Governmental Funds
Chapter 3 discussed the specific types of funds that are considered governmental funds. They are the general fund, special revenue funds, capital projects funds, debt service funds, and permanent funds. Governmental funds are required to present two financial statements.
1. Balance sheet
2. Statement of revenues, expenditures, and changes in fund balances
In each of these statements, a separate column is presented for each major governmental fund. A single column is presented for all of the nonmajor governmental funds that combines all of the amounts for all of the nonmajor funds. A total is presented on each statement reflecting the total amounts for all governmental funds.
The balance sheet presents the assets, liabilities, and fund balances of the governmental funds. An example balance sheet is presented as Exhibit 4.3. The balance sheet is presented in a “balanced” format, meaning that the total of assets equals the total of liabilities plus the total fund balances. Notice also that the term “fund balances” is to be used to connote the difference between assets and liabilities, instead of the net asset term used for a similar balance in the government-wide financial statements. Remember that governmental funds use the modified accrual basis of accounting and current financial resources measurement focus. Therefore, in general, the balance sheet of these funds will not contain long-term assets (such as capital assets) or long-term liabilities (such as long-term debt).
The statement of revenues, expenditures, and changes in fund balances is the second financial statement presented for governmental funds. An example of this statement is presented in Exhibit 4.4. This statement is broken into three main categories: revenues, expenditures, and other financing sources (uses)
of funds. Revenues are presented by source, such as taxes, grants, and charges for services. Expenditures are presented by function or program, such as general government, public safety,social services, and so forth. Expenditures not assigned to an individual program are reported as additional line items. Debt service expenditures (including both interest payments and principal redemptions) are reported separately. Other financing sources and uses include all types of transactions that are not considered revenues and expenditures. These include transfers between funds and component units and proceeds from the sales
of bonds. The bottom line for the governmental funds, representing all the revenues, expenditures, and other financing sources and uses of funds, represents the change in the fund balances for the fiscal year. The ending fund balance of the prior fiscal year, plus or minus this bottom line for all of the governmental
funds reported on the statement of revenues, expenditures, and changes in fund balances, has to equal the ending fund balance reported on the balance sheet.
Taken From : Governmental Accounting Made Easy