Vocabulary
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+Definitions and terms
Unless otherwise noted, most definitions on this page come from The internet's leading free wiki site for investment information, Investopedia. Also utilized heavily is the Washington State Office of Financial Management State Administrative and Accounting Manual.

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  • Accrual basis: An accounting method that measures the performance and position of a company by recognizing economic events regardless of when cash transactions occur. The general idea is that economic events are recognized by matching revenues to expenses (the matching principle) at the time in which the transaction occurs rather than when payment is made (or received). This method allows the current cash inflows/outflows to be combined with future expected cash inflows/outflows to give a more accurate picture of a company's current financial condition1.

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C

  • Cash flow statement: Complementing the balance sheet and income statement, the cash flow statement (CFS), a mandatory part of a company's financial reports since 1987, records the amounts of cash and cash equivalents entering and leaving a company. The CFS allows investors to understand how a company's operations are running, where its money is coming from, and how it is being spent. Here you will learn how the CFS is structured and how to use it as part of your analysis of a company2

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E

  • Economic resources measurement focus: Considers all of the assets available for the purpose of providing goods and services and reports all inflows, outflows, and balances affecting or reflecting an entity‚Äôs net assets. The economic resources measurement focus is used for proprietary and fiduciary funds, as well as for government-wide financial reporting3.

F

  • Fiduciary funds: Fiduciary funds are used to account for assets held by the state in a trustee capacity, or as an agent for others and that cannot be used to support the state's own programs. There are four types of fiduciary funds: private-purpose, pension (and other employee benefit), and investment trust funds, and agency funds4.

G

  • General fund balance sheet: A financial statement that discloses the assets, liabilities, and equities of an entity at a specified date in conformity with generally accepted accounting principles (GAAP)5. The general fund is used to account for the financial activities of the general government not required to be accounted for in another account6.
  • Government fund financial statements: Governmental funds are used to account for most typical governmental functions focusing on the acquisition, use, and balances of a state's expendable financial resources and the related current liabilities. The accounting for governmental funds has a budget orientation using the current financial resources measurement focus and the modified accrual basis of accounting. There are five types of governmental funds: General, Special Revenue, Debt Service, Capital Projects, and Permanent Funds7.
  • Government wide financial statements: Financial statements that incorporate all of the state's governmental and business-type activities, as well as its nonfiduciary component units. There are two basic government-wide financial statements: the Statement of Net Assets and the Statement of Activities. Both basic government-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting8.

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M

  • Modified accrual: An accounting method commonly used by government agencies that combines accrual-basis accounting with cash-basis accounting. Modified accrual accounting recognizes revenues when they become available and measurable and, with a few exceptions, recognizes expenditures when liabilities are incurred. This system divides available funds into separate entities within the organization to ensure that the money is being spent where it was intended9.

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  • Proprietary and fiduciary funds: See fiduciary funds and proprietary funds
  • Proprietary funds: Proprietary funds are used to account for the state's ongoing organizations and activities that are similar to those often found in the private sector. These funds are considered self-supporting in that the services rendered by them are generally financed through user charges or on a cost reimbursement basis. Proprietary funds use the economic resources measurement focus and the accrual basis of accounting. There are two types of proprietary funds: enterprise funds and internal service funds10

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  • Statement of activities: A government-wide financial statement that reports the net (expense) revenue of its individual functions. An objective of using the net (expense) revenue format is to report the relative financial burden of each of the reporting government's functions on its taxpayers11.
  • Statement of cash flows: A GAAP financial statement for proprietary funds that provides relevant information about the cash receipts and cash payments of a government during a period. It categorizes cash activity as resulting from operating, noncapital financing, capital financing and investing activities12.
  • Statement of changes in fiduciary net assets: The fund financial statement that presents information about the changes in net assets for each fiduciary fund13.
  • Statement of changes in net assets: The financial statement that is the GAAP operating statement for pension and investment trust funds. It presents additions and deductions in net assets held for pension benefits and investment pool participants. It reconciles net assets held at the beginning and end of the financial period, explaining the relationship between the operating statement and the balance sheet14.
  • Statement of fiduciary net assets: The fund financial statement that presents information about the assets, liabilities, and net assets for each fiduciary fund type15.
  • Statement of financial position: A company financial statement that displays all items as percentages of a common base figure. This type of financial statement allows for easy analysis between companies or between time periods of a company16.
  • Statement of net assets: A government-wide financial statement that reports the difference between assets and liabilities as net assets, not fund balances or equity. Assets are reported in order of liquidity, or how readily they are expected to be converted to cash and whether restrictions limit the government's ability to use the resources. Liabilities are reported based on their maturity, or when cash is expected to be used to liquidate them. Net assets are displayed in three components - invested in capital assets, net of related debt; restricted; and unrestricted17.
  • Statement of revenues, expenditures and changes in fund balance: The financial statement that is the GAAP operating statement for governmental funds. It presents the inflows, outflows, and balances of current financial resources. It reconciles fund balance at the beginning and end of the financial period, explaining the relationship between the operating statement and the balance sheet18.
  • Statement of revenues, expenses and changes in fund net assets: The financial statement that is the GAAP operating statement for proprietary funds. It distinguishes between operating and nonoperating revenues and expenses and separately presents revenues from capital contributions and additions to the principal of permanent and term endowments, special and extraordinary items, and transfers. It reconciles fund net assets or fund equity at the beginning and end of the financial period, explaining the relationship between the operating statement and the balance sheet/statement of net assets19.

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