Section 3: 10–20%B11

Governmental Funds and Fund Accounting

Exam insight

State and local government accounting starts with the fund. Place a transaction in the wrong fund or apply the wrong measurement focus and the fund balance, the budgetary entries, and the eventual government-wide conversion all come out wrong.

What AICPA wants you to know

1Classify the 11 fund types into the three fund categories
2Apply current financial resources / modified accrual to governmental funds and economic resources / full accrual to proprietary and fiduciary funds
3Recognize revenues when measurable and available and expenditures when incurred
4Record budgetary entries and encumbrances, including the reversal at year-end
5Classify ending fund balance into the five GASB 54 categories

Patterns in this topic

The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.

The Modified Accrual ReadGovernmental funds measure current financial resources: recognize revenue when measurable and available, and expenditures when incurred.The Fund StructurePlace the transaction in the right fund, classify fund balance by how binding the constraint is, and test a major fund on 10 and 5 percent.

Exam tip

Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.