Question

Describe the purpose and the financial reporting requirements for the General and Special Revenue Funds. Include the way the modified basis of accounting is used to account for revenues and expenditures along with the use of budgetary accounts in your discussion.

Answer 1

Financial reporting for the general and special revenue funds is all about the government funds. General fund used to account for all financial resources that are not restricted to specific purposes or otherwise required to be accounted for in another fund. Special Revenue fund used to account for general government financial resources that are restricted by law or contractual agreement to specific purposes other than debt service or major capital projects.

The reports should include the following elements of financial statements:

• Assets
• Deferred outflows of resources
• Liabilities
• Deferred inflows of resources
• Net position

On a statement of financial position, present both of the following:

• Deferred outflows of resources in a separate section following assets
• Deferred inflows of resources in a separate section following liabilities

Present the statement of net position in the following format:

Assets + deferred outflows of resources – liabilities – deferred inflows of resources = net position

There are three components of net position:

• Net investment in capital assets
• Restricted (should display the major categories of restrictions)
• Unrestricted

Reporting the elements of the governmental funds statement of revenues, expenditures and changes in fund balances to be presented in the following order:

• Revenues
• Expenditures
• Excess (deficiency) of revenues over expenditures
• Other financing sources and uses (including transfers)
• Special items
• Extraordinary items
• Net change in total fund balance
• Fund balance beginning of period
• Fund balance end of period

Initially report inventories and prepaid items as an asset at the time of purchase and defer the recognition of an expenditure until the period in which the inventories are consumed or the prepaid items are used.

Governmental fund reporting focuses primarily on the sources, uses and balances of current financial resources and often has a budgetary orientation. The governmental fund category includes the general fund, special revenue funds, capital projects funds, debt service funds and permanent funds.

Budget & Financial Reporting (BFR) contributes to the outcome 'sustainable government finances'. It provides policy and financial advice to the Minister for Finance, senior ministers and a number of Cabinet committees, including the Expenditure Review Committee (ERC) of Cabinet, on policy proposals, government expenditure and non-taxation revenue in order to facilitate the Government’s Budget and other major economic updates throughout the year.

The Budget is produced each year and embodies the policy priorities and fiscal targets of the elected Government, as well as reporting on the updated financial position of Government. Once authorised by Parliament, the Budget documentation forms part of the legal framework that authorises the spending of public money on the financial proposals announced in Budget.