Lesson: Governmental Fund Structure

Instructor: Nick Palazzolo

In this lesson, delve into the foundational elements of governmental fund structure with Nick Palazzolo, CPA, who turns the complexity of fund accounting into an accessible and engaging narrative. By comparing funds to various types of personal checking accounts, Nick demystifies each fund's unique purpose within a governmental context—from the general fund, akin to where a paycheck might be deposited, to the custodial fund, which resembles holding money for someone else. Emphasizing the practicality of memorization, he encourages getting intimate with the chart that categorizes the five governmental funds, two proprietary funds, and four fiduciary funds. Nick assures that this knowledge is not just theoretical, but a key to unlocking "free points" on the exam and building a solid foundation for understanding the nuances of public sector financial management.

Updated: Oct. 20, 2021 Create an account

"Examprep.ai helped me pass all 4 CPA exams on the first try. I highly recommend. I especially like the feedback and ratings the software provides so I know where to focus my time."

Daniel H., CPA

"I can't recommend ExamPrep.ai enough. Nick's lessons turned concepts I struggled with into strengths. I was able to pass FAR right before other exams expired!"

Andrew K, CPA

"I just want to say thank you for the great lesson videos. I couldn't stay awake through lectures of another course. After watching all your FAR lessons I was finally able to pass!"

Alyssa M., CPA Candidate

Recommended Lessons

Governmental Accounting: Measurement Focus and Basis Overview and Objectives

Governmental Fund Structure

Measurement Focus and Basis of Accounting

Current Financial Resources Measurement Focus

Modified Accrual Accounting

Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

Cite this lesson

Link to this page

[[ citeExample ]]

Copy to clipboard

Copy URL to clipboard

Copy HTML to clipboard

All right. First off, this is our big kahuna, our magic chart, our secret to success as a governmental entity. Think of your local town. We have three types of funds. And what are funds?

I'm just going to address that first. Think of them like checking accounts. Imagine you personally have many, many checking accounts and all eleven of these checking accounts serve a different purpose. For example, and this is super high level. So don't worry about understanding everything here right away.

This general fund is where let's say you are going to get your paychecks deposited. Similarly for governments, this is where they collect their property tax revenue. They make their primary revenue. Now let's say you have an investment account and you want to fund your investments similarly to you. The government would then transfer funds from this “checking account” from the general fund to the enterprise fund for its business related activities.

Now let's say you want to save that money for someone else. Let's say your brother gives you $1,000, says he needs this in a week. Why did he do that? I don't know. Maybe he is changing his bank accounts and won't have an intermediary one. So then maybe you would take some funds and store them in the custodial fund. He would transfer your funds to you and they would sit in the custodial fund. You are acting as the custodian of his finances, his money. Just many different examples here of different funds.

Not to get into them too much. We have plenty of time for that. One note I would say right off the bat is do it for me, do it for yourself, do it for whoever you're taking this test for. Memorize this chart completely in its entirety.

To unlock this lesson, sign up for a free account.

Get more from this lesson

Create an account 7-day free trial. No credit card required.

Governmental Accounting: Part 1

Module: 3 Concepts, 29 Lessons

Governmental Assets, Liabilities, Revenues & Expenses Overview and Objectives

1:32

Governmental Fund Structure

1:12

Governmental Revenues - General Fund

1:31

Governmental Expenditures - General Fund