Measurement focus is concerned with whatfinancial dealings and events will be accepted in the accounting records and reported in thefinancial statements. Anaccounting method that comprehend economic events despite of when cashtransactions happen.
Generally the basis of accounting illustrates when thingsare measured (Luder K, 1992). The economic resources measurement concentrate reportson the income balances and flows of both current and noncurrent assets and liabilities,while the current financial resources concentrated only on the report of balancesand flows of current assets and liabilities. The basis of accounting distinguishrevenues when income and expenses when encounter, where the customized accrualbasis conceded revenues when assessable and obtainable for current spending andexpenditures when a present liability has been deserved. Governmental funds utilizethe current financial resources measurement focus, and fiduciary and proprietaryfunds use the economic resources measurement focus. Generally Governmentalfunds use the customized accumulation basis of accounting (Luder K, 1992).
Fiduciaryand proprietary funds use the accumulation basis of accounting. Business andGovernment type activities at the government-wide level report on net activitiesand assets using the economic resources measurement focus and the accumulation basisof accounting.Bondindenture also called a bond ordinance present the legal basis for issuingrevenue bonds and describes the terms under which supplementary bonds might beissued, as well as the need for revenue producing projects. It characterizedwhat may or may not be in the calculation and description of revenues andexpenses (Jones R H & Luder K, 1996). The bond indenture or ordinance must fulfillwith the stipulations of state law in order to give the debt general obligationstatus; generally, “the full faith and credit” of the unit, or its commonrevenues must be vow to pay recurring interest and to pay basic at maturity.General long-term debt comprises a number of diversities of debt that are not verificationby notes or bonds; e.
g., the current value of capital lease rentals, unfunded incomeliabilities, the noncurrent part of debt for compensated claims and for absencesand judgments.Anexchange transaction is one in which each party sacrifices and receivessomething of near equal value (Vela J M, 1996b). For example, in a municipalcorporation the water department earns the revenue when it bills consumers for waterreceived is an exchange transaction.
The credit rules, similar to profitable accounting,are that the revenue is familiar by the party selling goods or services whenthe deals occurs and the income has been earned. On the other hand anon-exchange transaction is one in which one party obtain something of valuewithout exactly giving value in exchange (Vela J M, 1996b). The examples of non-exchangetransaction fall into four important categories i.e consequential tax revenues(e.g., income and sales taxes), compulsory no exchange revenue (e.g., fines, propertytaxes and penalties), government- authorization no exchange transactions (e.
g.,certain social wellbeing services authorized by a government), and intended nonexchangetransactions (e.g.
, grants and privilege from private donations and higherlevel governments). These valuable rules depend on which of the above specifiedcategories in which the transaction falls. Generally, Consequential taxrevenues are noted in the period in which the basic exchange occurs. Compulsorynonexchange revenue is accepted in the period in which the income are requiredto be used (Jones R, 2000). This nonexchange transactions occurring in agovernmental support, the revenue must be assessable and available before it isaccepted.
Generally revenues are distinguished for government- authorization nonexchange transactions and intended nonexchange transactions when alleligibility necessities have been met or when revenue is received. GASB accounting andfinancial reporting standards for risk financing activities provide that aninternal service fund should concede claims expense and a associated liabilitywhen a claim has been emphasized and it is possible that a loss has been earnedand the amount can be convincingly estimated (Montesinos V & Vela Bargues JM, 2000). Generally the internal service fund may use any basis measured suitableto charge other funds of the government body. The internal service fund mustdistinguish both long-term and current claims fixed cost and liabilities forits risk financing interest within the specific fund (Montesinos V & VelaBargues J M, 2000). This fund may use any basis it considers suitable to chargeother such funds of the entity, as long as the following provisions are met:ii) The full charge bythe internal service source to the other funds is only based on historical costinformation or an actuarial method and adjusted over a logical period of timeso that internal service fund incomes and expenses are approximately same.
iii) In addition to aboveprovisions, the total charge by the internal service fund to the other fundsmay also include a rational condition for expected future tragedy losses.Charges made in accordance with the prior provisions should be acclaimed asrevenue by the internal service fund and as expenses and expenditures by theother funds of the government entity. Deficits, if any three provisions, in theinternal service fund resulting from the claim of (2) and (3) above do not A sinkingfund is a portion of a bond agreement or preferredstock charter that requires the issuer to commonly set money asidein a separate custodial account for the limited purpose of redeeming the sharesor bonds (Montesinos V, 1998). Revenue bond issues that must need the issuer toset aside or accumulate part of the yearly revenue which is then used to exchangebonds before maturity, often well before standard call dates. Generally the savefunds are called the sinking fund.
The amount of bonds subject to a sinkingfund call is conventional in a sinking fund program. The specific bonds (sinkingfund) that are called each year are usually chosen for deliverance by thedrawing of arbitrary lots. Mostly, sinking funds can either be in the formor in cash of other bonds or ideal stock.