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CITY OF RAMSEY, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1994 Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Basis of Statement Presentation (continued) 2) Proprietary Fund Type a) Enterprise Funds - The Enterprise Funds are used to account for operations that are financed and operated in a manner similar to private business enterprises- -where the intent of the governing body is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges. 3) Fiduciary Fund Type a) Expendable Trusts and Agency Funds - The Expendable Trust and Agency Funds are used to account for assets held by the City in the capacity of trustee or agent. 4) Account Groups a) General Fixed Assets - The General Fixed Assets Account Group is used to account for fixed assets acquired by the City's govemmental fund types. b) General Long -Term Debt - The general long -term debt group of accounts contains the long -term liabilities of the City, other than those liabilities included in the Proprietary Funds. D. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment applied to a fund is determined by its measurement focus and its basis of accounting. Measurement Focus The measurement focus of a fund determines what the fund measures. All governmental and expendable trust funds are accounted for using a current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (revenue and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Fixed assets used in governmental fund type operations and long -term liabilities expected to be financed from governmental funds are accounted for in two account groups, as they are concerned only with the measurement of financial position, and are not involved with measurement of results of operations. The Proprietary Funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and liabilities associated with the operation of these funds are included on the balance sheets. Fund equity is segregated into contributed capital and retained earnings components. Operating statements present increases (revenues) and decreases (expenses) in net total assets. Fund equity is segregated into contributed capital and retained earnings components. Operating statements present increases (revenues) and decreases (expenses) in net total assets. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Basis of Accounting A fund's basis of accounting determines when a transaction or event is recognized in the fund's operating statement. —10—