Government Accounting (GASB)
Government accounting follows standards set by the Governmental Accounting Standards Board (GASB), using fund accounting and the modified accrual basis to track resources restricted for specific purposes.
Explanation
State and local governments use fund accounting to demonstrate compliance with legal and budgetary requirements. The three fund categories are governmental funds (general, special revenue, debt service, capital projects, permanent), proprietary funds (enterprise, internal service), and fiduciary funds (pension trust, investment trust, private-purpose trust, custodial). Each has specific measurement focus and basis of accounting rules.
Government-wide financial statements use the economic resources measurement focus and accrual basis (similar to commercial entities), while governmental fund financial statements use the current financial resources measurement focus and modified accrual basis. This dual perspective is a key FAR exam concept. Revenue recognition under modified accrual requires amounts to be both measurable and available.
Key Points
- •Three fund categories: governmental, proprietary, fiduciary
- •Government-wide statements: accrual basis, economic resources focus
- •Governmental fund statements: modified accrual basis, current financial resources focus
- •Modified accrual revenue recognition: measurable and available
Exam Tip
Government accounting is a significant portion of FAR. Focus on fund classification, the dual perspectives, and when to use modified accrual versus full accrual.
Frequently Asked Questions
Related Topics
Not-for-Profit Accounting
Not-for-profit (NFP) organizations follow specific FASB guidance for reporting net assets in two categories (with donor restrictions and without donor restrictions) and recognizing contributions.
GAAP Framework and Conceptual Framework
U.S. Generally Accepted Accounting Principles (GAAP) are the authoritative standards for financial reporting by nongovernmental entities, codified in the FASB Accounting Standards Codification (ASC).
Balance Sheet (Statement of Financial Position)
The balance sheet reports an entity's assets, liabilities, and equity at a specific point in time, following the fundamental accounting equation: Assets = Liabilities + Equity.
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