Fundamentals of Governmental Accounting and Reporting

Chapter 4Measurement Focus and Basis of Accounting

Learning objectives

• Differentiate the two measurement focuses used by governments.
• Differentiate the two bases of accounting used by governments.
• Recognize special terminology used to account for certain items and transactions.

Just what is it that you want to measure?

As it turns out, this is an important question in governmental accounting. The same transaction can be reported differently by different funds. Which transactions a fund records and when depend on the fund’s operating objective. It all comes down to the measurement focus and basis of accounting (MFBOA) being used.

Governmental funds are used to account for the general activities of the government financed primarily by taxes and grants. Proprietary funds are used to account for the business-type activities financed primarily by user fees. The activities and operating objectives of these two fund categories are different and therefore their reporting objectives are different. The two types of fund categories use different measurement focuses and bases of accounting.

Measurement focus

A key to understanding governmental accounting is recognizing that financial statements can measure different things. For example, a cash flow statement will report all transactions that affect cash only. Measurement focus is concerned with what is being measured and reported in the financial statements. The financial statements for governmental and proprietary funds measure two ...