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Chapter 4

ACCT 4421 Chapter 4: Chapter 4 Study Guide

Course Code
ACCT 4421
Donna Torres

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Chapter 4 Recognizing Revenues in Governmental Funds
1. Why governments focus on current financial resources and use the modified accrual basis
to account for their governmental funds
2. Why governments focus on all economic resources and use the full accrual basis in their
government‐wide financial statements
1. Allows for analysis to assess interperiod equity
3. The key distinctions between the modified and full accrual bases of accounting
4. The distinction between exchange and nonexchange transactions
5. The main types of nonexchange transactions
6. The impact of the available” criterion on revenue recognition
7. How each of the following types of revenues are accounted for:
1. Property taxes
2. Sales taxes
3. Income taxes
4. Licenses and permits
5. Fines
6. Grants and donations
7. Sales of capital asset
8. On‐behalf payments
Why and How do governments use the modified accrual basis:
- GASB chose to develop a reporting model that incorporates more than one basis of
revenue and expenditure recognition either statements that embrace more than one
basis of accounting or statements that incorporate two or more sets of statements within
the same report
- Government-wide statements consolidate all funds on a FULL ACCRUAL BASIS
o Except for fiduciary funds, which are not consolidated because the beneficiaries
are outside parties from the government
o Demonstrates whether interperiod equity was achieved
- Governmental Fund statements present governmental funds on a MODIFIED ACCRUAL
o Except for proprietary funds which use a full accrual basis
o This allows for comparison between government entities
o Reconciliations may be necessary for any budget to actual variances that are due
to differences in accounting principles
o Measurement focus is on current and near-current financial resources
Current financial resources means expendable financial resources
Relationship Between Measurement Focus and Basis of Accounting
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