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Government Accounting #365426

Course Overview

Credit

Amount

CPA

Course Author: Steven M. Bragg, CPA Field of Study (CPA): Government Accounting

Course Description

Course publication/revision date: This course was updated on 11/12/2025 (2026 edition).

The accounting used by government entities is substantially different from the accounting used by for-profit organizations. This course describes the unique aspects of governmental accounting, including the use of funds, the modified accrual basis of accounting, and many unique financial statement formats and disclosures. There is a strong emphasis on common accounting transactions, the annual comprehensive financial report, budgetary reporting, and nonexchange transactions. In short, Governmental Accounting is an essential desk reference for the professional accountant.

Table of Contents

Chapter 1 Governmental Accounting Overview1

Learning Objectives	1
Introduction	1
Sources of Governmental Accounting Standards	1
Information Sources	2
Application of Governmental Accounting Standards	2
Legal Provisions	3
Goals of a Governmental Accounting System	3
Fund Accounting Systems	3
Types of Assets	4
Types of Liabilities	5
Budget Issues	5
Financial Reports	5
Summary	6
Review Questions	7

Chapter 2 Fund Accounting8

Learning Objectives	8
Introduction	8
Fund Accounting Overview	8
Definition of a Fund	8
Governmental Funds	8
Proprietary Funds	10
Fiduciary Funds	12
Fund Contents	13
Interfund Loans	13
Evaluation Periods	13
Special Questions Related to Funds	14
Summary	14
Review Questions	15

Chapter 3 Basis of Accounting and Measurement Focus16

Learning Objectives	16
Introduction	16
Basis of Accounting	16
Cash Basis	16
Accrual Basis	16
Modified Accrual Basis in Governmental Fund Statements	17
Revenue Recognition	17
Expenditure Recognition	17
Measurement Focus	19
Accrual Basis Reporting in Government-Wide Financial Statements	21
Accrual Basis in Proprietary Fund Statements	22
Revenue Recognition When Right of Return Exists	22
Disclosures	22
Summary	22
Review Questions	24

Chapter 4 Reporting Capital Assets25

Learning Objectives	25
Introduction	25
Valuation of Capital Assets	25
Capitalization Thresholds	26
Networks and Subsystems	27
Capitalization of Interest Costs	27
Capitalization Rate	28
Capitalization Period	28
Impact of Tax-Exempt Borrowings	28
When to Capitalize Expenditures	29
Depreciation of Capital Assets	29
Depreciation Methods	29
Modified Approach	35
Intangible Assets	36
Works of Art and Historical Treasures	38
Asset Transfers	38
Impairment of Capital Assets	39
Impairment Losses under the Modified Approach	44
Capital Asset Disposal	44
Infrastructure Asset Recordkeeping	44
Reporting of Capital Assets	44
Disclosure of Capital Assets	45
General Disclosures	45
Disclosure of General Capital Assets	46
Disclosure of Capital Assets of Proprietary Funds	46
Disclosure of Capital Assets of Fiduciary Funds	46
Disclosure of Depreciation	46
Disclosure of Accumulated Depreciation	48
Disclosure of Capitalized Interest	48
Disclosure of Assets Not Being Depreciated	49
Disclosure of Impairment	49
Summary	49
Review Questions	50

Chapter 5 Reporting Liabilities51

Learning Objectives	51
Introduction	51
Reporting Long-Term Liabilities	51
Current Liabilities	52
Short-Term Obligations	53
Modified Accrual Recognition of Liabilities and Expenditures	53
Debt Service Funds	55
Contingent Liabilities	55
Additional Liability Reporting Topics	55
Disclosure of Liabilities	55
Summary	56
Review Questions	57

Chapter 6 The Budget and Budgetary Accounting58

Learning Objectives	58
Introduction	58
Budgetary Period	58
Budget Types	58
Budgetary Control	59
Encumbrances	60
Summary	60
Review Questions	61

