Fund Accounting
Accounting that segregates resources into funds to track restrictions and accountability in government and nonprofit entities.
FAR tests this where the measurement focus and basis of accounting diverge by fund category. The classic tell: a question gives you a capital outlay, debt issuance, or long-term liability and asks for the governmental-fund effect. With the current financial resources focus, the answer records capital purchases as expenditures (no asset, no depreciation in the fund), shows bond proceeds as an other financing source (not a fund liability), and recognizes revenue only when measurable and available—for property taxes, available means collected within 60 days of year-end. Proprietary and fiduciary funds flip to the economic resources focus, so the same outlay capitalizes and depreciates.
The trap is applying business-style accrual to a governmental fund and capitalizing the asset—wrong layer. Governments report dual perspectives: fund statements plus government-wide statements (full accrual via conversion entries), so the reconciliation between them is heavily tested. Mnemonic for the governmental funds: GRaSP—General, special Revenue, debt Service, capital Projects, plus Permanent.
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