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Lesson 2: Priniciples of Accounting for State and Local Governments
Summary and Preview
This lesson introduced you to the key characteristics that distinguish governmental and not-for-profit entities from for-profit entities, identified the authoritative bodies for government financial reporting standard setting, explained the minimum requirements for general purpose external financial reporting, and introduced you to the concepts of measurement focus and basis of accounting. You were also presented with the key differences between the various budget classifications and their impact on communicating the achievement of goals and objectives.
In Lesson 3, "The Governmental Operating Statements Accounts; Budgetary Accounting," we will examine how operating revenues and expenses that relate to governmental activities are classified and reported in the government-wide financial statements; differentiate between revenues and other financing sources and between expenditures and other financing uses in governmental funds, and explain how budgetary accounting contributes to budgetary control.
Reading Highlight
State and local governmental accounting is different from private sector accounting in three major aspects especially as it pertains to transparency and accountability. State and local government accounting (1) use separate funds to account for its financial activities, (b) focus on flow of current financial resources and use of modified accrual basis of accounting in some funds, and (3) incorporates budgetary accounts into the financial accounting system for some funds. As you read Chapter 2, you will begin to better understand the integrated reporting model and the measurement focus and basis of accounting. As you read the articles by Crain and Schermann, Attmore, Allen, and McCall and Klay, you will begin to learn in depth the importance of financial reporting in achieving state and local government fiscal accountability.