Chapter 7 Common Accounting Transactions62

Learning Objectives	62
Introduction	62
Capital Asset Transactions	62
Asset Purchase Transaction	62
Depreciation Transaction	63
Asset Sale Transaction	63
Debt Transactions	64
Initial Debt Transaction	64
Debt Payments	64
Interest Accrual	65
Debt Service Fund Transactions	65
Encumbrance Transactions	66
Interfund Transactions	67
Inventory Usage	67
Reimbursement Transactions	69
Summary	69
Review Questions	70

Chapter 8 Classification and Terminology71

Learning Objectives	71
Introduction	71
Interfund Activity	71
Reporting of Internal Activities and Balances	72
Reporting of Internal Service Fund Balances	72
Classifications within the Statement of Net Position	72
Current Assets	73
Allowances	73
Current Liabilities	73
Classifications within Governmental Fund Financial Statements	74
Other Long-Term Debt Transactions	74
Capital Asset Sales	74
Revenues	74
Expenditures	75
Classifications within the Government-Wide Statement of Activities	75
General	75
Expenses	76
Revenues	76
Unusual or Infrequent Items	77
Right of Offset	78
Reporting Net Position	78
Governmental Fund Reporting	79
Disclosures	81
Summary	82
Review Questions	83

Chapter 9 The Financial Reporting Entity84

Learning Objectives	84
Introduction	84
Accountability	84
The Financial Reporting Entity	84
Primary Governments	85
Component Units	86
Summary	89
Review Questions	90

Chapter 10 Annual Comprehensive Financial Report91

Learning Objectives	91
Introduction	91
Components of the Annual Comprehensive Financial Report	91
Introduction to the ACFR	92
Management's Discussion and Analysis	92
Basic Financial Statements – Government-Wide	94
Statement of Net Position	94
Statement of Activities	96
Basic Financial Statements – Fund Financial Statements	100
Major Funds	100
Reconciliation to Government-Wide Statements	101
Required Financial Statements – Governmental Funds	101
Required Financial Statements – Proprietary Funds	103
Required Financial Statements – Fiduciary Funds	106
Comparative Financial Statements	106
Required Supplementary Information	106
Combining Statements and Individual Fund Statements and Schedules	107
Statistical Tables	108
Major Component Unit Information	108
Account Classification Rules	108
Disclosures	109
Sample Annual Comprehensive Financial Report	109
Management's Discussion and Analysis	110
Basic Financial Statements	114
Combining Statements	123
Summary	125
Review Questions	126

Chapter 11 Additional Financial Reporting Considerations127

Learning Objectives	127
Introduction	127
Related Party Transactions	127
Subsequent Events	128
Going Concern Considerations	129
Prior Period Adjustments	130
Accounting Changes and Error Corrections	130
Change in Accounting Principle	130
Change in Accounting Estimate	131
Change in Reporting Entity	131
Summary	131
Review Questions	132

Chapter 12 Notes to Financial Statements133

Learning Objectives	133
Introduction	133
Notes Overview	133
Significant Accounting Policies	134
Additional Disclosures	135
Disclosure of Risk Concentrations	137
Disclosure Sequence	139
Notes Minimization	140
Sample Disclosure of Accounting Policies	140
Sample Disclosure of Assets and Liabilities	145
Sample Disclosure of Contingencies	149
Sample Disclosure of Risk Management	149
Sample Disclosure of Subsequent Events	149
Summary	150
Review Questions	151

Chapter 13 Budgetary Reporting152

Learning Objectives	152
Introduction	152
Overview of Budgetary Reporting	152
Additional Reporting	153
Sample Budgetary Comparison Reports	153
Budgetary Control	157
Summary	157
Review Questions	158

Chapter 14 Cash Flows Statements159

Learning Objectives	159
Introduction	159
Reporting Requirements	159
Report Contents	159
Cash and Cash Equivalents	159
Gross and Net Cash Flows	160
Negative Cash Balances	160
When Cash Flow Occurs	160
Cash Flows from Operating Activities	160
Cash Flows from Noncapital Financing Activities	161
Cash Flows from Capital and Related Financing Activities	161
Cash Flows from Investing Activities	162
Specific Cash Flow Classifications	163
Information about Noncash Activities	164
Sample Statement of Cash Flows	164
Summary	166
Review Questions	167

