What Is the Basic Requirement of Government Accounting?
The basic requirement of government accounting is fund accounting. Because local, state and federal governments carry out such a wide variety of operations, it's impossible to account for all activities in one accounting entity. Instead, government accounting uses separate funds, each set up as a separate accounting entity with its own self-balancing, double-entry set of accounts.
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Fund Categories
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The three general types of funds in government accounting are governmental funds, proprietary funds and fiduciary funds. Governmental funds cover typical government functions. Proprietary funds are used for activities similar to private businesses. Fiduciary funds are used to hold assets as a trustee.
Governmental Funds
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Governmental fund types are general fund, special revenue fund, debt services fund, capital projects fund and permanent fund. These are used to account for the sources and uses of revenue for the primary unit of government.
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Proprietary Funds
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Proprietary fund types are enterprise funds and internal service funds. These funds are considered self-supporting because they are funded by user charges, fees and reimbursements.
Fiduciary Funds
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Fiduciary fund types are pension trust funds, investment trust funds, private purpose trust funds and agency funds. These funds are used to account for financial resources held for other entities, groups or individuals in a trustee capacity.
Financial Reporting Requirements
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Interim reporting is necessary for management control, legislative oversight or other purposes, usually on a quarterly basis, the same as any other going concern. A comprehensive annual financial report is prepared that includes all activities of the primary government and its component units.
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