Lesson 3 Overview

This lesson will describe the basic accounts used by state and local governments and how to start using those accounts in the preparation of journal entries. Additionally, it will review how and when revenues and expenditures are recognized in governmental funds. Finally, it will define the different subsections or categories of fund balance.

Objectives

After completing this lesson, you should be able to

• identify when and how revenues and expenditures are recognized using modified accrual accounting,
• classify the segments of the fund balance for a governmental fund, and
• prepare journal entries using modified accrual accounting.

Important concepts include

• the difference between exchange and non-exchange transactions,
• revenue recognition,
• encumbrances,
• categories/restrictions of fund balance,
• sources and uses of funds, and
• budgets.

Lesson 3 Readings and Activities

By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 3 Course Schedule.