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CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 2001 NOTE 1— SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 governmental fund types. b. General Long -Term Debt — The General Long -Term Debt Account Group of accounts contains the long-term obligations of the City, other than those liabilities in the Proprietary Funds. E. 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 funds 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 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. 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 sheet. Fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. Basis of Accounting A fund's basis of accounting determines when a transaction or event is recognized in the fund's operating statement. The modified accrual basis of accounting is used by all governmental fund types and the Expendable Trust Funds. Under this basis of accounting, transactions are recorded in the following manner: 1. Revenue Recognition — Revenue is recognized when it becomes measurable and available. "measurable" means the amount of the transaction can be determined and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. -13-