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Essentials of
Accounting for
Governmental
and Not-for-Profit
Organizations
Fourteenth Edition
Paul A. Copley,
Ph.D., CPA, CGFM
Professor School of Accounting
James Madison University
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Contents
Preface iii Chapter Two
OVERVIEW OF FINANCIAL
Chapter One REPORTING FOR STATE AND
INTRODUCTION TO LOCAL GOVERNMENTS 18
ACCOUNTING AND The Governmental Reporting Entity 19
FINANCIAL REPORTING Reporting by Major Funds 21
FOR GOVERNMENTAL Overview of the Comprehensive Annual
AND NOT-FOR-PROFIT Financial Report (CAFR) 21
ORGANIZATIONS 1 Introductory Section 22
Financial Section: Auditor’s Report 23
Generally Accepted Accounting Management’s Discussion and Analysis
Principles 3 (MD&A) 24
Sources of Generally Accepted Statement of Net Position 26
Accounting Principles 5 Government-wide Statement of
Definition of Government 7 Activities 28
Objectives of Accounting and Financial Governmental Funds: Balance Sheet 30
Reporting 8 Governmental Funds: Statement of
Objectives of Accounting and Financial Revenues, Expenditures, and Changes
Reporting for State and Local in Fund Balance 32
Governmental Units 8 Proprietary Funds: Statement of Net
Objectives of Financial Reporting by the Position 34
Federal Government 9 Proprietary Funds: Statement of
Objectives of Financial Reporting by Revenues, Expenses, and Changes in
Not-for-Profit Entities 10 Fund Net Position 36
State and Local Government Financial Proprietary Funds: Statement of Cash
Reporting 10 Flows 38
Comprehensive Annual Financial Fiduciary: Statement of Fiduciary Net
Report 10 Position 40
Measurement Focus and Basis of Fiduciary: Statement of Changes in
Accounting 12 Fiduciary Net Position 40
Fund Structure for State and Local Notes to the Financial Statements 42
Government Accounting and Required Supplementary Information
Reporting 13 Other Than MD&A 44
Number of Funds Required 16 Combining Statements 46
Statistical Information 46
Summary 47
ix
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x Contents
Chapter Three Re-establishment of Encumbrances 88

MODIFIED ACCRUAL Recording Prior-Year Property Taxes as
Revenues 88
ACCOUNTING:
Tax Anticipation Notes Payable 88
INCLUDING THE ROLE Payment of Liabilities as Recorded 89
OF FUND BALANCES Issue Purchase Orders 89
AND BUDGETARY Recording Property Tax Levy 89
AUTHORITY 53 Collection of Delinquent Taxes 89
Modified Accrual Accounts 54 Collection of Current Taxes 90
Balance Sheet Accounts 54 Other Revenues 90
Financial Statement Activity Repayment of Tax Anticipation
Accounts 59 Notes 91
Budgetary Accounts 59 Recognition of Expenditures for
Expenditure Cycle 61 Encumbered Items 91
Revenue Recognition for Nonexchange Payrolls and Payroll Taxes 91
Transactions 63 Payment on Account and Other
Summary 66 Items 92
Appendix: Budgetary Accounting Correction of Errors 92
Illustrated 66 Amendment of the Budget 93
Budgets and Budgetary Accounts 66 Interfund Transactions 93
Accounting for Revenues 68 Write-off of Uncollectible Delinquent
Accounting for Encumbrances and Taxes 95
Expenditures 69 Accrual of Interest and
Budget Revisions 73 Penalties 96
Budgetary Comparison Schedule 73 Deferral of Property Tax Revenue 96
Special Item 96
Preclosing Trial Balance 96
Chapter Four Closing Entries 98
ACCOUNTING FOR THE Year-End Financial Statements 100
Illustrative Case—Special Revenue
GENERAL AND SPECIAL
Fund 101
REVENUE FUNDS 82 Motor Fuel Tax Revenues 104
Overview of Modified Accrual Expenditures for Road Repairs 104
Accounting 83 Reimbursement to General Fund 104
Interfund Transactions 84 Reimbursement Grant
Interfund Loans 84 Accounting 104
Interfund Services Provided and Closing Entry 105
Used 86 Year-End Financial
Interfund Transfers 86 Statements 105
Interfund Reimbursements 86 Recognition of Inventories in
Illustrative Case—General Fund 86 Governmental Funds 106
Use of Budgetary Accounts 87 Summary 108
Recording the Budget 87
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Contents xi
Chapter Five Enterprise Funds 153

ACCOUNTING FOR OTHER Illustrative Case—Water Utility
Fund 155
GOVERNMENTAL FUND
Proprietary Fund Financial
TYPES: CAPITAL PROJECTS,
Statements 160
DEBT SERVICE, AND Statement of Net Position 162
PERMANENT 117 Statement of Revenues, Expenses,
Capital Projects Funds 118 and Changes in Fund Net
Illustrative Case 120 Position 164
Debt Service Funds 125 Statement of Cash Flows 164
The Modified Accrual Basis—As Applied Environmental Liabilities 166
to Debt Service Funds 125 Accounting for Municipal Solid Waste
Additional Uses of Debt Service Landfills 166
Funds 126 Pollution Remediation Costs and Asset
Debt Service Accounting for Serial Retirement Obligations 167
Bonds 126 Summary 167
Illustrative Case—Regular Serial
Bonds 126
Other Issues Involving Payment of Long- Chapter Seven
Term Debt 129 FIDUCIARY FUNDS 181
Debt Service Accounting for Deferred
Serial Bonds 129 Private-Purpose Trust Funds 184
Debt Service Accounting for Term Accounting for Investments 184
Bonds 129 Illustrative Case—Private-Purpose Trust
Bond Refundings 129 Funds 186
Permanent Funds 130 Public Employee Retirement
Financial Reporting for Governmental Systems (Pension Trust
Funds 132 Funds) 187
Financial Statements—Governmental Accounting and Reporting for Defined
Funds 132 Benefit Pension Plans 188
Summary 136 Additional Disclosures 192
Other Postemployment Benefit Trust
Funds 194
Chapter Six
A Note about IRS 457 Deferred
PROPRIETARY FUNDS 145 Compensation Plans 196
Internal Service Funds 147 Investment Pools 196
Establishment and Operation of Internal Custodial Funds 198
Service Funds 148 Section 529 College Savings
Illustrative Case—Supplies Plans 198
Fund 148 Tax Collection Funds 199
Other Issues Involving Internal Service A Note about Escheat
Funds 152 Property 201
Risk Management Activities 152 A Final Comment on Fund
Implications for Other Accounting and
Funds 153 Reporting 202
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xii Contents
Chapter Eight Chapter Nine

GOVERNMENT-WIDE ADVANCED TOPICS
STATEMENTS, CAPITAL FOR STATE AND LOCAL
ASSETS, LONG-TERM GOVERNMENTS 260
DEBT 212 Reporting by Special-Purpose
Conversion from Fund Financial Records Entities 261
to Government-wide Financial Special-Purpose Governments Engaged in
Statements 213 Governmental Activities 261
Capital Asset–Related Entries 215 Special-Purpose Governments Engaged
Long-Term Debt–Related Only in Business-type Activities 263
Entries 220 Special-Purpose Governments Engaged
Adjusting to Convert Revenue Only in Fiduciary-type Activities 265
Recognition to the Accrual Special Assessments 265
Basis 222 Leases 266
Adjusting Expenses to the Accrual Employer Reporting for Pensions 267
Basis 223 Illustrative Example 270
Adding Internal Service Funds to Changes in Actuarial Assumptions and
Governmental Activities 226 Net Pension Liability 271
Eliminating Interfund Activities and Other Items Affecting Net Pension
Balances within Governmental Liability 274
Activities 228 A Final Note: Pension Discount Rates 274
Worksheet to Illustrate the Employer Reporting for Other
Adjustments 229 Postemployment Benefits 275
Government-wide Financial Summary 275
Statements 232
Statement of Net Position 232 Chapter Ten
Statement of Activities 234 ACCOUNTING FOR
Required Reconciliation to Government- PRIVATE NOT-FOR-PROFIT
wide Statements 235
ORGANIZATIONS 283
Appendix: Accounting for Capital
Assets and Long-Term Debt in Organizations Covered in this
Governmental Activities 241 Chapter 284
Accounting for General Capital Assets, Overview of Not-for-Profit
Including Infrastructure 241 Accounting 285
The Modified Approach for Reporting Financial Reporting 285
Infrastructure 242 Accounting for Contributions 287
Collections 243 Illustrative Transactions and Financial
Asset Impairment 244 Statements 293
Accounting for Long-Term Beginning Trial Balance 293
Debt 244 Transactions 294
Types of General Long-Term Financial Statements 303
Debt 245 Performance Evaluation 306
Debt Disclosures and Mergers and Acquisitions 310
Schedules 245 Summary 311
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Contents xiii
Chapter Eleven Chapter Thirteen