Chapter 15 Segment Information168

Learning Objectives	168
Introduction	168
Segment Reporting	168
Sample Segment Reporting	169
Summary	171
Review Questions	172

Chapter 16 Reporting Entity and Component Unit Presentation and Disclosure173

Learning Objectives	173
Introduction	173
The Financial Reporting Entity Defined	173
The Component Unit Defined	173
Major Component Unit Information	174
Blending Component Units	175
Equity Interests in Component Units	177
Intra-Entity Transactions	177
Reporting Periods	178
Note Disclosures	178
Presentation Issues	178
Summary	179
Review Questions	180

Chapter 17 Statistical Section181

Learning Objectives	181
Introduction	181
Overview of the Statistical Section	181
General Content	181
Focus of the Data	182
Limitations	182
Financial Trends Information	182
Net Position	182
Changes in Net Position	183
Revenue Capacity Information	188
Revenue Base Information	188
Revenue Rates Information	189
Principal Revenue Payers Information	191
Property Tax Levies and Collections	193
Debt Capacity Information	193
Ratios of Outstanding Debt	193
Direct and Overlapping Debt	195
Debt Limitations	197
Pledged-Revenue Coverage	198
Additional Debt Reporting Topics	198
Demographic and Economic Information	199
Demographic and Economic Indicators	199
Principal Employers	199
Operating Information	201
Government Employees	202
Operating Indicators	202
Capital Assets	204
Sources, Assumptions, and Methodologies	204
Summary	204
Review Questions	206

Chapter 18 Fair Value Measurement207

Learning Objectives	207
Introduction	207
Fair Value Definition	207
Fair Value Principles	207
Characteristics of the Asset or Liability	207
Markets	208
Transaction Costs	208
Bid-Ask Spread	208
Valuation Techniques	208
Market Approach	209
Cost Approach	209
Income Approach	209
Fair Value Hierarchy	209
Level 1 Inputs	209
Level 2 Inputs	210
Level 3 Inputs	210
Measurement Principles	211
Disclosures	211
Summary	212
Review Questions	213

Chapter 19 Claims Accounting214

Learning Objectives	214
Introduction	214
Risk Transfers	214
Claim Recognition	214
Discounting	215
Annuity Contracts	215
Risk Financing Activities in an Internal Service Fund	215
Participation in Public Entity Risk Pools	215
Insurance Transactions	216
Claims-Made Policies	216
Retrospectively-Rated Policies	216
Policyholder Dividends	216
Contractual Actions	216
Contingencies	217
Presentation Issues	217
Disclosures	217
Summary	219
Review Questions	220

Chapter 20 Conduit Debt Obligations221

Learning Objectives	221
Introduction	221
Accounting Issues	221
Disclosures	222
Summary	223
Review Questions	224

Chapter 21 Escheat Property225

Learning Objectives	225
Introduction	225
Accounting Issues	225
Summary	226
Review Questions	227

Chapter 22 Inventory228

Learning Objectives	228
Introduction	228
Accounting Issues	228
Average Costing	228
FIFO Costing	229
LIFO Costing	231
Disclosures	232
Summary	232
Review Questions	233

Chapter 23 Landfill Closure and Postclosure Costs234

Learning Objectives	234
Introduction	234
Operating Methods	234
Estimated Total Current Cost of MSWLF Closure and Postclosure Care	234
Reevaluations	235
Proprietary Fund Reporting	235
Governmental Fund Reporting	237
Government-Wide Financial Statement Reporting	237
Changes in Estimates	237
Assets Placed in Trust	237
Responsibility Assumed by a Different Entity	237
Disclosures	238
Summary	238
Review Questions	240

Chapter 24 Leases241

Learning Objectives	241
Introduction	241
Lease Term	241
Lessee Lease Accounting	241
Lease Asset	242
Lessor Lease Accounting	243
Initial Direct Costs	243
Lease Receivable	243
Deferred Inflow of Resources	243
Accounting for Short-Term Leases	244
Contracts that Transfer Ownership	244
Additional Leasing Topics	244
Presentation	245
Disclosures	245
Lessee Disclosures	246
Lessor Disclosures	246
Summary	246
Review Questions	247

