,Essentials of
Accounting for
Governmental
and Not-for-Profit
Organizations
Thirteenth Edition
Paul A. Copley,
Ph.D., CPA
Professor
School of Accounting
James Madison University
,ESSENTIALS OF ACCOUNTING FOR GOVERNMENTAL AND NOT-FOR-PROFIT ORGANIZATIONS,
THIRTEENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2015, 2013, and 2011.
No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or
retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any
network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the United
States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LCR 21 20 19 18 17
ISBN 978-1-259-74101-2
MHID 1-259-74101-X
Chief Product Officer, SVP Products & Markets: Editorial Coordinator: Allie Kukla
G. Scott Virkler Digital Product Analyst: Xin Lin
Vice President, General Manager, Products & Markets: Director, Content Design & Delivery: Linda Avenarius
Marty Lange Program Manager: Daryl Horrocks
Managing Director: Tim Vertovec Content Project Managers: Heather Ervolino; Dana
Marketing Director: Natalie King Pauley; Karen Jozefowicz
Brand Manager: Patricia Plumb Buyer: Laura Fuller
Marketing Manager: Cheryl Osgood Designer: Matt Diamond
Director, Product Development: Rose Koos Content Licensing Specialist: Shannon Manderscheid
Director of Digital Content: Peggy Hussey (text)
Associate Director of Digital Content: Kevin Moran Cover Image: Image Source, All Rights Reserved
Lead Product Developers: Kris Tibbetts Typeface: 10.5/12 STIX Mathjax Main
Product Developers: Erin Quinones and Randall Compositor: SPi Global
Edwards Printer: LSC Communications
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Names: Copley, Paul A., author.
Title: Essentials of accounting for governmental and not-for-profit
organizations / Paul A. Copley, Ph. D., CPA, KPMG Professor, Director,
School of Accounting, James Madison University.
Description: Thirteenth Edition. | Dubuque : McGraw-Hill Education, 2017. |
Revised edition of the author’s Essentials of accounting for governmental
and not-for-profit organizations, [2015].
Identifiers: LCCN 2016041136 | ISBN 9781259741012 (paperback : alk. paper)
Subjects: LCSH: Administrative agencies—United States—Accounting. |
Nonprofit organizations—United States—Accounting. | BISAC: BUSINESS &
ECONOMICS / Accounting / Governmental.
Classification: LCC HJ9801 .H39 2017 | DDC 657/.83500973—dc23
LC record available at https://lccn.loc.gov/2016041136
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not
indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee
the accuracy of the information presented at these sites.
mheducation.com/highered
, Preface
Thank you for considering the thirteenth edition of Essentials of Accounting for
Governmental and Not-for-Profit Organizations. The focus of the text is on the prepara-
tion of external financial statements. The coverage is effective in preparing candidates for
the CPA examination. I have used the text with traditional three-semester-hour classes,
with half-semester GNP courses, and as a module in advanced accounting classes. It is
appropriate for accounting majors or as part of a public administration program.
The most notable change from earlier editions is in the presentation of college and
university accounting. Both private sector and public sector colleges are now presented
in a single chapter, Chapter 11. Readers are taken through a representative set of trans-
actions for two similar-sized colleges. By examining both public and private institutions
at the same time, it is easier to gain an appreciation for the similarities and differences
in these two groups.
Among other changes, the thirteenth edition is updated for recent professional pro-
nouncements including:
∙ GASB Statement No. 72: Fair Value Measurement and Application
∙ GASB Statement Nos. 74 and 75: Financial Reporting for Postemployment Benefit
Plans Other Than Pensions and Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions
∙ GASB Statement No. 76: Hierarchy of Generally Accepted Accounting Principles
for State and Local Governments
∙ GASB Statement No. 81: Irrevocable Split-Interest Agreements.
Additionally, a discussion is provided in Chapter 10 of FASB Accounting Standards Update
(2016-14) - Presentation of Financial Statements of Not-for-Profit Entities. This newly
issued standard becomes effective in 2018.
The text contains a discussion of the GASB Codification of Financial Reporting
Standards. References are made throughout the text to specific segments of the Codification.
With the implementation of GASB 54 (Fund Balance Reporting), the last vestige of budget-
ary accounting is phased out of government financial statements. The thirteenth edition
continues to provide budget and encumbrance journal entries, but presents these as dis-
tinct accounts that are not commingled with the accounts appearing in the basic financial
statements. This approach should reduce confusion sometimes experienced by students,
particularly with the recording of encumbrances.
Among the more challenging aspects of state and local government reporting is the
preparation of government-wide financial statements. The approach demonstrated in
the text is similar to that used in practice. Specifically, day-to-day events are recorded at
the fund level using the basis of accounting for fund financial statements. Governmental
activities are recorded using the modified accrual basis. The fund-basis statements are
then used as input in the preparation of government-wide statements. The preparation
of government-wide statements is presented in an Excel worksheet. This approach has
two advantages: (1) it is the approach most commonly applied in practice, and (2) it is
iii
Accounting for
Governmental
and Not-for-Profit
Organizations
Thirteenth Edition
Paul A. Copley,
Ph.D., CPA
Professor
School of Accounting
James Madison University
,ESSENTIALS OF ACCOUNTING FOR GOVERNMENTAL AND NOT-FOR-PROFIT ORGANIZATIONS,
THIRTEENTH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2015, 2013, and 2011.