COLLEGE AND UNIVERSITY AUDITING, TAX-EXEMPT
ACCOUNTING 321 ORGANIZATIONS,
Overview of College and University
AND EVALUATING
Accounting 322 PERFORMANCE 378
Financial Statements 323 Governmental Auditing 379
Revenue and Expense Classification 323 The Single Audit Act and
Illustrative Case—Comparison of Public Amendments 383
and Private Colleges 326 The Sarbanes-Oxley Act 385
Illustrative Case—Journal Entries 327 Tax-Exempt Organizations 386
Illustrative Case—Closing Entries 334 Applying for Tax-Exempt Status 387
Illustrative Case—Financial Federal Filing Requirements 387
Statements 335 Unrelated Business Income Tax
Split-Interest Agreements 339 (UBIT) 390
Summary 343 IRS Oversight 390
Summary and Some Conclusions Related
to Exempt Entities 391
Chapter Twelve Evaluating Performance 391
ACCOUNTING FOR Analysis of Not-for-Profit Organization
HOSPITALS AND Financial Statements 391
OTHER HEALTH CARE Analysis of State and Local Government
Financial Statements 392
PROVIDERS 349
Service Efforts and Accomplishments
Accounting and Reporting Requirements Reporting 396
of the Health Care Guide 351
Financial Statements 351
Patient Service Revenue 353 Chapter Fourteen
Classifications 356 FINANCIAL REPORTING
Illustrative Transactions 356 BY THE FEDERAL
Beginning Trial Balance 356
GOVERNMENT 403
Illustrative Transactions—Operating
Activities 357 Federal Government Accounting
Illustrative Transactions—Nonoperating Standards 404
Activities 359 Financial Reporting by Federal
Illustrative Transactions—Closing Agencies 405
Activities 361 Balance Sheet 406
Illustrative Statements for Private Statement of Net Cost 406
Sector Not-for-Profit Health Care Statement of Changes in Net
Entities 365 Position 408
Financial Reporting for Governmental Statement of Budgetary
and Commercial Health Care Resources 408
Entities 367 Statement of Custodial Activity 410
Summary: Accounting for Health Care Consolidated Financial Report of the
Organizations 370 U.S. Government 410
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xiv Contents
Budgetary and Proprietary Glossary: Governmental and

Accounting 413 Not-for-Profit Accounting
Budgetary Accounts 413 Terminology G-1
Proprietary Accounts 414
Summary 416 Index I-1
Appendix: Illustrative Example 416
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Chapter One
Introduction to Accounting
and Financial Reporting
for Governmental
and Not-for-Profit
Organizations
No Money shall be drawn from the Treasury, but in Consequence of
Appropriations made by Law; and a regular Statement and Account of the
Receipts and Expenditures of all public Money shall be published from time
to time. Article 1, Section 9: The United States Constitution
If men were angels, no government would be necessary. If angels were to

govern men, neither external nor internal controls on government would be
necessary. James Madison, fourth president of the United States and principal
author of the U.S. Constitution
Learning Objectives
• Obtain an overview of financial reporting for nonbusiness entities.
• Distinguish between private and public sector organizations.
• Identify the sources of authoritative accounting standards for various public and
private sector organizations.
• Define the 11 fund types used by state and local governments.
I n its relatively short existence, the United States has grown to be the largest and
most successful economy in history. Why then would a country founded on the
principles of free markets and private investment rely on governments to provide
many goods and services? The answer lies in understanding the incentives of a
free enterprise economy. There are many services that simply cannot be priced in a
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2 Chapter 1
way that naturally encourages commercial entrepreneurs to enter the marketplace.

Commonly this is because the service is subject to free-riding. For example, public
safety and a clean environment benefit all citizens, whether or not they contribute to
its cost. In other instances, free market incentives do not align with public interest.
For example, society finds it desirable to provide a K–12 education to all its citi-
zens, not just those with the ability to pay. Because there is no practical means for
businesses to sell these services, governments are called upon through the political
process to provide those services that citizens demand.1
Although the majority of products and services are provided by either businesses
or governments, in some circumstances private organizations are formed to pro-
vide goods or services without the intent of earning a profit from these activities.
Examples include public charities, trade associations, and civic groups. Again, the
goods or services they provide often cannot be priced in a way that encourages
commercial entrepreneurship. For example, a public radio broadcast cannot be
effectively restricted to only those individuals choosing to support the public radio
station. While this explains why the services are not provided by businesses, why
aren’t governments called upon to provide them?
In some instances, obstacles exist that prevent government involvement. For
example, the U.S. Constitution provides for separation of church and state. Therefore,
any group that wishes to promote religious activities must do so through private
organizations rather than through government. More commonly the reason is lack
of political influence. Support for the arts may be important to a group of individu-
als but unless that group is sufficiently large to influence the political process, it is
unlikely that elected officials will use government funds for that purpose. However,
support for the arts could still be provided by forming a charitable foundation with
no relationship to the government and having the foundation solicit donations from
that segment of the public that finds the arts important.
The organizations introduced in the preceding paragraphs are the focus of this book:
governmental and not-for-profit organizations. They are distinguished from commer-
cial businesses by the absence of an identifiable individual or group of individuals
who hold a legally enforceable residual claim to the net resources. Throughout the text
a distinction will be made between public and private organizations. Public organiza-
tions are owned or controlled by governments. Private organizations are not owned
or controlled by governments and include businesses as well as private not-for-profit
organizations. Not-for-profit organizations lack a residual ownership claim and the
organization’s purpose is something other than to provide goods and services at a profit.
Because significant resources are provided to governments and not-for-profit
organizations, financial reporting by these organizations is important. To para-
phrase the James Madison quotation provided at the beginning of the chapter,
because humans (not angels) operate governments, controls are necessary. Financial
reports that reflect the policies and actions of governmental managers are an effec-
tive means to control the actions of those entrusted with public resources. To be
effective, external financial reports must be guided by a set of generally accepted
1
The branch of economics that studies the demand for government services is termed public choice.
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Introduction to Accounting and Financial Reporting 3
accounting principles. The generally accepted accounting principles for govern-

mental and private not-for-profit organizations are the subject of this book. The
first nine chapters of the text deal with public sector (state and local government)
organizations and Chapters 10, 11, and 12 deal primarily with private not-for-profit
organizations. Chapter 13 discusses auditing and tax-related issues unique to gov-
ernments and private not-for-profits and also evaluates performance of these enti-
ties. Chapter 14 describes financial reporting by the federal government.
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Biologists tell us that organisms evolve in response to characteristics of their environ-
ment. Similarly, accounting principles evolve over time as people find certain practices
useful for decision making. Further, we expect organisms in different environments to
evolve differently. Similarly, if the environments in which governments and not-for-
profits operate differ in important ways from that of commercial enterprises, we would
expect the accounting practices to evolve differently. It is important to understand how
governments and not-for-profit organizations differ from commercial businesses if we
are to understand why the accounting practices of these nonbusiness organizations
have evolved in the manner we will see throughout the remainder of this text.
The Governmental Accounting Standards Board published a document titled Why
Governmental Accounting and Financial Reporting Is—and Should Be—Different
(http://www.gasb.org/white_paper_full.pdf). This white paper identifies five envi-
ronmental differences between governments and for-profit business enterprises and
describes how those differences manifest in differences in the objectives and practice
of financial reporting.
1. Organizational Purposes. While the purpose of a commercial business is to
generate a profit for the benefit of its owners, governments exist for the well-being
of citizens by providing public services—whether or not the services are profitable
undertakings. The result is that government accounting practices are not focused
on the measurement of net income for the purpose of measuring return to investors.
Rather they are intended to satisfy the information needs of a variety of users.
While the purpose of government operations differs greatly from commercial
businesses, the purpose of governmental accounting is the same—to provide infor-
mation that is useful to stakeholders in making decisions. However, governments
have vastly different sets of users of accounting information. Like businesses, gov-
ernments have creditors who are interested in assessing the creditworthiness of the
government. Citizens and businesses, both within the government’s jurisdiction
and those considering relocation to the jurisdiction, are also stakeholders who rely
on governmental reporting to make economic decisions. In addition, governments
receive resources from other governments and grantors who may require financial
reports and audits as a condition of the grant. Since this diverse set of resource
providers have varying interests, the information needs of one group may not meet
the needs of another. The result is that governments report far more disaggregated
information than commercial enterprises.
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4 Chapter 1
2. Sources of Revenues. Net income is a universally accepted measure of busi-

ness performance. The calculation of net income begins with sales. A sale occurs
when an independent party perceives that the service offered both provides value
and is fairly priced. Net income then simply determines whether this measure of
demand (sales) exceeds the cost of providing the service and is an accepted measure
of performance for business organizations. In contrast, governments derive many of
their resources from taxes. Individuals and businesses pay taxes to avoid penalty,
not voluntarily because they perceive government services to be of value and fairly
priced. Since taxes do not involve an earnings process, the timing of the recognition
of tax revenue is not always clear.
3. Potential for Longevity. Because the U.S. and state constitutions grant state
and local governments the ability to tax, governments very rarely go out of busi-
ness. This long-term view of operations changes the focus of accounting from one
of near-term recovery of amounts invested in assets to a longer-term focus on the
sustainability of services and the ability to meet future demand. As a result, govern-
ments may elect not to depreciate some capital assets but expense improvements
that extend an asset’s useful life.
4. Relationship with Stakeholders. Taxes are levied through the legislative
process by officials elected by the citizens. Because citizens and businesses are
then required to pay these taxes, governments have an obligation to demonstrate
accountability for these public funds. While a business can use its resources as it
deems appropriate, governments frequently receive resources that are restricted to
a particular purpose. For example, a city may collect a telephone excise tax legally
restricted to operating a 911 emergency service. In an effort to provide assurance
that resources are used according to legal or donor restrictions, governments use
fund accounting. A fund represents part of the activities of an organization that is
separated from other activities in the accounting records to more easily demonstrate
compliance with legal restrictions or limitations.
5. Role of the Budget. Many businesses prepare budgets, but these are for plan-
ning and control purposes and are rarely made available to creditors or investors. In
contrast, government budgets are expressions of public policy and often carry the
authority of law, preventing public officials from spending outside their budgetary
authority. The increased importance of budgets is reflected in government financial
reports by a required report comparing budgeted and actual amounts.
For these and other reasons, the accounting practices of governmental organiza-
tions evolved differently from those of businesses. As you will see in later chapters,
the accounting practices of not-for-profit organizations more closely resemble those
of commercial businesses. However, the not-for-profit environment shares some
important characteristics with governments. Similar to governments, not-for-profits
do not have residual owners. “Investors” in not-for-profits are diverse and include
donors, volunteers, and members. In addition, as with governments, the excess of
revenues over expenses is not an effective measure of organizational performance.
Finally, like governments, not-for-profits commonly receive resources with donor-
imposed restrictions.
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Sources of Generally Accepted Accounting Principles

