Financial Reporting - Fund Accounting
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What is Fund Accounting, what does it emphasize and whom is it used by?
Fund accounting is an accounting system emphasizing accountability
rather than profitability.
It used by non-profit organizations and governments
- In this system, a fund is a self-balancing set of accounts,
- segregated for specific purposes in accordance with laws and regulations or special restrictions and limitations*.
What defines a current assets?
Used in operations or converted to cash within 1 year.
How is a capital asset defined?
–Benefit the organization for more than 1 year (service life)
Includes intangible assets*
*GASB # 51 – Accounting & Financial Reporting for Intangible Assets – periods beginning after 6/15/2009 i.e. FY 2010
What are current liabilities?
–Obligations due within 1 year (includes current portion of long term debt)
What are non-current liabilities?
–Obligations due more than 1 year hence
How are total assets minus total liabilities defined for governmental, proprietary & fiduciary funds?
- Net assets – Fund level for proprietary
- & fiduciary funds
- Fund balance* – Fund level for governmental
- funds, i.e. unreserved fund balance
*GASB # 54 - Fund Balance Reporting and Governmental Fund Type Definitions
According to GASB #54, what are the 5 types of fund balances?
- Nonspendable Fund Balance
- Cannot be spent because of:
- Form (e.g. inventory, prepaid assets)
- Must be maintained intact (e.g. principal of endowment fund)
- Restricted Fund Balance
- Externally enforceable limitations on use
- By creditors, grantors, contributors, laws,
- By law- constitutional or enabling legislation
- Committed Fund Balance
- Limitation in place before end of period
- Limitation is self imposed (e.g. carryovers)
- Must be removed by same “highest level” that imposed it
- Assigned Fund Balance
- Limitation results from intended use
- “intended use” delegated to lower level
- May be removed by same level that received delegation
- Unassigned Fund Balance
- Residual net resources
- Balance in excess of :
- non spendable/restricted/committed/assigned i.e. surplus
What are the three broad fund classifications?
- –Governmental funds (5)
- –Proprietary funds (2)
- –Fiduciary funds (4)
What are the 5 types of Government funds?
- –1. General
- To account for & report all financial resources not (required to be)* accounted for & reported in another fund
- Only fund required by GAAP
- Only one ‘General Fund”
- Small local governments may have only a General Fund
**GASB 54 drops this phrase
- 2. Special Revenue (OLD)
- Resources restricted to specific purpose
- –Legal or contract (e.g. CRA)
- 2. Special Revenue (NEW)
- Account for & report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects
- 3. Debt Service
- Resources accumulated to pay long term debt
- Principal & interest
- 4. Capital Projects
- Acquisition/construction of major capital assets*
- –i.e. not equipment units financed by proprietary funds
- 5. Permanent
- Resources restricted to extent that earnings and not principal may be used for support of entity programs
* GASB # 54 updates
What are the 2 types of Proprietary Funds?
- 1. Internal Service
- Services provided by one agency, etc. to another on a cost reimbursement basis
- 2. Enterprise
- Operations financed & operated similar to private business
- –i.e. user fees
- –Accountability (not “profit “makers)
What are the 4 types of Fiduciary Funds?
- 1. Pension Trust Fund
- Resources held in trust for others (others people's money)
- 2. Investment Trust Fund
- Pooled resources of legally separate entities
- Entity holds investments on behalf of others
- 3. Private-purpose Trust Fund
- Principal & income benefit specific individuals or organization
- 4. Agency Fund
- Pass-through funds (other people's money)
- –e.g. utility deposits
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