Chapter 25 Nonexchange Transactions248

Learning Objectives	248
Introduction	248
Overview of Nonexchange Transactions	248
Accounting for Nonexchange Transactions	250
Requirements and Restrictions	250
Reimbursements	250
Derived Tax Revenues	250
Imposed Nonexchange Revenues	250
Government-Mandated and Voluntary Nonexchange Transactions	251
Donations of Capital Assets	252
Subsequent Breaching of Eligibility Requirements	252
Nonexchange Revenues Administered by another Government	252
Revenue Recognition in Governmental Fund Statements	253
Pass-Through Grants	253
On-Behalf Payments	253
Disclosures	254
Summary	254
Review Questions	255

Answers to Chapter Questions256

Glossary271

Index277

Course Details

Author: Steven M. Bragg, CPA

Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.

Publication/Revision Date: 11/12/2025

Course Exam Questions (online): 65 (multiple-choice)

Program Delivery Method: NASBA QAS Self-Study

Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors ID: 107615

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Recognize the entities responsible for formulating accounting standards.
Cite the organizational structure used by governmental accounting standards.
Specify the different types of funds and how they are used.
Describe the accounting structure of a fund.
Identify the characteristics of the different bases of accounting.
Specify how the accounting treatment for revenue varies, based on when it is received.
Recognize the accounting for incurred but unmatured liabilities.
Recognize the different types of infrastructure assets.
Identify the types of costs that can be included in the cost of a capital asset.
Specify when interest costs should and should not be capitalized.
Describe the stages of completion associated with the recognition of computer software.
Recognize the various indicators of asset impairment.
Specify the different types of long-term debt.
Recognize the different types of current liabilities.
Identify the funds that are more likely to have budgets associated with them.
Describe how an encumbrance is used.
Cite the different types of interfund activities.
Specify the classifications used to track expenditures.
Identify the components of net position.
Describe the nature of a financial reporting entity.
Specify the indicators of control over another entity.
Describe the contents of the various components of the annual comprehensive financial report.
Describe how the order of liquidity is applied in the statement of net position.
Recognize the proper accounting treatment for issued debt.
Describe how a negative balance is treated in the restricted net position line item.
Identify the different categories used for program revenues.
Specify the formula underlying a balance sheet.
Specify the disclosures used when there is a related party transaction.
Describe the proper accounting for the correction of an error.
Define a change in estimate, principle, and entity.
Specify the topics that should be covered in the notes to the financial statements.
Recognize the circumstances under which an accounting policy should be disclosed.
Cite the disclosures needed when future revenues are sold.
Identify the circumstances under which a budgetary comparison should be presented.
Describe the nature of budgetary control.
Recognize the types of funds that must present a statement of cash flows.
Specify how a statement of cash flows is constructed.
Identify the transactions that are associated with each of the classifications in a statement of cash flows.
Recognize the circumstances under which discrete presentation is used in the financial statements.
Recognize the factors involved in designating a component unit as major.
Cite the circumstances under which a statistical section is included in a set of financial statements.
Describe the formulation of fair value for real and personal property.
Specify which governments must include overlapping rates information in their financial statements.
Recognize the different types of demographic and economic indicators.
Specify the types of costs that can be associated with a purchase.
Describe the different levels of the fair value hierarchy.
Cite the criteria for determining whether risk has been transferred.
Specify the accounting to use when a loss has been incurred.
Identify the characteristics of a conduit debt obligation.
Specify the proper accounting for escheat property.
Specify the characteristics of the different inventory costing methods.
Recognize the types of costs associated with landfill closure and postclosure activities.
Specify the proper accounting for a change in the estimated total current cost of landfill closure and postclosure care.
Identify the circumstances under which a lease liability should be revised.
Describe the components of the lease receivable asset.
Specify the circumstances under which a government does not recognize a nonexchange transaction.
Cite the different types of restrictions associated with a grant.
Specify the accounting for a pass-through grant.