Main Content

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.

Lesson 2 Discussion

Discussion Question: What are the criteria for determining if a governmental or enterprise fund must be reported as a major fund? What other funds should or may be reported as major funds?

First, you will discuss the question or explore a different question on the same topic with your group members in your group discussion forum space. Once your group has collaborated and developed a position, please assign one person to post  your group's position (indicating the group number) to the Lesson 2 Assigned Question Class Discussion Forum no later than 11:59 p.m. eastern time on Thursday. Each team must provide two sources of evidence for their argument. From Friday to Sunday, each student is required to read and make individual comments on all other group postings.

Exercise 2-1

Assignment: Write a three-page, double-spaced response to Exercise 2-1 in the Reck et al. textbook. Examine the CAFR, pp. 59–60, complet Questions a-f, using your chosen government entity. Submit your examination to the Lesson 2 CAFR Summary Drop Box.

Note: You can find out which group you are assigned to with the following steps:

  1. Click on the Communicate link on the left menu of this page.
  2. Select the Course Roster link beneath the Course Roster subheading.
  3. On the right side of the toolbar, select the Teams link to view the list of teams for the course.
  4. Select the Members link beneath a team name to view an alphabetized member roster for that team.

 


Top of page