No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or
retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any
network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the United
States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LCR 21 20 19 18 17
ISBN 978-1-259-74101-2
MHID 1-259-74101-X
Chief Product Officer, SVP Products & Markets: Editorial Coordinator: Allie Kukla
G. Scott Virkler Digital Product Analyst: Xin Lin
Vice President, General Manager, Products & Markets: Director, Content Design & Delivery: Linda Avenarius
Marty Lange Program Manager: Daryl Horrocks
Managing Director: Tim Vertovec Content Project Managers: Heather Ervolino; Dana
Marketing Director: Natalie King Pauley; Karen Jozefowicz
Brand Manager: Patricia Plumb Buyer: Laura Fuller
Marketing Manager: Cheryl Osgood Designer: Matt Diamond
Director, Product Development: Rose Koos Content Licensing Specialist: Shannon Manderscheid
Director of Digital Content: Peggy Hussey (text)
Associate Director of Digital Content: Kevin Moran Cover Image: Image Source, All Rights Reserved
Lead Product Developers: Kris Tibbetts Typeface: 10.5/12 STIX Mathjax Main
Product Developers: Erin Quinones and Randall Compositor: SPi Global
Edwards Printer: LSC Communications
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Names: Copley, Paul A., author.
Title: Essentials of accounting for governmental and not-for-profit
organizations / Paul A. Copley, Ph. D., CPA, KPMG Professor, Director,
School of Accounting, James Madison University.
Description: Thirteenth Edition. | Dubuque : McGraw-Hill Education, 2017. |
Revised edition of the author’s Essentials of accounting for governmental
and not-for-profit organizations, [2015].
Identifiers: LCCN 2016041136 | ISBN 9781259741012 (paperback : alk. paper)
Subjects: LCSH: Administrative agencies—United States—Accounting. |
Nonprofit organizations—United States—Accounting. | BISAC: BUSINESS &
ECONOMICS / Accounting / Governmental.
Classification: LCC HJ9801 .H39 2017 | DDC 657/.83500973—dc23
LC record available at https://lccn.loc.gov/2016041136
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not
indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee
the accuracy of the information presented at these sites.
mheducation.com/highered
, Preface
Thank you for considering the thirteenth edition of Essentials of Accounting for
Governmental and Not-for-Profit Organizations. The focus of the text is on the prepara-
tion of external financial statements. The coverage is effective in preparing candidates for
the CPA examination. I have used the text with traditional three-semester-hour classes,
with half-semester GNP courses, and as a module in advanced accounting classes. It is
appropriate for accounting majors or as part of a public administration program.
The most notable change from earlier editions is in the presentation of college and
university accounting. Both private sector and public sector colleges are now presented
in a single chapter, Chapter 11. Readers are taken through a representative set of trans-
actions for two similar-sized colleges. By examining both public and private institutions
at the same time, it is easier to gain an appreciation for the similarities and differences
in these two groups.
Among other changes, the thirteenth edition is updated for recent professional pro-
nouncements including:
∙ GASB Statement No. 72: Fair Value Measurement and Application
∙ GASB Statement Nos. 74 and 75: Financial Reporting for Postemployment Benefit
Plans Other Than Pensions and Accounting and Financial Reporting for
Postemployment Benefits Other Than Pensions
∙ GASB Statement No. 76: Hierarchy of Generally Accepted Accounting Principles
for State and Local Governments
∙ GASB Statement No. 81: Irrevocable Split-Interest Agreements.
Additionally, a discussion is provided in Chapter 10 of FASB Accounting Standards Update
(2016-14) - Presentation of Financial Statements of Not-for-Profit Entities. This newly
issued standard becomes effective in 2018.
The text contains a discussion of the GASB Codification of Financial Reporting
Standards. References are made throughout the text to specific segments of the Codification.
With the implementation of GASB 54 (Fund Balance Reporting), the last vestige of budget-
ary accounting is phased out of government financial statements. The thirteenth edition
continues to provide budget and encumbrance journal entries, but presents these as dis-
tinct accounts that are not commingled with the accounts appearing in the basic financial
statements. This approach should reduce confusion sometimes experienced by students,
particularly with the recording of encumbrances.
Among the more challenging aspects of state and local government reporting is the
preparation of government-wide financial statements. The approach demonstrated in
the text is similar to that used in practice. Specifically, day-to-day events are recorded at
the fund level using the basis of accounting for fund financial statements. Governmental
activities are recorded using the modified accrual basis. The fund-basis statements are
then used as input in the preparation of government-wide statements. The preparation
of government-wide statements is presented in an Excel worksheet. This approach has
two advantages: (1) it is the approach most commonly applied in practice, and (2) it is
iii
