Eleven fund types in three categories
| Category | Funds | Basis / measurement focus |
|---|---|---|
| Governmental | General, Special Revenue, Capital Projects, Debt Service, Permanent | Modified accrual; current financial resources |
| Proprietary | Enterprise, Internal Service | Full accrual; economic resources |
| Fiduciary | Pension trust, Investment trust, Private-purpose trust, Custodial | Full accrual; economic resources |
Modified accrual
- Revenues recognized when measurable and available — collectible within the period or soon enough after to pay current-period liabilities (commonly interpreted as within 60 days)
- Expenditures (not "expenses") recognized when the related fund liability is incurred
- No long-term assets or long-term liabilities on the governmental fund balance sheet
- Capital asset purchases are recorded as expenditures; debt proceeds are other financing sources
IMPORTANT: The vocabulary is the tell. "Expenditures," "other financing sources/uses," and "fund balance" signal governmental funds / modified accrual. "Expenses," "net position," and depreciation signal proprietary funds or government-wide statements / full accrual.
Budgetary accounting and encumbrances
Governments record the budget: Dr. Estimated Revenues, Cr. Appropriations, with the difference to Budgetary Fund Balance. When a purchase order is issued, an encumbrance is recorded to reserve the appropriation; when the goods arrive, the encumbrance is reversed and the actual expenditure recorded.
Fund balance classifications
- Nonspendable — inventory, prepaid items, permanent fund principal
- Restricted — constrained externally (creditors, grantors, law)
- Committed — constrained by the government's highest decision-making authority
- Assigned — intended for a purpose but less formal
- Unassigned — the residual (only the General Fund normally reports a positive unassigned balance)
EXAM TIP: The General Fund accounts for everything not required to be in another fund — there is exactly one, and it always exists.