Further complicating accounting issues is the fact that we have three levels of
government (federal, state, and local) and not-for-profits may be either publicly
or privately owned. This is important because different standards-setting bodies
have authority for establishing reporting standards for these groups. Illustration 1-1
summarizes the various organizational types and the bodies with primary standard-
setting authority.
Accounting and financial reporting standards for the federal government are
published by the Federal Accounting Standards Advisory Board (FASAB). The
standards are technically “recommendations” since, as a sovereign nation, the federal
government cannot relegate authority to an independent board. Recommendations
of the FASAB are reviewed and become effective unless objected to by one of the
principals, the U.S. Government Accountability Office (GAO), the U.S. Department
of the Treasury, or the U.S. Office of Management and Budget. These standards apply
to financial reports issued by federal agencies and to the Consolidated Financial
Report of the United States Government. Accounting and financial reporting stan-
dards for the federal government are illustrated in Chapter 14.
Accounting and financial reporting standards for state and local governments in the
United States are set by the Governmental Accounting Standards Board (GASB).
The GASB also sets accounting and financial reporting standards for governmentally
related not-for-profit organizations, such as colleges and universities, health care enti-
ties, museums, libraries, and performing arts organizations that are owned or controlled
by governments. Accounting and financial reporting standards for profit-seeking busi-
nesses and for nongovernmental not-for-profit organizations are set by the Financial
Accounting Standards Board (FASB).
The GASB and the FASB are parallel bodies under the oversight of the Financial
Accounting Foundation (FAF). The FAF appoints the members of the two boards
and provides financial support to the boards by obtaining contributions from busi-
nesses; professional organizations of accountants and financial analysts; CPA firms;
debt-rating agencies; and state and local governments. Because of the breadth of
support and the lack of ties to any single organization or government, the GASB and
the FASB are referred to as “independent standards-setting bodies.” Standards set
by the FASAB, GASB, and FASB are the primary sources of generally accepted
accounting principles (GAAP) as the term is used in accounting and auditing
literature.
ILLUSTRATION 1-1 Summary of Standards-Setting Organizations

Reporting Organization Standards-Setting Board
Federal government Federal Accounting Standards Advisory Board (FASAB)
State and local governments Governmental Accounting Standards Board (GASB)
Public not-for-profits Governmental Accounting Standards Board (GASB)
Private not-for-profits Financial Accounting Standards Board (FASB)
Investor-owned businesses Financial Accounting Standards Board (FASB)
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6 Chapter 1
GASB standards are set forth in documents called Statements of Financial

Accounting Standards. Although no longer used, in the past the GASB also issued
Interpretations that provided guidance on previously issued statements. From time
to time, the Board finds it necessary to expand on standards in Technical Bulletins
and Implementation Guides. The sources of authoritative GAAP for state and local
governments therefore are
∙ Category A: GASB Statements (and Interpretations)
∙ Category B: GASB Implementation Guides, GASB Technical Bulletins, and
literature of the American Institute of Certified Public Accountants (AICPA)
specifically cleared by the GASB
If the accounting treatment for a given transaction is not specified by a statement
in Category A, a state and local government should consider whether it is covered
by one of the sources identified in Category B. If the accounting treatment is not
specified within one of these authoritative sources, the government should consider
whether the transaction is sufficiently similar to ones covered by one of the authori-
tative sources that a similar accounting treatment can be applied. If not, the govern-
ment may use nonauthoritative sources for guidance, including
∙ GASB Concept Statements,
∙ FASB, FASAB, or International Standards Board pronouncements,
∙ AICPA literature not specifically cleared by the GASB,
∙ Other sources provided by professional organizations, regulatory agencies, text-
books, and published articles, or
∙ Prevalent practices that evolved among governments without specific authorita-
tive action.
Both the FASB and FASAB have similar hierarchies of GAAP for entities fall-
ing within their jurisdictions. The GASB, FASB, and FASAB publish codifica-
tions (organized versions) of accounting standards. The GASB also publishes a
comprehensive collection of its implementation guides. The advantage of using the
codified versions of standards is that all relevant standards for a particular topic are
presented together and any superseded segments of standards have been removed.
Codification references are presented in two parts: the first (section) identifies a
topic and the second identifies a paragraph within the codification. Letters typically
give a clue as to the topic (e.g., L for leases and Ho for hospitals). Paragraph num-
bers may be used to determine the level of authority within the GAAP Hierarchy.
These are summarized as follows:
Section #s Topics
1000–1900 General Principles
2000–2900 Broad Financial Reporting Requirements
Letters (A–Z) Specific Balance Sheet or Operating Accounts
Double letters Specialized Industries or Reporting Units
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Paragraph #s Level of Authority

100–499 GASB Statements
500–599 Definitions
600–699 GASB Technical Bulletins and AICPA Audit and Accounting
Guides and Statements of Position
700–799 AICPA Practice Bulletins
900–999 Nonauthoritative discussions
For example:
Codification
Reference Section Paragraph
1000.101 Section 1000 indicates this Paragraphs 101–104 present the GAAP
pertains to general principles Hierarchy and since the paragraph number
(in this case GAAP Hierarchy). is <500, it comes from a GASB Statement
(in this case Statement No. 76).
1700.601 Section 1700 indicates this Paragraph 601 states what to disclose if a
pertains to reporting of government is not legally required to adopt
budgetary information. a budget. Since the paragraph number is
600–699, this is Level B GAAP.
F60.101 The single letter (F) identifies a The paragraph number (<500) indicates this
specific account (in this case standard comes from a GASB Statement.
Food stamps).
Co5.902 The double letters (Co) identify The paragraph number (>900) indicates
a specialized industry these are nonauthoritative examples of
(Colleges and universities). financial statements for a state university.
Definition of Government
Some organizations possess certain characteristics of both governmental and non-
governmental not-for-profit organizations. Since there are different standard-setting
boards, it is important to identify which board’s standards apply to a given entity.
For this reason, the FASB and GASB agreed upon a definition of governmental
organizations:
Public corporations and bodies corporate and politic are governmental organizations.
Other organizations are governmental organizations if they have one or more of the
following characteristics:
a. Popular election of officers or appointment (or approval) of a controlling major-
ity of the members of the organization’s governing body by officials of one or
more state or local governments;
b. The potential for unilateral dissolution by a government with the net resources
reverting to a government; or
c. The power to enact and enforce a tax levy.
Furthermore, organizations are presumed to be governmental if they have the
ability to issue directly (rather than through a state or municipal authority) debt that
pays interest exempt from federal taxation.
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8 Chapter 1
OBJECTIVES OF ACCOUNTING
AND FINANCIAL REPORTING
All three standards-setting organizations—the Federal Accounting Standards
Advisory Board, the Financial Accounting Standards Board, and the Governmental
Accounting Standards Board—take the position that the establishment of account-
ing and financial reporting standards should be guided by conceptual considerations
so that the body of standards is internally consistent and the standards address broad
issues. The cornerstone of a conceptual framework is said to be a statement of the
objectives of financial reporting.
Objectives of Accounting and Financial Reporting
for State and Local Governmental Units
GASB has issued six concept statements. Concepts Statement No. 1 identifies three
primary user groups of government accounting information: creditors, citizens, and
oversight bodies (including granting agencies and the legislature). The information
needs of government creditors are not greatly different from their counterparts in the
corporate world, namely to evaluate the likelihood the government will continue to
make its debt payments as they come due. Citizens and oversight bodies have a very
different purpose, which is to determine whether elected officials have raised and
expended the public’s money in a manner consistent with law and the public’s best
interest. Satisfying this citizen “right to know” objective is not easily accomplished
and commonly requires government financial reports to provide much greater detail
than can be found in corporate annual reports.
One difficulty governments have in meeting the information needs of citizens
is that traditional financial statements, which measure events in dollars, are not
well designed to evaluate the government’s effectiveness in delivering services. For
example, consider a public school system. A traditional financial report will show
the sources of revenues and amounts expended, but does little to tell the reader
whether the schools are doing a good job. In many cases nonfinancial measures
are better indicators of performance. These might include the number of students
advancing to the next grade, graduation rates, and scores on college entrance exams.
Concepts Statements No. 2 and No. 5 relate to the reporting of nonfinancial mea-
sures, called service efforts and accomplishments reporting. Service efforts and
accomplishments reporting will be more fully described in Chapter 13.
Concepts Statement No. 3 defines methods of presenting information in financial
reports and develops the following disclosure hierarchy:
1. When items (assets, liabilities, revenues, etc.) can be measured with sufficient
reliability, they should be reported in the basic financial statements.
2. The notes to the financial statements are intended to enhance the understand-
ing of items appearing in the financial statements but are not a substitute for rec-
ognition when a transaction or event can be measured with sufficient reliability.
3. Occasionally the GASB determines that additional information is necessary to
provide context and understanding of information in the statements or notes.
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In such cases, the GASB requires the presentation of required supplementary

information (RSI). RSI appears most commonly in the form of schedules or
tables. Management’s Discussion and Analysis is also an example of RSI.
4. The final level of disclosure includes other supplementary information that is not
required by GASB standards but which the reporting government feels is useful
in understanding the operations of the government.
Concepts Statement No. 4 provides key definitions of items appearing in financial
statements. Not surprisingly, assets, liabilities, and net position (residual equity) are
each defined. However, GASB utilizes two additional elements that do not appear in
the balance sheets of nongovernmental organizations: deferred inflows and deferred
outflows of resources. The most common deferred inflows are taxes that have
been deferred to a future period when they are expected to be available for opera-
tions. Deferred inflows and outflows are also used by GASB to record events and
transactions that appear in Accumulated Other Comprehensive Income (AOCI) in
commercial organizations. For example, prior service costs resulting from changes in
pension terms and changes in the value of hedging derivatives are recognized as AOCI
by business organizations and as deferred inflows and outflows by governments.
Finally, Concepts Statement No. 6 examines the issue of when it is most appropri-
ate to measure assets and liabilities at historical cost and when it is more appropriate
to remeasure assets to fair value or settlement amount. In general, remeasurement
is appropriate for assets that will be converted to cash and liabilities where there is
uncertainty over the timing and amount of payments.
Objectives of Financial Reporting by the Federal Government

