Vocabulary

Question 1

Governmental Accounting

Answer 1

The field of accounting that focuses on the financial reporting and management of public sector organizations, including states, cities, and municipalities.

Question 2

GAAP (Generally Accepted Accounting Principles)

Answer 2

Standards for financial reporting that ensure consistency, comparability, and transparency. For governments, GAAP is set by GASB.

Question 3

GASB (Governmental Accounting Standards Board)

Answer 3

The standard-setting body for accounting and financial reporting for U.S. state and local governments.

Question 4

Accountability

Answer 4

The cornerstone of all financial reporting in the government sector — refers to the government’s obligation to demonstrate effectiveness in resource usage and compliance with laws.

Question 5

Fund

Answer 5

A self-balancing set of accounts used to track resources and activities separately to ensure legal and fiscal accountability.

Question 6

Fund Accounting

Answer 6

A system that emphasizes accountability over profitability, used in governments to segregate resources by purpose.

Question 7

Governmental Funds

Answer 7

Funds that account for most of the government’s basic services, including:

General Fund

Special Revenue Funds

Capital Projects Funds

Debt Service Funds

Permanent Funds*

Question 8

Proprietary Funds

Answer 8

Business-like funds, which include:

Enterprise Funds

Internal Service Funds*

Question 9

Fiduciary Funds

Answer 9

Funds used to report resources held for others (e.g., pensions, trust funds).

Question 10

Modified Accrual Basis

Answer 10

Used for governmental funds. Recognizes revenues when measurable and available; expenditures when incurred.

Question 11

Accrual Basis

Answer 11

Used for government-wide and proprietary/fiduciary funds. Recognizes revenues when earned and expenses when incurred.

Question 12

General Fund

Answer 12

What it is: The main operating fund of a government.

What it pays for: Day-to-day services like police, fire, parks, administration, etc.

Where money comes from: Taxes (property, sales), fees, licenses.

Why it matters: Every government has one. If it’s not in another fund, it goes here.

Question 13

Major Fund

Answer 13

Any fund that is significant in size and importance, required to be reported separately in financial statements.

Question 14

Government-Wide Financial Statements

Answer 14

Provide a broad, long-term view of the government’s financial position and operations, using accrual accounting.

Question 15

Statement of Net Position

Answer 15

Similar to a balance sheet. Reports assets, liabilities, and net position (for government-wide and proprietary funds).

Question 16

Statement of Activities

Answer 16

Reports revenues and expenses for each function/program, showing net (expense) revenue.

Question 17

Fund Financial Statements

Answer 17

Provide more detail on specific activities and compliance for major funds. Use modified accrual for governmental funds.

Question 18

Fiscal Accountability

Answer 18

Focuses on whether the government complied with budgetary and legal constraints — mainly in fund statements.

Question 19

Operational Accountability

Answer 19

Focuses on long-term accountability for efficiently using resources — mainly in government-wide statements.

Question 20

Reconciliation

Answer 20

A required explanation showing the differences between the fund-level and government-wide statements (due to different accounting bases).

Question 21

What is GPEFR (General Purpose External Financial Reporting)

Answer 21

The minimum external reporting required under GAAP:

MD&A

Basic Financial Statements

Required Supplementary Information (RSI)

Question 22

What is the ACFR (Annual Comprehensive Financial Report)

Answer 22

A full financial report that goes beyond the minimum GAAP requirements. Consists of:

Introductory Section

Financial Section (includes GPEFR)

Statistical Section

Question 23

MD&A (Management’s Discussion and Analysis)

Answer 23

A narrative overview of the financial activities and performance of the government, required by GAAP.

Question 24

RSI (Required Supplementary Information)

Answer 24

Additional financial info required by GAAP (e.g., pension schedules, budgetary comparisons) but not part of basic financials.

Question 25

Notes to the Financial Statements

Answer 25

Essential explanations and details that clarify data in the financial statements.

Question 26

Statistical Section

Answer 26

Part of the ACFR, not required by GAAP. Contains tables, charts, and historical data about financial trends, demographics, and economic conditions.

Question 27

Introductory Section (ACFR)

Answer 27

Provides general information, such as letter of transmittal, organization chart, and awards received.

Question 28

Financial Section (ACFR)

Answer 28

Includes auditor’s report, MD&A, basic financial statements, notes, and RSI.

Question 29

Budgetary Compliance

Answer 29

The government’s adherence to the legally adopted budget, often assessed through budget-to-actual comparisons.

Question 30

Comprehensive vs. General Purpose

Answer 30

“Comprehensive” (ACFR) goes beyond GAAP minimums. “General Purpose” (GPEFR) refers to only the core financial and narrative reporting required by GAAP.

Question 31

Measurable and Available

Answer 31

The criteria for recognizing revenue under modified accrual accounting.

Question 32

Fund Balance

Answer 32

The difference between assets and liabilities in a governmental fund. Categories include: nonspendable, restricted, committed, assigned, and unassigned.

Question 33

Special Revenue Fund

Answer 33

What it is: Funds used to track money that must be spent for specific purposes. What it pays for: Projects or programs funded by grants or taxes for a specific use. Where money comes from: Federal/state grants, dedicated taxes (like a gas tax). Examples: Street maintenance fund, school lunch fund, library grants.

Question 34

Capital Projects Funds

Answer 34

What it is: Used for large construction or infrastructure projects. What it pays for: New buildings, roads, bridges, or improvements. Where money comes from: Bonds, grants, or transfers from other funds. Why it matters: Helps separate one-time large projects from day-to-day budgets.

Question 35

Debt Service Funds

Answer 35

What it is: Used to pay back government debt (usually bonds). What it pays for: Principal and interest on bonds or loans. Where money comes from: Property taxes dedicated to debt, or transfers. Why it matters: Helps ensure the government pays its debts on time and transparently.

Question 36

Permanent Funds

Answer 36

What it is: Trust funds where the principal stays intact forever, but the interest can be used. What it pays for: Public programs, like scholarships or parks, from investment earnings. Where money comes from: Donations or long-term investments. Example: A city receives a $1 million donation and can only spend the interest each year.

Question 37

Enterprise Funds

Answer 37

What it is: Used for services provided to the public that charge a fee, like a business. What it pays for: Utilities (water, sewer), public transportation, airports, golf courses. Where money comes from: User fees (e.g., your water bill). Why it matters: Helps track whether the service can cover its own costs. Example: A city runs a water company — all operations and charges go through an enterprise fund.

Question 38

Internal Service Funds

Answer 38

What it is: Used for services provided inside the government, from one department to another. What it pays for: Things like IT support, motor pools, central printing, insurance. Where money comes from: Charges to other departments (not the public). Why it matters: Promotes efficiency and shows cost of internal services. Example: The HR department runs a health insurance plan for all city workers — this would go in an internal service fund.