Governmental
The Modified Accrual Switch
Governmental funds run on modified accrual: revenue when measurable and available (60 days), capital outlay as an expenditure, and no depreciation.
How the exam words it
- -The stem asks how a purchase 'is recorded in the general fund' versus the government-wide statements.
- -Property taxes are levied and partly collected after year-end, and it asks 'how much property tax revenue is recognized under modified accrual?'.
- -It asks which basis applies to governmental funds versus enterprise or proprietary funds.
- -Long-term bonds are issued or debt service is paid from a governmental fund.
The playbook
- 1Pick the lens: governmental funds use modified accrual and current financial resources; government-wide and proprietary statements use full accrual and economic resources.
- 2Revenue is recognized when measurable and available, meaning collected within the year or within 60 days after year-end.
- 3Capital purchases are capital outlay expenditures in the funds (no asset, no depreciation); the asset and depreciation appear only government-wide.
- 4Bond proceeds are other financing sources in the funds, and interest is an expenditure when due, not accrued.
The trap
Recognizing the full tax levy as revenue. Under modified accrual only amounts collected during the year or within 60 days after year-end are available and recognized.
How the exam varies it
The same pattern, re-skinned along these axes:
Fund statements versus government-wide treatmentRevenue (the 60-day rule) versus capital outlay versus debtWhich fund type applies which basis
Drill this pattern
8 questions of The Modified Accrual Switch from across the AUD topics. Clear it by getting 5 right with a streak of 3.