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Principles ofAccounting andFinancial Reportingfor State and LocalGovernmentsLearning ObjectivesAfter studying this chapter, you should be able to:1.Explain the nature of the three major activity categories of a state or localgovernment: governmental activities, business-type activities, and fiduciary activities.2.Explain the components of GASB’s integrated accounting and financial reportingmodel, including:The reporting entity.Government-wide financial statements.Fund financial statements.Definition offundand principles of fund accounting.Types of funds in each fund category and characteristics of each fund type.3.Discuss the nature of major fund reporting and the criteria used to determinewhether a fund should be reported as a major fund.ChapterTwo
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ACTIVITIES OF GOVERNMENTChapter 1 explained that the characteristics of governmental organizations differ fromthose of for-profit business organizations. One key difference is that governments arenot profit seeking but exist to meet citizens’ demand for services, consistent with theavailability of resources to provide those services. Although the types and levels of ser-vices vary from government to government, most general purpose governments providecertain core services: those related to protection of life and property (e.g., police andfire protection), public works (e.g., streets and highways, bridges, and public buildings),parks and recreation facilities and programs, and educational, cultural, and social ser-vices. Governments must also incur costs for general administrative support such as dataprocessing, finance, and personnel. Core governmental services, together with generaladministrative support, comprise the major part of what GASBConcepts Statement No. 1refers to as governmental-type activities.1In its more recent pronouncements, GASBrefers to these activities as simplygovernmental activities.