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CPA FAR – STUDY UNIT 19

Governmental Accounting – Full Accrual
Core Concepts

1. Characteristic Transactions of Governmental Entities

a. Outlays for operations vs. outlays for capital assets
b. Supplies and prepaid items
c. Capital leases
d. Municipal solid waste landfills
e. Compensated absences
f. Works of art and historical treasures
g. Capital assets and long-term liabilities
h. Deferred outflows and inflows of resources
i. Investments
2. Government-Wide Financial Statements
a. The government-wide financial statements do not display funds or fund types but instead
report information about the governmental activities and business-type activities of the
government as a whole.
1) Governmental activities are normally financed by nonexchange revenues (taxes,
etc.). They are reported in governmental and internal service funds.
2) Business-type activities are financed at least in part by fees charged to external
parties for goods and services. They are usually reported in enterprise funds.
b. The statement of net position reports all financial and capital resources. Net position is
reported in the following components: (1) net investment in capital assets, (2) restricted net
position, and (3) unrestricted net position.
c. The statement of activities presents operations in a format that displays net expense or
revenue for each function. Direct expenses must be reported by function, and program
revenues and general revenues are separately reported.
3. Proprietary Funds Reporting
a. The economic resources measurement focus and the accrual basis of accounting are
required in the proprietary fund financial statements. The following statements are required:
1) Statement of net position
2) Statement of revenues, expenses, and changes in fund net position
3) Statement of cash flows
4. Fiduciary Funds Reporting
a. The economic resources measurement focus and the accrual basis of accounting are
required in the fiduciary fund financial statements. The following statements are required:
1) Statement of fiduciary net position
2) Statement of changes in fiduciary net position
b. Agency funds report resources held solely in a custodial capacity. These funds account
only for the receipt, temporary investment, and payment of resources to individuals, private
organizations, or other governments. Agency funds are not reported in the statement
of changes in fiduciary net position, and revenues, expenses, gains, and losses are not
recorded.

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