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CITY OF GEM LAKE, MINNESOTA <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEM13ER 31,.2007 <br />NOTE 'I SUMMARY OF SIGNIFICANT ACCOUNTING: POLICIES (CONTINUED) <br />C. Measurement Focus and Basis of Accounting (Continued) <br />Governmental fund financial statements are reported using the current financial <br />resources measurement focus and the. modified accrual basis of accounting, Revenues <br />are recognized as soon as they are both measurable and available. The City considers <br />all revenues to be available if #hey are collected within 60 days after the end of the <br />current period'.. Property and other taxes, licenses, :and interest are all considered to be <br />.susceptible to accrual. Expenditures are recorded when the related fund. liability is <br />incurred, except for principal and interest on general long-term. debt, compensated <br />absences, and claims and judgments, which are recognized as expenditures to the <br />extent that they have matured. Proceeds of general long-term debt and acquisitions <br />under capital leases are reported as other financing sources. <br />Proprietary funds distinguish operating revenues and expenses from nonoperating item. <br />Operating revenues :and expenses generally result from providing services and <br />producing and delivering goods in connections with a proprietary fund's principal <br />ongoing operations. The principal operating revenue of the City's enterprise. funds are <br />charges to customers for sales and services. Operating expenses for enterprise funds <br />include the cost. of sales and services, administrative expenses, and. depreciation on <br />capital assets. All revenues and expenses not meeting this definition are reported as <br />nonoperating revenues and expenses. <br />D. Budgets <br />Budgets are adopted on a basis consistent with U.S. generally accepted accounting <br />principles. An annual appropriated :budget is adopted. for the General Fund. Budgeted <br />expenditure appropriations lapse at year. -end. <br />E. Cash .and. Investments <br />Cash and investment balances from all funds are pooled and invested to the extent <br />available in investments authorized by Minnesota Statutes. Earnings from investments. <br />are allocated to individual funds on the basis of the fund's equity in the cash and <br />investment pool. <br />(17) <br />