B5 - M1 Budgetary and Activity Accounting

Question 1

How do you recognize revenue for “Derived non exchange transactions” on Modified accrual?

Answer 1

Derived non-exchange transactions are recognized as revenue when they meet both time and modified accrual requirements.

Time requirements limit the revenue recognition for year-end to the revenue derived from sales prior to the year end.

Modified accrual criteria require that revenue be both measurable and available

Question 2

What is the BAE BAE concept for Governmental accounting

Answer 2

BAE means “Budgetary, activity and Encumbrances” which represents the 3 different sets of books for governments or governmental funds

BAE BAE means you have to open the year (first BAE) and close the year (2nd BAE) and the recording is backwards (meaning you have to credit budgets and debit actuals and consider encumbrances/commitments

Budgetary - (opens the year) To Manage and control spending
Activity - (Actuals)
Encumbrances - Commitment to spend on future expense (reserving a portion of the budget

Question 3

Types of Governmental Funds? (GRASPP)

Answer 3

G General Fund

R Revenue (Special) Fund

a and

S Service (Debt) Fund

P Projects (Capital) Fund

P Permanent Fund

Question 4

What are the types of lease per Governmental accounting standards?

Answer 4

1. Short term lease - for lease less than a year w/o transfer of ownership (same as operating lease in commercial accounting
2. Contract that transfers ownership - Over a year term and/or with transfer of ownership (same as finance lease in commercial accounting)

Question 5

What is difference of propriety fund vs. governmental fund?

Answer 5

The main difference between governmental funds and proprietary funds is that governmental funds are used for traditional government functions, while proprietary funds are used for business-like activities

Proprietary funds, government-wide and fiduciary fund FS uses Full accrual basis/economic resources measurement focus accounting