29. Governmental Accounting Flashcards
Which funds use modified accrual accounting, and which funds use accrual accounting?
The governmental funds use modified accrual accounting, and the proprietary funds and fiduciary funds use accrual accounting.
What are the governmental funds?
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Permanent: (e.g., an endowment) principal is restricted and must be permanently invested; income from investments can be spent
Debt service: accumulated resources for paying principal and interest on long-term debt
Capital projects: resources for major purchase or construction of capital assets (e.g. buildings)
Special revenue: revenues earmarked for specific activities other than capital projects or debt service
General: accounts for any activity not accounted for in another fund
What are the proprietary and fiduciary funds?
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Internal service: (proprietary) provides goods and services to other governmental departments and charges them for it
Pension trust: (fiduciary) account for government employee pensions and other post-retirement benefits
Investment trust: (fiduciary) account for pooled resources of many government entities that are invested by one government entity
Private purpose trust: (fiduciary) account for resources held to benefit private persons, organizations, or other governments (e.g. a scholarship fund)
Enterprise: (proprietary) accounts for activities in which customers voluntarily pay a government entity for goods and services (e.g. post office, lottery, airport)
Agency: (fiduciary) accounts for funds to be transferred to other funds or outsiders; all assets held belong to others; assets always equal liabilities; no equity section
What kind of fund activity appears on the government-wide financial statements?
The government-wide financial statements include activity from government funds and proprietary funds but NOT fiduciary funds.
Activity from which funds appears in the governmental activities section of the government-wide statement of net position (i.e. balance sheet)?
The governmental activities section includes activity from the five governmental funds (Permanent, Debt service, Capital projects, Special revenue, General) and the internal service fund (one of the two proprietary funds).
Activities from which fund appear in the business type activities section of the government-wide statement of net position (balance sheet)?
Activities from only the enterprise fund (one of the two propriety funds) appears in the business type activities section.
What are the five classes of fund balances on fund financial statements?
In order from most restrictive to least restrictive:
- Nonspendable fund balance: funds not in spendable form (e.g. inventory or principal balance of a permanent fund)
- Restricted fund balance: funds restricted to a specific purpose by law or external parties (e.g. creditors, grantors)
- Committed fund balance: funds restricted to a specific purpose by highest internal government authority
- Assigned fund balance: funds the government intends for a specific purpose but not restricted by external parties or committed by internal authority
- Unassigned fund balance: all general funds that are not restricted, committed, or assigned to a specific purpose
When making budgetary entries, should you enter a debit or credit to record estimated revenues?
Debit.
A budgetary entry records the authority to collect the revenue, not the actual collection. The authority to collect is recorded with a debit. The actual collection is recorded with a credit.
Example:
Dr. Estimated revenues $700
Dr. Estimated other financial sources (e.g. bond proceeds) $200
Cr. Appropriations $500
Cr. Estimated other financial uses $250
Cr. Budgetary fund balance - unrestricted $150
When making budgetary entries, should you enter a debit or credit to record appropriations?
Credit.
A budgetary entry records the authority to spend, not the actual spending. The authority to spend is recorded with a credit. The actual spending is recorded with a debit.
Example:
Dr. Estimated revenues $700
Dr. Estimated other financial sources (e.g. bond proceeds) $200
Cr. Appropriations $500
Cr. Estimated other financial uses $250
Cr. Budgetary fund balance - unrestricted $150
When are property taxes recorded in the general fund, which uses modified accrual accounting?
Property taxes are recorded when they are assessed, which is before they are collected.
Property taxes and grants are the only revenues accrued in advance of collection, because they are considered measurable and available during the current period. Any property taxes that are expected to be collected more than 60 days after the fiscal year-end are recorded as deferred revenue. Estimated uncollectible amounts are recorded in an allowance account.
Example:
Dr. Property taxes receivable $2,100
Cr. Allowance for doubtful accounts $300
Cr. Revenue $1,600
Cr. Deferred revenue $200
What’s the difference between appropriation, encumbrance, and expenditure?
An appropriation is the amount the government is authorized to spend per its budget. It is recorded at the beginning of the current year and reversed at year-end.
An encumbrance is the amount the government expects to spend on a certain item–i.e., it reserves the amount in advance. The amount may vary from the appropriation for the item. The encumbrance is recorded when an order for the item is placed and reversed when the order is filled.
An expenditure is the amount the government pays for an item. The amount may vary from the appropriation and/or encumbrance for the item.
What’s the difference between imposed nonexchange revenue and derived tax revenue?
Imposed nonexchange revenues result from assessments that the government imposes on nongovernmental entities, such as property taxes and fines.
Derived tax revenues are assessments on exchange transactions, such as income taxes, sales taxes, hotel taxes, etc. That is, the tax revenue derives from an exchange transaction, such as buying merchandise, renting a hotel room, etc.
