Principles of Governmental Accounting
1. Fund Accounting: Governmental accounting follows fund accounting principles, which require the segregation of government funds into distinct accounts or funds based on their specific purposes, restrictions, or legal requirements.
2. Legal Compliance: Governmental accounting adheres to legal and regulatory requirements governing the financial management and reporting of public funds. This includes compliance with accounting standards established by regulatory bodies such as the Governmental Accounting Standards Board (GASB) and adherence to laws, regulations, and fiscal policies related to budgeting, appropriations, and expenditure controls.
3. Accrual Basis of Accounting: While cash basis accounting is used for some governmental funds, such as the general fund, governmental accounting generally adopts the accrual basis of accounting for financial reporting purposes.
4. Consistency and Comparability: Governmental accounting emphasizes the importance of consistency and comparability in financial reporting. Governments are encouraged to apply accounting policies and practices consistently from year to year to facilitate meaningful comparisons of financial data over time.
5. Financial Reporting Objectives: Governmental accounting aims to achieve specific financial reporting objectives, including providing relevant, reliable, and understandable financial information to stakeholders.