ACCT Accounting 4070 Chapter 2

ACCT Types of Gov’t Activities Governmental Business-type Fiduciary

ACCT Reporting Entity Primary Government and Component Units – primary government - state, local, special – component units – legally separate organization

ACCT Reporting Entity Type of presentation – discrete presentation – blending

ACCT Required Financial Statements Government-wide financial statements Fund financial statements

ACCT Required Financial Statements Government-wide financial statements – total economic resources measurement focus – accrual basis of accounting – use two columns (governmental activities and business-type activities) – Internal Service Fund - report in the governmental activities column – fiduciary activities - not reported

ACCT Required Financial Statements Fund financial statements – two governmental fund financial statements balance sheet; statement of revenues, expenditures, and changes in fund balances – three proprietary fund financial statements statement of net assets; statement of revenues, expenses, and changes in fund net assets; statement of cash flows – two fiduciary fund financial statements statement of fiduciary net assets; statement of changes in fiduciary net assets

ACCT Major Funds Reported on fund financial statements – separate column for each major governmental fund – nonmajor governmental funds - combined in single column Definition of “major funds” – Prob 2-5

ACCT Basic Concepts of Funds Fund – a fiscal and accounting entity with a self-balancing set of books; segregating financial resources, liabilities payable from fund resources, and fund equities to attain objectives specified by regulations, restrictions, or limitations – i.e. an entity with its own set of books

ACCT Basic Concepts of Funds Budgetary accounting – funds controlled by system of budgets – estimated revenues and expenditures – legally approved – budgets entered into budgetary accounts – actual expenditures recorded in proprietary accounts

ACCT Types of Funds Governmental Funds (5 types) – General Fund; Special Revenue Funds; Capital Projects Funds; Debt Service Funds; Permanent Funds Proprietary Funds (2 types) – Internal Service Funds; Enterprise Funds Fiduciary Funds (4 types) – Agency Funds; Investment Trust Funds; Private-purpose Trust Funds; Pension Trust Funds

ACCT Government Funds General fund – one per government – most of general government operating activities accounted for in GF Special Revenue Funds (SRF) – financial resources earmarked for a specified operating purpose – accounting and budgeting usually identical to GF

ACCT Government Funds Capital Projects Funds (CPF) – financial resources segregated for construction or acquisition of long-lived capital assets Debt Service Funds (DSF) – financial resources segregated to pay principal or interest on long-term general liabilities

ACCT Government Funds Permanent Funds – account for resources provided by trust in which the earnings but not the principal must be used for public purposes

ACCT Government Funds Governmental Funds Common Characteristics – use current financial resources measurement focus – use modified accrual basis of accounting – account for expenditures of appropriations (not expenses) – capital assets and long-term liabilities are not accounted for within governmental funds

ACCT Proprietary Funds Internal service funds (ISF) – account for activities in which goods or services are provided to other departments of the same government or to other governments for a charge – examples: central stores, central computing, motor pools, and printing – reported as governmental activities in government- wide statements because primarily benefit the government.

ACCT Proprietary Funds Enterprise Funds – account for activities in which goods or services are provided to the general public for a charge – examples: electric and water utilities, airports, parking garages, transportation systems, and liquor stores – reported as business-type activities in government-wide financial statements

ACCT Proprietary Funds Proprietary Funds Common Characteristics – accounting and reporting essentially same as for-profit entities full accrual accounting – capital assets and long-term liabilities accounted for in the funds – depreciation expense reported in the funds – reports expenses not expenditures

ACCT Fiduciary Funds Agency Funds (often several) – account for financial resources in which the government is acting in an agency capacity – accounting is simple; assets = liabilities – no revenue and expense accounts used – no fund equity account – examples: tax agency funds, special assessment debt service funds, and pass- through agency funds

ACCT Fiduciary Funds Trust Funds – Investment trust funds – Private-purpose trust funds – Pension trust funds

ACCT Capital Assets General capital assets are distinguished from capital assets of proprietary and fiduciary funds – general capital assets reported in government-wide financial statements – not reported in fund financial statements

ACCT Capital Assets Proprietary capital assets – reported in both government-wide and fund financial statements Fiduciary capital assets – reported only in the statement of fiduciary net assets

ACCT Capital Assets Accounted for at historical cost, or estimated cost if actual cost is unknown Donated assets accounted for at estimated fair value at time of gift Capital assets depreciated over estimated useful lives, except inexhaustible assets such as land

ACCT Capital Assets Depreciation expense for general capital assets – reported only in the government-wide financial statements Proprietary and fiduciary capital assets depreciation – reported in the fund financial statements and government-wide statements

ACCT Capital Assets Infrastructure assets highways, streets, sidewalks, storm sewers, street lights, etc. GASB 34 requires reporting (and depreciating) in government-wide statements “modified approach” may be used for certain infrastructure assets instead of depreciation

ACCT Long-term Liabilities General long-term liabilities are distinguished from fund long-term liabilities – general long-term liabilities reported in government-wide statements – general long-term liabilities not reported in the fund financial statements

ACCT Long-term Liabilities Long-term liabilities to be repaid from proprietary funds – reported in the proprietary fund statements and government-wide statements Long-term liabilities to be repaid from fiduciary funds – reported in the fiduciary fund statements and government-wide statements

ACCT Measurement Focus – Basis of Accounting

ACCT GASB 34 in the News