The Governmental Accounting Standards Board (GASB) governs state and local government financial statements. Government-wide financial statements use the economic resources measurement focus and accrual basis, capturing current and long-term resources, obligations, revenues, and expenses.
The statement of net position reports financial position at a date. The statement of activities reports functional expenses, related program revenues, and changes in net position over a period. Together, these financial statements show the resources supporting public services and the cost of delivering them.
Government-wide financial statements separate generally tax-supported governmental activities from partly or wholly fee-supported business-type activities, followed by a total primary-government column. Public safety and parks commonly belong to governmental activities; enterprise water operations ordinarily belong to business-type activities.
Supporting documentation must establish component-unit treatment before aggregation. Blended component units enter the appropriate primary-government activities; discretely presented component units appear separately and remain outside the primary-government total. Fiduciary activities are excluded because their resources support beneficiaries outside the government's own programs.
The applicable reporting model covers fiscal years beginning after June 15, 2025. Year 1 and Year 2 are relative labels.
Common mistakes
- Deferred signs reversed. Subtracting outflows and adding inflows gives thousand dollars, instead of 360.
- Advance counted as revenue. Moving the refundable 40 from liabilities into revenue raises governmental net position incorrectly to thousand dollars.
- Current debt omitted. Subtracting only noncurrent capital debt gives thousand dollars of governmental net investment, overstated by 60.
Bottom line
- Government-wide financial statements consist of the statement of net position and statement of activities, using economic resources and accrual.
- Governmental and business-type activities appear separately, with discretely presented component units outside the primary-government total and fiduciary activities excluded.
- Enterprise funds ordinarily supply business-type activities; internal service funds ordinarily enter governmental activities after appropriate adjustments.
- Net position equals assets plus deferred outflows less liabilities less deferred inflows.
Exam shortcut
First identify the requested statement, reporting units, activity columns, and trial-balance closing status. Mark source accounts already adjusted so their effects enter only once. For net position, sort the five statement elements before computing the residual. Circle current debt installments, restricted-resource obligations, and deferred-resource labels in the supporting schedules. For activities, classify taxes immediately, then inspect grant purpose and eligibility. Calculate each functional net amount before adding general revenues.
The full lesson (about 4,527 words, 30 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- III.A1
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