The Federal Accounting Standards Advisory Board (FASAB) was established to
recommend accounting and financial reporting standards to the principals—the
U.S. Office of Management and Budget, the U.S. Department of the Treasury,
and the U.S. Government Accountability Office. The FASAB has issued eight
Statements of Federal Financial Accounting Concepts (SFFACs). These con-
cepts apply to financial reporting for the federal government as a whole and for
individual reporting agencies.
SFFAC 1, Objectives of Federal Financial Reporting, outlines four objectives
that should be followed in federal financial reporting. The first, budgetary integrity,
indicates that financial reporting should demonstrate accountability with regard to
the raising and expending of moneys. The second, operating performance, suggests
that financial reporting should enable evaluation of the service efforts, costs, and
accomplishments of the federal agency. The third, stewardship, reflects the concept
that financial reporting should enable an assessment of the impact on the nation of
the government’s operations and investments. Finally, the fourth, systems and con-
trols, indicates that financial reporting should reveal whether financial systems and
controls are adequate.
Other federal government accounting concept statements include
∙ SFFAC 2—Entity and Display,
∙ SFFAC 3—Management’s Discussion and Analysis,
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10 Chapter 1
∙ SFFAC 4—Intended Audience and Qualitative Characteristics for the

Consolidated Financial Report of the United States Government,
∙ SFFAC 5—Definitions of Elements and Basic Recognition Criteria for Accrual-
Basis Financial Statements,
∙ SFFAC 6—Distinguishing Basic Information, Required Supplementary
Information, and Other Accompanying Information,
∙ SFFAC 7—Measurement of the Elements of Accrual Basis Financial Statements
in Periods After Initial Recording, and
∙ SFFAC 8—Federal Financial Reporting.
Objectives of Financial Reporting by Not-for-Profit Entities

FASB has issued eight concepts statements, including one dedicated to nonbusi-
ness entities. In its Statement of Financial Accounting Concepts No. 4, the FASB
identifies the information needs of the users of nonbusiness financial statements.
These include providing information that is useful to present and potential resource
providers who are
∙ Making decisions about the allocation of resources to those organizations,
∙ Assessing the services that a nonbusiness organization provides and its ability to
continue to provide those services,
∙ Assessing management’s stewardship and performance, and
∙ Evaluating an organization’s economic resources, obligations, and effects of
changes in those net resources.
STATE AND LOCAL GOVERNMENT

FINANCIAL REPORTING
GASB Concepts Statements stress that accounting and reporting standards for state
and local governments should meet the financial information needs of many diverse
groups: citizen groups, legislative and oversight officials, and investors and cred-
itors. The primary report for meeting these diverse needs is the Comprehensive
Annual Financial Report.
Comprehensive Annual Financial Report

GASB Codification Sec. 2200 sets standards for the content of the Comprehensive
Annual Financial Report of a state or local government reporting entity. A
Comprehensive Annual Financial Report (CAFR) is the government’s official
annual report prepared and published as a matter of public record. In addition to
the basic financial statements and other financial statements, the CAFR contains
introductory material, an auditor’s report, certain RSI, schedules necessary to dem-
onstrate legal compliance, and statistical tables. Chapter 2 presents an extensive
discussion and illustration of the basic financial statements and the other major
components of the CAFR.
cop01384_ch01_001-017.indd 10 04/04/19 08:01 AM

Illustration 1-2 presents an overview of the financial reporting process for state
and local governments. While a business will typically have a single general led-
ger, the activities of governments are broken down into accounting subunits called
funds. A typical town or county government could have a dozen funds while cities
and states generally have many more. Each fund requires its own general ledger and
general journal. These are represented at the bottom of Illustration 1-2. In addition,
records are kept of general fixed assets and long-term debt.
ILLUSTRATION 1-2 Financial Reporting Process for State and Local Governments
Government-wide
Statement of Net Position
and Statement of Activities
Combining
Worksheet and
Journal Entries
Enterprise Funds
Internal Service Funds
Change to the
Accrual Basis
from Modified
Accrual
Fund-Basis Financial Fund-Basis Financial Fund-Basis Financial

Statements: Statements: Statements:
Governmental Activities Proprietary Activities Fiduciary Activities
Accounting Ledgers: Records of General Accounting Ledgers: Accounting Ledgers:

Governmental Fixed Assets and Business-type Fiduciary
Activities Long-Term Debt Activities Activities
cop01384_ch01_001-017.indd 11 04/04/19 08:01 AM

12 Chapter 1
Governments have two levels of financial statement reporting. The first is the
fund-basis financial statements. Fund-basis statements are presented for three cat-
egories of activities: governmental, proprietary, and fiduciary. These categories and
the funds that comprise each category are described in detail later in this chapter.
While the fund-basis statements present an in-depth record of individual activi-
ties of the government, it is difficult for the financial statement user to pull this
disaggregated information together and form an overall view of the government’s
finances. For that reason, governments are also required to present government-
wide financial statements. The government-wide statements combine the govern-
mental and business-type activities of the government for the purpose of presenting
an overall picture of the financial position and results of operations of the govern-
ment. An important feature of the government-wide financial statements is that they
are prepared using a common measurement focus and basis of accounting.
Measurement Focus and Basis of Accounting

State and local governments prepare their financial reports using two general
accounting methods. One method assumes an economic resources measurement
focus and the accrual basis of accounting, and the other method assumes a flow of
current financial resources measurement focus and modified accrual accounting.
Each of these two methods is discussed below.
Economic Resources Measurement Focus and the Accrual Basis of Accounting

The government-wide statements and the fund statements for proprietary funds and
fiduciary funds use the economic resources measurement focus and the accrual
basis of accounting. Measurement focus refers to what items are being reported in
the financial statements. An economic resources measurement focus measures both
current and long-term assets and liabilities and is the measurement focus used by
commercial businesses. A balance sheet prepared on the economic resources focus
reports the balances in fixed assets and long-term liabilities. Basis of accounting
determines when transactions and events are recognized in the accounting records.
The accrual basis of accounting recognizes revenues when they are earned (and are
expected to be realized) and recognizes expenses (including depreciation) when the
related goods or services are used up. Accruals are commonly required for interest
and other expenses, regardless of when cash is to be transferred. Again, this is the
basis of accounting used by commercial businesses.
Current Financial Resources Measurement Focus and the Modified Accrual

Basis of Accounting The fund statements for governmental funds are presented
using the current financial resources measurement focus and modified accrual basis
of accounting. Many of the transactions in governmental funds are nonexchange in
nature; that is, they are activities undertaken in response to the needs of the public.
Activities reported in governmental funds are heavily financed by taxes and other
involuntary contributions from persons (and organizations) who do not receive ser-
vices in direct proportion to the contribution they make. GASB standards provide
that accounting systems of governmental funds are designed to measure (a) the
cop01384_ch01_001-017.indd 12 04/04/19 08:01 AM

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CHAP. II.
It was long ere Sebastian could calm the anguish of her, who still
“Warmed his fond heart, and beat in every pulse:”
To the pang of parting, quickly succeeded the tortures of suspense; her

