Page 268 - Honorable Mayor and Members of the City Council

BUDGETARY BASIS – BASIS OF ACCOUNTING

BASIS OF ACCOUNTING

The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All
governmental funds are accounted using a current financial resources measurement focus. With this measurement
focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of
these funds present increases (revenues and other financing sources) and decreases (expenditures and other financing
uses) in net current assets.

All governmental fund types are accounted for using the modified accrual basis of accounting. Under the modified
accrual basis of accounting, revenues are recognized when susceptible to accrual (when the revenues become both
measurable and available). Measurable means the amount of the transaction can be determined; available means
collectible within the current period or soon enough after to be used to pay liabilities of the current period. The City
considers ad valorem taxes, penalty and interest as available, if they are collected within thirty days after year-end.
Licenses, permits and filing fees, fines and forfeitures, charges for services, and other revenues are recorded when
received because these revenue sources are generally not measurable until actually received. Franchise taxes, sales
taxes, other taxes, intergovernmental revenue, and use of money and property (interest income) are accrued when
their receipt occurs soon enough after the end of the accounting period so as to be considered both measurable and
available. Gross sales taxes are considered measurable when in the hands of the intermediary collecting government
and are recognized as revenue at that time.

Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability
is incurred. Principal and interest payments on general long-term debt are recorded as fund liabilities when due.

The City reports deferred revenues on its combined balance sheet of the City’s Comprehensive Annual Financial
Report. Deferred revenues arise when a potential revenue does not meet both the measurable and available criteria
for recognition in the current period. Ad valorem taxes, penalty and interest, and street assessments that are not
receivable within thirty days from year-end are classified as deferred revenues. In subsequent periods, when both
revenue recognition criteria are met, the liability for deferred revenue is removed from the combined balance sheet
and the revenue is recognized.

CITY OF BENBROOK 2018-19 ANNUAL BUDGET
267