1998 CAFR - Laserfiche WebLink

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CITY OF RAMSEY Notes to Financial Statements (continued) December 31, 1998 NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. Major revenue that is susceptible to accrual includes property taxes, special assessments, intergovernmental revenue, charges for services, and interest earned on investments. Major revenue that is not susceptible to accrual includes licenses and permits, fees, and miscellaneous revenue. Such revenue is recorded only when received because it is not measurable until collected. 2. Recording of Expenditures -Expenditures are recognized under the modified accrual basis of accounting when the related fund liability is incurred, except for principal and interest on general long-term debt which is recognized when due. Certain expenditures for approved disbursements or liabilities incurred in advance of the year in which the item is to be used are recorded as prepaid. -13-