child was at the mercy of an ocean whose horrors she had herself
experienced too awfully not to apprehend similar disaster for others.
Aziek soon ceased to complain, but Sebastian’s watchful eyes marked
the sudden alteration in hers at every blast of wind. Those wintry storms
which formerly served to heighten the sublimity of their scenery, were now
heard with horror: the pale cheek, the lifted eye, the scarce-breathed, half-
checked apostrophe, all testified the suffering of an anxious mother.
Sebastian perceived the inutility of remonstrance and exhortation; these
might teach her to conceal her grief, but they could not bring her to conquer
it: he abandoned them therefore, contenting himself with winning her to
other interests, and planning new calls upon her benevolence.
He talked perpetually of Blanche, he talked without gloom; he reverted
to her sweet manners and virtues, he repeated the anecdotes of her
childhood, (anecdotes, which a mother never ceases to hear with interest) he
drew various imaginary pictures of her future destiny, and he took care to
make those pictures pleasing. By degrees Kara Aziek learnt to associate the
prospect of happiness with this temporary privation; she learnt to believe
the sanguine fortunes he foretold, and her mind, permitted to dwell on one
dear object, readily took the only way he chose should lead to it. If tears
sometimes trickled down her cheek at the name of her far-distant treasure,
they were tender tears, full of gratitude and hope.
The tedious months at length wore away, and letters arrived from Sicily.
What were the emotions of the parents when they saw the writing of
their daughter, and were thus assured of her safety! for some time they
could not read her letter; but they opened not any other, their child’s
sentiments and situation absorbed all their interest. Having recovered
himself, Sebastian read the letter aloud, though his voice and his hand yet
betrayed signs of remaining agitation.
The letter contained an account of Blanche’s voyage, a warm
acknowledgement of Gaspar’s cares, description of her reception by the
Duchess of Medina Sidonia, and a confession of her pleasurable emotions
on witnessing the customs and refinements of Europe.
To these details was added the most affecting expressions of love for her
parents, and of sorrow at their wide separation: it was evident that the
simple enjoyments of her native village yet held their place in her
uncorrupted heart; the amusements of Sicily could not displace them, for
these amusements only gratified her senses.
Charmed with the Duke and Duchess of Medina Sidonia, she described
their kindness in glowing language: her delineation of their sentiments
relieved Kara Aziek from many fears; with such noble persons she could
trust her daughter’s heart.
The packets from De Castro and Gaspar were chiefly on business:
Sebastian perused them attentively. They informed him that Queen
Elizabeth’s favorable disposition yet remained unimpaired, but that being
desirous of acting on certainties, and avoiding indiscreet reliance on her
good faith, De Castro thought it expedient to return to London with his
credentials from Sebastian, for the settlement of a final treaty between
them; of which Princess Blanche should be the pledge on the side of
Portugal, and an immediate loan of money, (for the furtherance of their
schemes,) the guarantee on the part of England.
This arranged, he would instantly send for Blanche, who might be safely
committed to Gaspar, and would be permitted to retain this watchful friend
about her person, at the court of London.
Through the exertions of Lord Essex, some German Princes had
promised to join the triple league against their common enemy, and Henry
of France, (perhaps secretly favoring those principles he had weakly yielded
up to gain a throne,) actually advanced an unconditional sum of money for
the aid of Sebastian’s agents in their various missions.
A formidable expedition under the gallant Essex, was fitting out in the
ports of England; the capture or destruction of Cadiz was its object. But the
most extraordinary part of this communication, was contained in the
following sentences.
“Amongst the volunteers in our expedition, there are two, at whose
names your majesty will start. Antonio of Crato, and his son Don
Christopher. For some time the prior had been upheld by the English, but on
discovering the instability and levity of his character, they abandoned his
interests: I found him living a neglected and private individual in London.
“He was unconscious that my exertions here were caused by any
stronger motive than the abhorrence of the Spanish yoke, (for our secret
goes not beyond a small circle) and he deemed it right to visit me—my
reception was so cold, that he quickly left me, and we have never met since.
“He is embarked in the enterprize, foolishly believing that it is meant for
his exaltation: Lord Essex is aware of the use which may be made of this
folly, (as it indeed serves to mask the real candidate for Portugal) and
suffers him therefore to boast as he will.
“Don Christopher is of a different stamp: there is an honourable
melancholy about him, that touched me at first sight; it is easy to perceive
that he blushes at the remembrance of his mother, and that the story of your
majesty’s wrongs has reached his ears. He accompanies the Earl of Essex as
his lieutenant: for he is a true patriot, and seems earnest to make some
atonement for the sins of his parents. Let me, sire, bespeak your favor for
him, when you meet him in Portugal.”
At this mention of his perfidious cousin, Sebastian felt an emotion long
unknown: his blood ran cold, and hastily putting down the letter, he took up
that of Gaspar.
Kara Aziek had no attention to bestow on the abject Prior of Crato: she
was absorbed in grateful contemplation of the happy prospect before her.
Don Emanuel had enumerated so many Spanish and Portuguese nobles,
eager to assist in the re-establishment of Sebastian or his offspring, that it
would have been criminal to refuse placing some confidence in their efforts.
England, France, and Holland, were on their side, and nothing remained to
be concluded, except the signing of a treaty, and the delivery of their mutual
pledges.
With these prospects she was not merely consoled, she was inspirited:
for the first time since the departure of Blanche her lovely eyes shone with
happiness, and she smiled without effort. Her hopes were gay, her joy
unclouded; for of the political world and its tumults, she had experienced
too little to form a distant idea of its rapid mutations.
Sebastian on the contrary, though he abounded in hope also, formed an
instantaneous picture of all the struggles and vicissitudes likely to follow
the public proclamation of his claims. The lives, the fortunes, of every one
embarked in his cause were now at stake: if Spain should feel in herself the
strength adequate to resistance, she would certainly refuse to yield back the
crown of Portugal, at the mere summons of England. War then, must decide
it at last; that war which he had hitherto so carefully shunned!
To the painfulness of this reflection he opposed the chief argument of De
Castro, which consisted in the horrible oppression of Philip: his extortions
and cruelty, daily ruined or maddened some noble Portuguese; he carried
their youth to fight against the Netherlands, and since not even personal
safety was purchased by submission to his yoke, was it not better to shed
their blood in brave resistance?
Aided by other powers, they would contend on equal terms, in point of
physical strength: and the force of a powerful sentiment would surely give
them superiority in all that related to opinion.
Revived by this reasoning, Sebastian banished the gloom of useless
regret, yet he could not cease to occupy himself with conjecture and
anticipation:—his mind was active and anxious, but that activity and that
anxiety were full of cheerfulness.
From this day the discourses of Sebastian and Kara Aziek lost their
pensive strain: they conversed more frequently together, and the theme they
dwelt on was their return to Europe. Time seemed long to them, because
they were eager, but it had ceased to be sad.
In these new emotions their former duties were not forgotten: as they
anticipated a removal from Cachoeira, its peaceful inhabitants, formed by
their care, and dependent on their goodness, became more interesting to
them; the Guaymures had claims on their hearts, which neither Sebastian
nor Kara Aziek were of a nature to disregard. They now redoubled their
solicitude for their welfare; and Sebastian already decided on leaving part
of his property in the hands of two respectable Portuguese, who had settled
near his abode: to these men he might safely trust it, as a deposit for the
promotion of public works, or as a fund in case of any unexpected calamity
by fire.
Months had gone by, and the second appearance of ships from that
quarter of the globe where all their interests was centered, was looked for
eagerly by Sebastian and Kara Aziek: the ships arrived.
Assured of his daughter’s health by seeing her hand writing, and now
deeply solicitous to learn the event of the pending negociation, Sebastian
transferred her letter to his wife, and opened the packet from Don Emanuel.
It was written immediately after his second return from England: it was
full of joyous expectation, Elizabeth had acceded to all the requests of the
King of Portugal; she was ready to exchange a large subsidy for the person
of the Princess Blanche; her expedition against Spain had sailed, and the
moment she should obtain some advantage there, and have the presumptive
heiress of Portugal in her possession, she meant to send and demand of
Philip the restitution of her father’s kingdom.
De Castro was come back to Sicily for the purpose of securing his
brother-in-law’s support to the measures of England: by the council of his
nobles, Philip might be influenced to resign a crown which he could not
keep without their assistance.
Affairs then were at their crisis; or rather that crisis was past, and at this
moment, Blanche was either residing in the palace of her ancestors, and
accepted as the representative of her father, or dwelling in England, while
foreign armies were disputing for her father’s rights.
The agitation excited by this idea, was yet fresh in the hearts of Kara
Aziek and her Sebastian, when a vessel with dispatches to the governor,
brought intelligence that Cadiz was taken by the English, that it was
suspected they meant to send out a fleet against Spanish America, and that
consequently the governor was called on to prepare for obstinate defence.
These news reached Cachoeira by the messenger who brought a letter
that had come in the same ship.
The letter was from Gaspar, and but a month later in date than that of De
Castro: it was short and afflicting: Don Emanuel was dead. A long and
violent fever with which he had been seized soon after his return to
Messina, had delayed the departure of Blanche, and had at last terminated
the life of her most valuable friend.
De Castro had died in the full belief that Providence favoured the cause
of justice and his King; he had died at the brightest moment of their
enterprize; he was therefore to be envied perhaps, if Providence should will
a different fate, and ordain disappointment to the allies.
But what a shock was this event! what a loss! the grief of Sebastian was
as profound as remembrance of De Castro’s past services, and dependence
on his exertions might be expected to render it: he lamented not only the
best of men, but the most zealous of friends. The sinew of his strength was
gone; nay rather, was not De Castro the soul of every project?
A solemn check was here given to those anticipations which had so
lately spread joy through Cachoeira: one blow, taught him who had been
stricken by repeated misfortune, to expect another, and while he mourned
the companion he loved, he trembled to imagine that new calamities might
be in store for himself and others.
Kara Aziek entered into all his feelings; her daughter, deprived of this
faithful protector, whom power and influence rendered more valuable than
the humbler though equally devoted Gaspar, pressed on her heart, and
called aloud for succour.
Upon the affection of the Duke and Duchess of Medina, she slightly
calculated, (for we do not receive strong impressions by mere description,
we must witness attachment, to rely on its existence) Kara Aziek only saw
her inexperienced daughter, alone, desolate, and sad, going amongst
strangers, to whose honour she must trust for generous treatment.
Distracted, bewildered, unconscious of what to wish or to propose, she
fell into a passion of grief which Sebastian understood but too well. He was
standing buried in thought: at the sound of her sobs he started, and
approaching her to support her, said in a composed tone: “We have indeed
lost our best friend, my Aziek! he cannot be replaced. Ought I not to
consider his death as the vice of Heaven calling me to abandon this solitude
and appear on the scene myself? Even in his most sanguine moments De
Castro regarded England with suspicion, and knew her to be guided by self-
interest: that base principle may as easily lead to her betraying my affairs,
as to her advancing them. What then would be the fate of our Blanche?
rouse yourself my beloved! we must stand the shock of peril together—my
resolution is taken—I quit Brazil.”
At these words Kara Aziek flung herself on his bosom with a cry of joy;
she had lost sight of every object except her daughter, and contemplating
her desolate state, possible danger to her husband was forgotten. “O my
Sebastian!” she exclaimed, “let us indeed brave the world united; give me
back my child, and then whatever be the destiny awarded us, we shall meet
it with courage. Here, our peaceful days are over—long, long have they
been over, without Blanche we live on, bereft of our soul.—Shall we ever
see her again? O thought too blissful!”
She ceased, overcome with an emotion which Sebastian endeavoured to
moderate, by assuring her that when once they had regained their daughter,
no political motive should induce him to resign her a second time.
The letter from Caspar was again read; and a long postscript which
Sebastian had overlooked in his first consternation, now served to guide
him in his plan for the future.
This postscript informed him that Juan (the cousin of Don Emanuel) had
set off for England with the intelligence of their loss; and that the detention
of Blanche had been agreed upon amongst them, until Queen Elizabeth
should fulfil her promise by sending part of the stipulated subsidy. This
caution, together with the length of time which must pass ere Don Juan
could return, (in consequence of the secret and circuitous route by which all
voyages to an enemy’s country were necessarily taken) animated Sebastian
to hope that his daughter had not yet left Sicily, and that he might find her
still at Messina.
It was his intention rather to become his own pledge of faith, than to risk
the security of his child. Known in Sicily as the orphan ward of Don
Emanuel, she had hitherto lived unsuspected, under the protection of his
sister: it was true, most people concluded her to be the illegitimate offspring
