Accounting of government funds
Measurement focus involves the various financial events and financial transactions that should be included in accounting records and hence, the financial statements. It involves the inflow and outflow of various institutional resources. The major measurement focuses which are normally used in government reporting are ‘Economic Resources Measurement Focus’ and ‘Current Financial Resource Measurement focus’. The former refers to where outflows, inflows and balances that indicate or affect the net position of a given entity are all reported in a financial statements’ set. This focus is applied in trust and proprietary funds and for the overall financial reporting of government resources (Graham, 2010). On the other hand, Current Financial Resource Measurement Focus refers to where the current financial resources comprising of inflows, outflows and balances that are expendable are reported on financial statements. This focus is exclusively used in financial reporting and accounting for the governments, both state and local, and is only used in showing the financial position of government funds and the results of the funds operations (Graham, 2010). In addition, Modified Accrual Basis is used government funds accounting and combines both accrual basis and cash basis. In this method, recognition of revenue is done when they are available and measurable. The recoding of expenditures is done on Full Accrual Basis since they can be measured the moment they are incurred. This is the traditional basis of accounting for preparing the financial statements of government funds (Bogui, 2008). For the expenditures, the modified accrual basis reports prepaid items and inventories as expenditures the moment they are purchased instead of capitalizing the as assets. The prepaid items and inventories may be reported initially as assets and their recognition is then differed until they are consumed (Bogui, 2008).References
Graham, L. (2010). Accountants' handbook: 2010 cumulative supplement. Hoboken, N.J: Wiley.283-284
Bogui, F. (Ed.). (2008). Handbook of governmental accounting. CRC Press. 157
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