund balances as a measure of available, spendable or appropriate resources. Uses modified accrual, and only current assets and liabilities are included on the B/S.
-Adding fixed assets excluded from governmental fund F/S's and subtracting current liabilities also excluded are two of the most significant reconciling items between governmental funds and government-wide F/S's.
2. Economic Resources (SE-PAPI): seeks to determine the costs of services and the efficiency and effectiveness with which invested capital has been used. All assets and all liabilities (current and non-current) are included on the B/S. Net assets are analyzed and reported as between restricted, unrestricted, and invested in property and equipment, net of related debt. Fixed assets and non-current liabilities are reported. Uses the full accrual method.
Income Statement- Basis of Accounting
-Refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the F/S's. Relates to the timing of measurements made.
1. Modified Accrual (GRaSPP): blend of cash basis and accounting concepts. Revenue is recognized when measurable and available. Available under modified accrual, means collectible w/in the current period or soon enough thereafter to be used to pay liabilities in the current period (generally w/in 60 days after year-end). Measurable means quantifiable in monetary terms. Expenditures are generally recorded when the related fund liability is incurred, w/ some exceptions (unmatured interest on LTD isn't accrued, only recorded when legally due).
-Addition of accrual basis revenues in excess of modified accrual revenues along w/ subtraction of accrued debt related expenses not recognized in governmental F/S's are frequent reconciling items between the governmental fund F/S's and the government-wide F/S's.
2. Full Accrual (SE-PAPI): identical to the accounting methods used in commercial enterprises. Revenue is recognized when earned and expenses are recognized when incurred.
Classification of Governmental Fund Balances (GRaSPP)
-Modified accrual, GASB 54 establishes 5 categories of fund balances to fully report various levels of constraint associated w/ fund equity. 5 Constraints:
1. Non-Spendable Fund Balance: to the extent that the equity is represented by current assets that cannot be spent (ex: prepaid expenses, inventories, etc.).
2. Restricted Fund Balance: associated w/ assets restricted by external authorities.
3. Committed Fund Balance: associated w/ assets obligated by a formal action of the government's highest decision-making authority (ex: resolutions etc.).
4. Assigned Fund Balance: resources associated w/ assets the government intends to obligate but hasn't formally committed.
5. Unassigned Fund Balance: associated w/ spendable assets neither restricted, committed, nor assigned. Only the general fund should have a positive unassigned fund balance.