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Unformatted text preview: Chapter 18 Chapter 18 AN INTRODUCTION TO ACCOUNTING FOR STATE AND LOCAL GOVERNMENTAL UNITS Answers to Questions 1 The Governmental Accounting Standards Board has primary responsibility for setting standards that provide GAAP for state and local governmental units. The most authoritative literature includes GASB Statements of Standards and GASB Interpretations. The second level of authoritative literature includes GASB Technical Bulletins and those AICPA audit and accounting guides and statements of position that the AICPA intended to make applicable to governments and that the GASB has cleared. 2 The Municipal Finance Officers Association (MFOA) issued Governmental Accounting, Auditing, and Financial Report (GAAFR) in 1968. These resources constituted the most complete frameworks of accounting principles specific to governmental units, and they provided standards for preparing and evaluating the financial reports of governmental units. 3 In 1974 the AICPA issued its industry audit guide, Audits of Sate and Local Governmental Units , in which it noted that GAAFRs accounting and reporting principles constituted GAAP except where they were modified by the audit guide. The AICPAs endorsements was important to the GAAFRs authority and general acceptance by preparers, auditors, and users of governmental financial statements. 4 A fund is a separate fiscal and accounting entity with a self-balancing set of accounts, "segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations." [ GASB Codification ] A governmental unit may have hundreds of funds, but only seven fund types . The Codification discusses three fund categories (governmental, proprietary, and fiduciary) and seven fund types (general, special revenue, capital projects, debt service, internal service, enterprise, and trust and agency funds). 5 Governmental funds are "expendable" or "source and disposition" funds through which most governmental functions are financed. These funds are essentially working capital entities. They include the general fund, special revenue funds, capital projects funds, and debt service funds. Proprietary funds are "nonexpendable" or "commercial type" funds used to account for ongoing activities that are similar to those found in private enterprise. They use the business accounting equation and their reporting parallels that of a business entity in most regards. They include two fund types--enterprise funds and internal service funds. Fiduciary funds are used to account for assets held by the governmental unit as trustee or agent 1 Accounting for State and Local Governmental Units --Part I for individuals, private organizations, and other governmental units. Fiduciary funds include trust funds (expendable, nonexpendable, and pension) and agency funds....
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This note was uploaded on 04/04/2012 for the course ACCT 111 taught by Professor Bemo during the Spring '12 term at Nanyang Technological University.
- Spring '12