Ch. 2 Flashcards
What is a component unit?
Part of a larger government
What are the 3 categories of activity used in fund basis?
1) Governmental
2) Proprietary
3) Fiduciary
What statements does GASB require for governments?
Fund financial statements and Government wide statements
***Each fund gets its own balance sheet and statement of revenues/expenditures
What basis of accounting is used by governmental funds?
Modified Accrual
What basis of accounting is used by proprietary/fiduciary funds?
Accrual Accounting
Why do governments use funds other than the general fund?
To show compliance, segregates the funds to help show it is being used for a specific purpose
Compliance with state/federal laws
***GASB does NOT require the use of other funds
What is the formal definition of a fund?
A fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations
What is economic resources measurement focus? Which type of funds use this?
Take account of transactions and events that affect all the economic resources available to the activity – financial and capital.
This is used by both proprietary and fiduciary funds.
What is current financial resources measurement focus ? Which type of funds use this?
Recording the inflows and outflows of financial (near-term) assets and distinctly has a budget orientation.
This is used by the governmental type funds.
When are revenues/expenses recognized when using accrual accounting? Which funds use this?
Revenues are recognized in the period that they are earned and measurable
Expenses are recognized when assets are consumed or when costs have expired.
Proprietary and fiduciary funds use accrual basis of accounting.
When are revenues/expenditures recognized when using modified accrual accounting? Which funds use this?
Revenue is recognized when its measurable and available.
Expenditures are recorded when a liability is incurred.
This is used by governmental-type funds.
What does available mean?
Collectible within the current period or soon enough thereafter so it can be used to pay bills of the current period.
Most pills are paid within 30 days
***No more than 60 days during the year, or after year end
Why are governments fundamentally different than businesses?
They are guaranteed their revenue.
Ex. Property Taxes. Can put a lien on a home, earn interest/penalties for late payments.
What are expenses?
Costs recorded in proper period, does not matter when paid.
What are expenditures?
Funds are designed to report only current financial resources (not long-term).
Outflows.
What are the 3 types of outflows of resources?
1) Current operating items
2) Capital asset acquisitions
3) Debt service
Why are governments required to provide fund statements and government wide statements?
Government fund statements only show current assets/current liabilities. There is a lot of information missing from these statements.
What is the difference between a loan and a transfer?
A loan will be repaid. Due to/Due from.
A transfer is not repaid. Considered other financing source.
What method is used to prepare cash flow statements?
GASB requires use of the direct method.
What are the 3 categories of a cash flow?
1) Operating
2) Investing
3) Financing
What is the general fund?
A residual fund used to account for and report all financial resources not accounted for and reported in some other fund
***every government has a general fund
What is the special revenue fund?
Used to account for the proceeds of specific revenue sources that are restricted or committed to spending for specified purposes other than debt service or capital projects.
What is the capital projects fund?
Used to account for and report on financial resources that are restricted or otherwise limited to spending for capital outlays, including the acquisition or construction of capital facilities and other capital assets.
What is the debt service fund?
Used to account for and report on financial resources that are restricted or otherwise limited too spending for principal and interest on general long-term debt
What is the permanent fund?
Used to report resources that are legally restricted so that only the earnings generated by the principal, and not the principal itself, may be used to support programs that benefit the government or its citizens
What are enterprise funds?
used to account for any activity whose products or services are sold for fee to external users, such as the general public
What 3 criteria must be met to be considered a enterprise fund?
1) The activity is financed with debt that is secured solely by a pledge of the net revenues from the activity’s fees and charges
2) Laws or regulations require that the costs of providing services, including capital costs, be recovered through fees and charges, rather than with taxes
3) The activity’s pricing policies set fees and charges that are designed to recover its costs, including capital costs
What are internal service funds?
Used to account for providing goods or services within the reporting government or to other governments, on a user-charge, cost-reimbursement basis
What are pension trust funds?
Used to account for resources controlled by the governmental unit and administered through trusts or equivalent arrangements for members and beneficiaries of public employee pension plans
What are investment trust funds?
Hold resources of an external investment pool or individual investment account managed by a sponsoring government and held in a trust
What are private-purpose trust funds?
used to report all fiduciary activities for which the governmental unit controls the assets that are not required to be reported in pension or investment trust funds
What are custodial funds
Used to report fiduciary activities that are not required to be reported in one of the other three types of fiduciary funds
