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31 CITY OF ST. ANTHONY, MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 1977 Note 1 - Summary of Significant Accounting Policies The accounting policies of the City of St. Anthony conform to generally accepted accounting principles as applicable to governmental units, except as explained in Notes 2 and 3. The following is a summary of the significant policies. Basis of accounting - The accrual basis of accounting is followed (with minor exceptions) by all funds other than the Cenral Fund and Special Revenue Funds. The General Fund balance sheet is presented on the modified accrual basis of accounting and the operating statements are presented on the cash basis for comparison with budget. Financial statements of the Special Revenue Funds are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting: . Revenues are recognized at the time cash is, or normally should be, received or when susceptible to accrual (measurable and available), although not yet received in cash. Expenditures are recognized when a liability is incurred, except for interest on long-term debt which is recognized when due. Investments - Investments are stated at cost which approximates market. Invest- ment revenue is recorded as earned and is allocated to the respective funds. Inventories - Inventories held by the Enterprise funds are stated at cost which is lower than market on a first -in first -out basis. The only other items of inventory would be a small quantity of supplies which were expensed as purchased. Property and equipment - Enterprise funds - The property and equipment of the Enterprise funds are stated at cost. Depreciation has been provided using the straight-line method over the estimated useful lives of the assets. The depreciation on Public Utility Fund property and equipment which was financed by special assessments, grants and contributions is charged to current revenues but then redistributed as a charge to the contributions in aid to construction account. General Long-term Debt - The general long-term liabilities, except for enterprise and special assessment funds, are not carried as a liability of a fund, but rather are set up in a separate self -balancing group of accounts known as the "general long-term debt group of accounts." Note 2 - General Fixed Assets General fixed assets owned by the City are not included in the financial state- ments since records thereof are not maintained. Generally accepted accounting principles require their inclusion in the financial statements. L