of her reputed guardian, but that conclusion excited no further inquiries, and
threatened her with no danger: it was therefore the safest asylum in which
affection could place her.
Having formed his resolution, Sebastian lost no time in beginning to act:
he settled his arrangements at Cachoeira; he left the largest portion of his
remaining property in the hands he had proposed, and preparing his mind
for toils and troubles to which it was now disused, he bade an eternal
farewel to Brazil.
It was a day of dismal sadness at Cachoeira, when its founder departed:
the importunate lamentations of his Indians followed him even to St.
Salvador; many of them petitioned to go with him, some refused to quit his
side till they saw him embarked, others flung themselves into the sea and
swam after the ship.
Sebastian had thanks and benedictions for them all: Kara Aziek repaid
them with her tears, and affectionate though mournful smiles. She knew
they were never to meet again, and her heart ached to think how delusive
were the hopes of their return, which each ardent native continued to
express, and demanded to have confirmed.
At length the sounds of sorrow no longer reached them from the
receding shore, it became more distant every moment, it lessened to a
speck, it sunk beneath the horizon! They looked back, and that vast
continent was blotted out from their sight: nothing remained but their
solitary vessel in the midst of that solemn and toiling ocean, beyond which
they were going to court difficulty and danger.
Their situation was like that of a soul returning a second time into mortal
life, after having long reposed on the calm of another world. Kara Aziek
doubted whether she should have strength to encounter the cares
inseparable from such a change; and Sebastian searched his spirit to
discover some of that fire and decisiveness which once predominated in his
character, though it had lain dormant at Cachoeira.
Bereft of Don Emanuel De Castro, he felt dependent chiefly on himself:
(for Don Juan he remembered merely as a very young lord whose character
was not yet developed when they sailed for Africa,) he shuddered to think
what might ensue should the Duke of Medina fail him at this awful
moment: should he have betrayed the secret of Blanche’s birth, her parents
might be hastening only to hear that their innocent child was immured in a
Castillian prison; but should he prove faithful, his counsel might in some
measure atone for the loss of De Castro.
Sebastian revolved these thoughts with deep attention; for the period was
critical, and he was about to play a solemn game that staked his liberty and
his life, the safety of his wife and daughter, and the existence of Portugal.
CHAP. III.
Filled with such agitating interests, neither Kara Aziek nor Sebastian
marked the dangers of their voyage: they heard the raging storms without
apprehension; mightier storms were threatening from afar, of still-deadlier
import, and though they cherished a rational hope of finding the scene less
fearful than they dreaded, they felt a presentiment of impending evils.
In something more than three months they reached St. Lucar, whence
they immediately took a passage up the Straits, to Messina.
They had re-embarked, and the vessel was under weigh, when a stranger
put off in a boat from the shore, and gained the ship. He had come post
from Madrid on some business near St. Lucar, and was now anxious to
reach the Venetian gulph where he calculated on obtaining a birth in some
vessel proceeding to Venice: his looks were those of a man who has just
quitted a scene of confusion: he had indeed left the capital of Castille an
hour after its gloomy tyrant had breathed his last.
Philip the second was dead: and as if the whole fabric of her enormous
power was shaken by this event, the strangers in Madrid all hurried to
convey the news, each to his own country, anxious to proclaim that this was
the moment for crushing the despotism of Spain.
Sebastian was sitting alone with Kara Aziek in the cabin they had
exclusively engaged for themselves, when the captain suddenly entered, and
unconscious of the peculiar interest his passengers had in such a
communication, imparted the death of Philip merely as a piece of news. He
then bolted out again, leaving Sebastian transfixed with surprise.
This event was indeed important to him: it was that which would give
his confederates every advantage, by affording them the opportunity of
falling upon Spain at a moment when her unsettled government could but
feebly resist, or would find it policy to comply with their demands: such an
event looked like an omen of success.
Amazement had struck both Sebastian and Kara Aziek speechless: they
did not hear the concluding sentence of the captain, who had requested
leave to send his new passenger into their cabin, as he was of rank, and no
other part of the ship was fit for his reception; they were startled therefore
to see a stranger of good mien and richly habited, enter their apartment.
The bright flush of their countenances subsided directly, and they turned
towards the windows; for Sebastian was anxious to avoid the chance of
recognition.
The stranger hesitated; at length closing the door, he advanced and
apologized for his intrusion, pleading the necessity occasioned by a violent
fall of rain, which drove him from the deck, and obliged him thus to throw
himself upon the politeness of others.
The gentleman spoke in Italian, which was evidently his native tongue.
His address was too courteous for Kara Aziek to persist in an appearance
of incivility; she turned round, and pronounced with hesitation, the
permission he sought.
Sebastian remained as if in thought, with his face to the windows; the
stranger sat down: he continued to converse with his fair companion, who
listened attentively, since he talked of the event which occupied her
thoughts. He spoke eloquently of the atrocious crimes that had disgraced
the life of Philip, and hazarded several acute conjectures upon the changes
which his death would produce in the cabinets of Europe. In particular, he
described one of the tyrant’s most insolent acts to the republic of Venice,
and anathematized his iniquitous treatment of Portugal.
At this part of his harangue, Sebastian unconsciously turned round, and
fixed an earnest look on the speaker; the latter started, stretched eagerly
forward, betrayed signs of doubt and surprize, and for a moment was silent;
but he resumed his discourse, on seeing that Sebastian precipitately moved
away.
While the Italian continued to speak, he watched every movement of
Sebastian: his countenance rapidly expressed the succession of thoughts
which this observation excited; suddenly rising he came directly in front of
the person he scrutinized. At this action an indignant flush crimsoned
Sebastian’s features; his look became severe; and the proud majesty with
which he stepped back from the advance of his observer, made the latter
pause.
“I mean not to offend, Sir!” said the stranger, respectfully inclining his
head, “Gracious Virgin! can it be possible; I know not what to—I dream
surely!—so many years!—if I am right in my suspicion, my knee should
follow the homage of my mind.”
Sebastian saw that he was discovered, but resolving to retain
concealment as long as possible, he gravely replied, “your manners surprise
me, sir! I am unconscious of ever having seen you before.”
The stranger still kept his eyes rivetted to the face of Sebastian, but their
expression was rather inviting than hostile. “My memory assures me, sir,”
he returned, “that I have seen you before: it was in the palace of Santos de
Veiel, on the coast of Algarve, where I went on a secret mission from the
Venetian Republic, to the young king of Portugal. Many years have gone by
since that period, but I still retain the impression made on me by Don
Sebastian’s most princely lineaments and gracious presence.—His
moderation, justice, and magnanimity in the conduct of state business, I had
then an opportunity of observing; his ardent piety was no less my
admiration:—and since the fatal year in which he was said to have perished,
I have always been one of those who most eagerly listened to the various
stories of his re-appearance.—I wish you to know me completely, sir: I am
Signor Giuseppe Morosini: the name of the noblest house in Venice, is, I
trust, a herald of honour:—at this day, my brother holds the first dignity of
the republic.”
“Your mien announced your nobility, sir!” replied Sebastian,
endeavouring to preserve the repelling coldness with which he awed the
vivacity of the Italian: Signor Morosini looked disappointed and
embarrassed; this remark did not answer his question, and he feared to
repeat it.
“My enthusiasm transports me too far;” he said, after a short silence, “if
you are not the personage I imagine; my discourse must sound like the
ravings of a madman, pardon me sir, I have no curiosity; respect and
disinterested zeal, alone dwell in my heart.—I see that I am not understood
—or not recollected—or not credited:—I am at a loss what to do.”—
The Venetian stopt, and sitting down, Sebastian perceived that he
contrived to let his mantle fall off, and discover below the collar of his ruff,
a device of diamonds which fastened it to his vest: this very bauble he
remembered having given to the Venetian envoy, at the period mentioned
by this stranger. He now examined him attentively; and as Signor
Morosini’s countenance had lost its vivacity, and taken an air of
mortification, that expression came nearer to the serious air of a man of
business: he began to recollect his features and his figure; though the
former were extremely darkened, and the latter greatly enlarged since they
had met at De Veiel. But still he shrunk from precipitate disclosure, and
remained silent.
Kara Aziek, in whom the stranger’s first address had awakened a
thousand fears, now recovered from that impression, and exchanged an
approving glance with Sebastian: she ventured not to speak, and for some
time, silence succeeded to the warmth of energetic discourse.
The reflections of Sebastian were fluctuating and troubled: his nature led
him to implicit confidence in the protestations of a man of whom he
remembered nothing that was not honourable; but experience had taught
him to doubt and to investigate, ere he trusted past recal.
Yet in what way should he act? if Signor Giuseppe were permitted to
depart under the impression which it was evident he retained, pique at being
distrusted, might render him forward to describe the person he had seen,
and the surprise that encounter had caused him. Such conduct must prove
destructive of that secrecy, which, for awhile, should belong to Sebastian’s
intercourse with Spanish subjects: he would be traced to Messina, to the
abode of the Duke de Medina Sidonia’s wife, and the sacrifice of their
whole family might follow the annihilation of his own.
Was it not better therefore, to take a bold step, and rely at once on the
honour and truth of this Venetian? his near relationship to the Doge, and the
aversion he expressed to the memory of Philip, might be fairly considered
as grounds for confidence; and if his favorable remembrance of the
Portuguese monarch, inspired him to attempt acquiring for the confederate
powers, the assistance of Venice, his friendship must be considered as an
important advantage.
These thoughts were agitating her husband, while Kara Aziek tried to
support languid conversation with Signor Morosini: the latter preserved a
timid and mortified air, yet now and then he stole an earnest glance towards
both his mysterious companions.
Sebastian suddenly approached, and lowering his voice, said, “I would
learn from you, noble Venetian, the name of him for whom you take me?”
Signor Giuseppe raised his head, and said frankly, “For Don Sebastian
himself.”
Sebastian gave no other answer than a gracious smile: the Venetian
seized the confession made by this well-remembered smile, and bent his
knee to the ground; the King gave him his hand, raised him up, and seated
himself by his side.
Signor Morosini, with the vivacity of his country, then began to pour
forth expressions of sincere joy, of wonder, of curiosity: he was eager to
learn where the King of Portugal could have been concealed so long; and
ere Sebastian found voice to reply, had imagined a thousand fantastic and
improbable adventures, which he uttered with more than his usual rapidity.
Sebastian briefly replied, then added, “You find Signor, that I know what
is due to the bare word of an honorable man: you have merely assured me
that you wish to serve me, and relying on that assurance, I no longer
hesitate to employ your friendship in negotiation with the Republic. For my
long irresolution at our first meeting, your own sense of discretion will
plead: in circumstances like mine, caution is a virtue.”
Signor Morosini replied with an excess of urbanity: his looks witnessed
his words; and the readiness with which he promised to use the utmost
diligence and prudence, in his negotiation with the Doge and the Senate,
forced Sebastian to confess, that his warmest friends were ever those on
whom he had no right to calculate.
Kara Aziek had retired to another part of the cabin, and taking up some
needlework, ventured not to share in a discourse, where every word was of
consequence to Sebastian, who alone could know how much to withhold or
to confide.
She observed that he never mentioned Blanche, that he prayed leave to
postpone telling the whole of his adventures, and that although he spoke of
England, France, and Holland, as favourably disposed towards him, he did
so in general terms; declining further explanation, until Venice had
determined on what course she would pursue.
Signor Giuseppe understood only, that the King of Portugal was going to
seek some old friend in Sicily; and solemnly swearing not to confide that
secret, even to his brother, he promised to be speedy in dispatching news of
success or failure, to Messina.
Thus situated, the vessel brought them to the mouth of the Venetian
gulph.
So many ships were proceeding to Venice, that Signor Morosini found
no difficulty in procuring the passage he sought: he renewed his promises
of secresy and devotedness, and getting into a felucca, was soon removed
from the vessel of Sebastian.
Filled with unexpected satisfaction by this Providential rencontre, and
led to hope complete success, since Philip was snatched from the world,
Sebastian discouraged not the expression of Kara Aziek’s joyful feelings.
He believed that the terror of Philip’s name no longer operating to
intimidate other sovereigns, past injuries would make them rise to limit the
power of his successor, such an event must prove a signal for Portugal to
start forward in her own cause: and if at the same time her long-lost
monarch should appear at the head of a confederate army, would not his
miraculous appearance stimulate them to victory.
It was now that the sun once more shone out over the darkened fate of
Sebastian: how various, how trying had been his lot! but he was becoming
accustomed to change; and that equanimity of soul which so peculiarly
distinguishes those who have passed through many vicissitudes, was
already visible, equally under sunshine or under storms.
