Ch. 3 Hw Flashcards
What is a budget? What purposes does it serve?
A formal estimate of the resources that an organization plans to spend for specified purposes during a specified time period (typically, a fiscal year) and the proposed means of acquiring these resources.
The purpose is to set forth the activities the organization plans to undertake and how they finance them.
What is a “balanced budget”?
When revenues and amounts made available from previously accumulated fund balances equal the appropriations made to authorize expenditures.
What is a capital budget? Why should it be prepared for a period greater than one year?
Focuses on the acquisition of long-lived resources such as buildings, roads, and equipment.
Should be incorporated into the annual budget for at least 10 years - long-lived resources are usually financed for a few years after being purchased.
What is an appropriation?
The legal authority to spend up to a maximum amount.
Revenues can be raised only from authorized sources and expenditures can be incurred only for authorized purposes an in amounts not to exceed authorized maximums.
What information is conveyed by the budgetary fund balance account?
Designed to keep track of actual revenues against budgetary estimates and actual expenditures against appropriations.
Identify 5 typical sources of revenue received by local governments.
- Taxes
- Charges for services
- Fines and forfeits
- Fees for licenses and permits
- Interest on investments
- Intergovernmental revenues (grants from other governments
What is the purpose of encumbrance accounting?
To help provide control over an appropriation characterized by expenditures that are unpredictable as to timing and/or amount.
