Lesson Overview

In Lesson 1, we examined the key characteristics that differentiate not-for-profit accounting and financial reporting from for-profit accounting and reporting. We compared the financial reporting objectives in government, not-for-profit organizations, and for-profit organizations. Lastly, we introduced the requirements for external financial reporting in relation to the comprehensive annual financial report; general objectives of state and local government financial reporting standards were also introduced.

In Lesson 2, we will (1) understand the nature of governmental activities and learn about three of them: governmental activities, business-type activities, and fiduciary activities; (2) look at the makeup of major fund reporting and the criteria for determining a major fund; (3) examine the components of the Governmental Accounting and Standards Board (GASB) integrated accounting and financial reporting model, including government-wide financial and fund financial statements and the types of funds in each category; and (4) measurement focus and basis of accounting that state and local governments use in preparing their financial reports.

Lesson Objectives

Before beginning this lesson, think about the following lesson objectives. After completing this lesson, you should be able to

• identify and explain the nature of key governmental activities;
• describe fund accounting;
• define a fund, types of funds, and characteristics of funds;
• identify and explain the components of the GASB’s integrated accounting and reporting model; and
• apply the concepts of measurement focus and basis of accounting into preparation of finacial reports.'

Lesson Roadmap

By the end of this lesson, make sure you have completed the readings and activities found in the Lesson 2 Course Schedule.