Kara Aziek was less philosophic, and more animated; she thought their
allotted time of suffering had reached its termination, and fondly
anticipating a re-union with her daughter, trusted that after this moment,
their destiny must remain bright and secure.
The wind favored her eagerness: their vessel proceeded rapidly, and
gained the port of Messina.
The house of Marco Cattizone (a name assumed by Gaspar, who
believed it prudent to lull curiosity, by passing for an Italian) was easily
discovered: as Sebastian and Kara Aziek approached it, their hearts
throbbed with apprehension, lest they should not find him: if he were gone
to England with Blanche, another tedious voyage must be taken.
They had wrapped themselves in large mantles to conceal their figures,
without appearing to have studied concealment, and having landed towards
night, they reached the house unnoticed. Sebastian knew that Gaspar had
married the favorite woman of the Duchess Medina, (by whom this little
estate was given as her dowry) he was therefore prepared to act cautiously,
when appearing thus unexpectedly before a friend, whose surprise might
betray him into indiscretion.
Having learned that Marco Cattizone was at home and alone in his
garden, he went with Kara Aziek into a retired room, and desired him to be
sent for. In a few moments Gaspar entered: Sebastian and Kara Aziek stood
with their faces averted till the servant had closed the door, they then turned
round, and Gaspar uttered a cry of joy: the next instant his countenance
changed, and he exclaimed, “In the name of God, dearest master, why are
you here? this precipitate step”—His looks expressed the apprehension he
felt.
Regardless of themselves, the impatient parents only pronounced the
name of Blanche. “She is here, blessed be Heaven!” returned Gaspar, “still
the care and delight of our good Duchess.”
“Does she remember us,” exclaimed Kara Aziek, “does she love us as
she used to do?”
Gaspar’s animated reply drew a flood of joyful tears down the cheeks of
the tender mother: lost in delightful anticipations, she listened not to the
alternate interrogatories and explanations of Sebastian and his friend; when
they spoke of the subject nearest her heart, she was all ear again.
They spoke of Blanche’s prolonged stay at Messina.—Caspar confessed,
that after the death of Don Emanuel de Castro, some wavering conduct on
the part of Queen Elizabeth, had rendered him fearful of committing so
precious a pledge to her good faith. Elizabeth had taken advantage of their
loss, to dictate new terms of alliance, and in her conversation with Father
Texere, had stipulated for two of the most important islands belonging to
Portugal, in the Atlantic and Indian ocean, to be given her as a
compensation for her services, in case Don Sebastian should be restored:
the repayment of the subsidy, of course, was not abandoned in her altered
articles.
Her avidity, and the ungenerous advantage thus taken of desperate
circumstances, had alarmed Gaspar, and disgusted the other adherents of
Sebastian: they deemed it right to detain Princess Blanche till the English
Queen should come back to her former terms; since once delivered into her
possession, the safety of Blanche might be turned by her into an instrument
of fresh extortion.
The ultimatum of the confederate nobles had lately been sent to London,
and at this period, Don Juan De Castro, (who was the bearer of it) was daily
expected to arrive with the decision of Elizabeth.
Intelligence like this must have struck a death-blow to the hopes of
Sebastian, had he not possessed a ground of encouragement in the prospect
of Venetian aid, and some consolation from the death of him who had
trampled on his country: his countenance was undismayed. “Let us not
despond, my friend! I have other resources yet.—Providence has not
abandoned your King:—our prime enemy is gone to answer for all his
crimes against God and man,—Philip of Spain is dead.”
Gaspar looked as if doubtful whether he were dreaming or awake, he
turned a vacant gaze from Sebastian to Kara Aziek: the former repeated his
assertion, briefly adding the source whence his information was derived.
That explanation led to a narrative of the adventure with Signor Morosini;
at which Gaspar passed from the extreme of despondency, to the extreme of
joy.
All his trouble vanished: he rightly believed that the accession of fresh
allies would force Elizabeth into moderation and fidelity; and that Philip III.
unwilling to strain the nerves of an infant government, and eager to regain
those friends which his gloomy predecessor had spurned from him, might
yield with a good grace to the mediation of so many princes, and restore the
crown of Portugal.
Relieved from the torture of contemplating future disasters, he now
considered the arrival of his sovereign, as an alarum to raise the spirits and
confirm the loyalty of his adherents; and no longer apprehensive for his
personal security, he delivered himself up to the gratifications of friendship.
Only the remembrance of De Castro, the generous De Castro, saddened
this meeting: his activity and virtues were sincerely eulogised: his last hours
were described by Gaspar; and many were the tears which then embalmed
his memory.
The distance of villa Rosolia, obliged Kara Aziek to resign the
expectation of embracing her daughter before the next day. Gaspar dwelt at
Messina for the convenience of receiving and forwarding dispatches beyond
sea; and Kara Aziek divined, that as his wife still retained her situation
about the person of the Duchess, he had formed the connection chiefly that
he might visit the villa unnoticed by the other domestics; thus preserving
his intercourse with the Duke, and his interest in Blanche undiscovered.
Villa Rosolia was two leagues off, but Gaspar deemed it expedient to
dispatch a messenger with a letter to Blanche under cover to his wife,
informing her of the arrival of her parents, and preparing her to receive
them on the ensuing day.
The return of this messenger brought a letter from Blanche written in the
overflowings of filial joy: she named an early hour for receiving her parents
on the morrow, when she hoped they were to meet never to part again.
Parental emotions banished sleep from the pillow of Kara Aziek and
Sebastian: their night was spent in conversation about her, upon whom hung
all their domestic happiness. Would they find her still the same artless and
admirable creature they had parted with in Brazil! would the same beautiful
countenance present itself unchanged to their partial sight?
A multitude of natural doubts and fears moderated their joy, but
increased their impatience, and they rose soon, to commence their short
journey to Rosolia.
Gaspar had the self-denial to remain behind, lest his appearance in
familiar society with the visitors of the Duchess Medina, should excite
curiosity in her household.
The hired carriage which conveyed them from Messina, was not long of
bringing them to the gate of the villa. At beholding that house which
contained her child, Kara Aziek’s emotion was heightened to painfulness:
she turned pale, grew faint, and alighting from the carriage, tottered into a
hall, almost unconscious of existence.
Having paused a little to recover herself, a servant led them into an
unoccupied apartment, where they were immediately joined by their
daughter.—She came alone.
At her entrance, both parents stretched out their arms towards her,
without having power to advance; they scarcely saw the beautiful young
creature who sprung to their embrace with the bloom of a Hebé, and a
sensibility which covered her glowing cheeks with tears: they knew it was
their child; for her voice vibrated in well-remembered sweetness on their
ear. They blessed, they embraced, they wept over her; they murmured out
their gratitude to Heaven; and lost to every thing else, thought only that
they were indeed met to part no more.
When this mutual transport had a little subsided, they were able to look
attentively on Blanche: it was not her extreme beauty (though she was
lovelier than any “mortal mixture of earth’s mould”) that elevated and
delighted their hearts; it was the expression which made that beauty
beautiful to them. Her eyes still beamed the tenderness and sweetness of her
mother, her brow yet announced the energy and heroism of her father: her
manner was still simple and modest; her words the language of unperverted
truth.
The mutual details of this happy family may be easily imagined: they
consisted on the part of the parents in the repetition of what they had
already repeated to Gaspar; and on the side of Blanche, in accounts of her
habits of life, and such interesting anecdotes of her protectress as were
connected with them.
She informed her father that the Duke had been sent for express the
evening before, on the death of Philip II. and ere Sebastian reached
Messina, had gone for Spain with his only son Don Hyppolito, in order to
appear at the first council of their new sovereign. This circumstance, though
it robbed Sebastian of that Nobleman’s advice, was yet to be considered as
replete with advantages, since in quality of counsellor to the new monarch,
he might add his influence to the Portuguese party, when England and the
other allies should openly proclaim in his favor.
Eager to introduce her protectress, Blanche now hastened away for that
purpose; she returned, preceded by the Duchess.
Her resemblance to Don Emanuel deeply affected Sebastian, he kissed
her hand in silence, and as he lifted up his head again, the Duchess saw that
tears were on his cheek; interpreting their cause, she too, turned aside to
hide rising emotion.
It is only a half-sorrow which seeks to display itself: true grief, like true
virtue, courts the shade.
Not a heart there, but was full of De Castro’s memory, yet not a lip
trusted itself to breathe his name.
The conversation flowed less on the past, than the future. Sebastian
found that the Duchess possessed an acute and penetrating mind: she had
entered into all the views of her brother and husband; and though the latter
had never consented to act in rebellion against his own lawful sovereign, he
was forward to avow his abhorrence of usurpation, and to prove it, by
entering his protest against a detention of the Portuguese crown, should
Philip refuse to resign it on the appearance of Sebastian.
She stated these principles with perfect candour, professing no more in
her husband’s name, than she knew him earnest to perform. She offered
Sebastian the protection of her house, and the use of the revenues attached
to it; for the family of Medina Sidonia was the richest in Spain, and this
Sicilian estate made but a small part of their wealth.
Impressed by her generous conduct, both Sebastian and Kara Aziek
renewed those protestations of eternal gratitude which they had first uttered,
while acknowledging all they owed to her for her maternal care of their
daughter, but they neither required nor accepted any additional favors
beyond that of shelter for awhile.
Happy were the days that now flowed away at the villa Rosolia; in the
enjoyment of life’s most hallowed affections, the parents and the child
refused to allow any moment of their time to distracting cares; they were all
absorbed in each other.
Gaspar might be said to hover over their domestic circle; for his spirit
was always with them, though their inequality of rank rendered the
discretion of distant respect an act of necessity. At some periods however,
this restraint was amply compensated. Innocent stratagems were devised by
which he had opportunities of conversing whole hours with his noble
friends; and though his wife was not entrusted with the secret of Blanche’s
connexion with these extraordinary strangers, she knew them to be his
former master and mistress, and wondered not at their graciousness to her
husband.
Letters from Spain and Venice changed the calm aspect of villa Rosolia.
—Medina Sidonia wrote, that he found the new King well-inclined to
lighten the burthens which his predecessor had imposed on the Portuguese,
nay, that he was aware of the danger of driving them to despair, and the
policy of conciliation; and that he had listened with attention to Medina’s
suggestion of placing at the head of their government their first noble, the
Duke of Braganza. This suggestion had been hazarded to try Philip’s pulse,
and from the moderation with which he received it, Medina sanguinely
concluded, that he would not attempt retaining the crown when the
legitimate owner was proved to be living.
Signor Morosini’s packet contained more substantial good fortune: it
accompanied an invitation from the Doge, for Don Sebastian to repair
immediately to Venice, where he promised (on certain conditions,
advantageous for the republic, and not inimical to the interests of Portugal)
to protect him against Spain, to procure the assistance of other Italian states,
and if supported by England and France, to take up arms in his cause.
Among the motives for gratitude to Don Sebastian which the Venetian
republic felt and acknowledged, was a very considerable loan of money
which she had borrowed at a time of imminent want, and which she had not
since been able to return. Sebastian had cancelled the debt; and he now
received this forwardness to assert his rights, as an honourable proof that
political virtue had not abandoned the world.
A list of illustrious names was subscribed to this letter: he well
remembered many of their signatures, that had been inscribed on official
papers at the period alluded to, and no longer doubting either the sincerity
or the success of Signor Morosini, he once more gave the reins to his
sanguine nature, and believed himself justified in trusting to the honor of
the Venetians.
This seemed the crisis of his fate, the hour that was to determine whether
Portugal should be emancipated, or doomed to eternal slavery. The bold act
of suddenly claiming his rights from the bosom of an independent state,
would fix the wavering inclinations of France and England; Holland had
never retracted her good faith; and thus supported, Sebastian believed
himself called on to resolve decisively.
It was important for him to secure the friendly offices of some powerful
personage in his own dominions, and to whom could he look with such
certainty, as to his kinsman the duke of Braganza?
This nobleman was that Theodosius, Duke of Barcelos, who at eleven
years old had borne a royal standard over the field of Alcazar: he was now
the only representative of their ancient house. To him, (as one dear to his
recollection, and well acquainted with his hand-writing) Sebastian intended
to address a confidential letter, informing him of his existence, and of his
determination to repair immediately to Venice, whence he should send a
summons to Philip for the restoration of his dominions.
Gaspar eagerly offered to become the bearer of this important dispatch,
fearful that any messenger less aware of its momentous nature, might fail of
delivering it, or loiter on his way. Gaspar’s long absence from Portugal
persuaded him that his person would be worn out of the memory of all but
his most familiar associates, and to none of them, except his sisters, was his
return from Barbary known. Besides the motive of duty, he pleaded his

