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Anna Yetkie
Professor Clark
BUS 611-91 Non-profit/government Accounting
April 16, 2010

Fund accounting is an accounting system that governments and most non-profits

use for financial accounting. Both government and non-profits have no profit motive; therefore

fund accounting is used for accountability and transparency. Fund accounting consists of

separate fiscal and accounting entities used to record assets, liabilities, revenues and

expenditures associated within certain functions. It also includes special reporting statements

required by GASBS 34.

The general fund is the primary fund in most governments. This fund is used to record

all revenues, expenditures, assets and liabilities not required to be reported somewhere else.

The special revenue fund is a fund that is used to account for special revenue sources

which are designated for use for specific purposes. A common example of revenues that are

accounted in the special revenue funds are for grants received from another form of

government. “For example, a city receives a state grant to build a new recycling center (Ruppel

62).”

The capital project fund is used to account for the creation of capital projects to be used

for general government operation. For example, the construction of school buildings would

generally be recorded under this fund.


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The debt service fund is used to for long-term debt committed by a government. In this

fund would be recorded the payment of principal and interest. The revenues from these

payments will generally come from the general fund.

The permanent fund was defined by GASBS 34. It is used to record a permanent

endowment provided the government. The endowment itself is not to be spent. Instead, interest

payments from the endowment may be used (Ruppel 75).

Proprietary funds operate on an accrual basis. Governments use the accrual basis rather

than the modified accrual basis of accounting. The two types of proprietary funds are enterprise

funds and internal service funds.

Enterprise funds are used to account for agencies of the government, which produce a

self-financing service for external customers. Examples might include a fund water, sewer

funds, and electric utility. Since this is supposed to emulate a private firm, these funds are

generally self-contained, including all debt, and capital construction transactions (Ruppel 78).

The internal service fund is used to record transactions for a government agency which

provides services to other government agencies. Examples might be a motor pool/repair

department, computer support or a print shop. Other government agencies are supposed to be

charged the full cost of the service (Ruppel 81).

Fiduciary funds are used to account for assets held in trust by the government for the

benefit of individuals or other entities. “There are four types of fiduciary funds: pension,

investment trust funds, private-purpose trust funds, and agency funds (Ruppel 83).
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There are two government-wide financial statements, which are the Statement of Net

Assets and the Statement of Net Activities.

The statement of net assets is similar to the private sector’s balance sheet. It includes a

government’s assets and liabilities at a specific point in time (Ruppel 96).

The statement of net activities shows the taxpayers a summary of transactions from “the

beginning net asset number to the ending net asset number reported on the statement of nets

assets (Ruppel 99).”

There are two fund financial statements: The Balance Sheet, Statement of Revenues,

Expenditures, and Changes in Fund Balance.

The balance sheet shows “the assets, liabilities and fund balances of the governmental

funds (Ruppel 108).”

The statement of revenues, expenditures, and changes in fund balance is separated into

three categories: revenues, expenditures and uses of funds. This report shows the changes in

these categories throughout the year (Ruppel 114-115).

Government and non-profit entities are service focused rather than driven by profit

revenues. Fund accounting is a detailed accounting of funds used for accountability and

transparency.
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Works Citied

Ruppel, Warren. "Governmental Accounting Made Easy, 2nd Edition." John Wiley & Sons, Inc.,

2010. 24 April. 2010.

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