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Chapter Three Re-establishment of Encumbrances 88

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Chapter Five Enterprise Funds 153

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Chapter Eight Chapter Nine

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Chapter Eleven Chapter Thirteen

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Budgetary and Proprietary Glossary: Governmental and

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If men were angels, no government would be necessary. If angels were to

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way that naturally encourages commercial entrepreneurs to enter the marketplace.

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 Introduction to Accounting and Financial Reporting 3

accounting principles. The generally accepted accounting principles for govern-

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

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2. Sources of Revenues. Net income is a universally accepted measure of busi-

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 Introduction to Accounting and Financial Reporting 5

Sources of Generally Accepted Accounting Principles

ILLUSTRATION 1-1 Summary of Standards-Setting Organizations

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GASB standards are set forth in documents called Statements of Financial

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 Introduction to Accounting and Financial Reporting 7

Paragraph #s Level of Authority

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 Introduction to Accounting and Financial Reporting 9

In such cases, the GASB requires the presentation of required supplementary

Objectives of Financial Reporting by the Federal Government

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∙ SFFAC 4—Intended Audience and Qualitative Characteristics for the

Objectives of Financial Reporting by Not-for-Profit Entities

STATE AND LOCAL GOVERNMENT

Comprehensive Annual Financial Report

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 Introduction to Accounting and Financial Reporting 11

Fund-Basis Financial Fund-Basis Financial Fund-Basis Financial

Accounting Ledgers: Records of General Accounting Ledgers: Accounting Ledgers:

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Measurement Focus and Basis of Accounting

Economic Resources Measurement Focus and the Accrual Basis of Accounting

Current Financial Resources Measurement Focus and the Modified Accrual

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Introduction to Accounting and Financial Reporting 3

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Introduction to Accounting and Financial Reporting 5

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Introduction to Accounting and Financial Reporting 7

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Introduction to Accounting and Financial Reporting 9

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Introduction to Accounting and Financial Reporting 11

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