Ch. 4

Question 1

Why is the general fund so important?

Answer 1

Every government has a general fund.

Reports on all day-to-day operations.

Bulk of activities (fixing roads, fire protection, police protection, etc)

Question 2

What is a top-down system?

Answer 2

Larger government collects taxes and filters money down back to smaller governments.

Question 3

What can be an issue with governments?

Answer 3

Each government has a responsibility to ITS residents.

They all act and operate separately even though they are really all connected.

Question 4

Special Revenue Fund

Answer 4

Revenue restricted for certain purposes.

**Do NOT make the mistake of only having special revenue fund if the funds are restricted

Question 5

What is accrual accounting based on?

Answer 5

GAAP and FASB

Question 6

What is modified accrual accounting based on?

Answer 6

GASB

Question 7

What basis of accounting is used for proprietary and government-wide?

Answer 7

Full accrual accounting

Question 8

What basis of accounting is used for governmental funds?

Answer 8

Modified accrual accounting

***almost cash basis

Question 9

What is the fundamental difference between available and earned?

Answer 9

Earned - shows current assets, current liabilities, long-term assets, long-term liabilities

Available - shows only current assets and current liabilities
***Does NOT include long-term liabilities and fixed assets

Question 10

What is meant by measurable?

Answer 10

HAVE to measure it to record it

Question 11

What is meant by available?

Answer 11

Have money and control over it, or coming in a short enough time to pay bills

***Within current year or 60 days

Question 12

Expenditures

Answer 12

Outflows of resources - expenses with certain exceptions

Recorded when a liability is incurred

Under GASB - except long-term liabilities - 60 day rule

Question 13

TAN

Answer 13

Tax Anticipation Note

Most school districts use these

Short-term borrowing

Question 14

BAN

Answer 14

Bond Anticipation Note

Short-term borrowing

***Intent/ability to pay through a serial bond treat as long-term even though legally it is short-term

Question 15

RAN

Answer 15

Revenue Anticipation Note

Start laying money out but expecting revenue

Short-term borrowing

Question 16

How can a government pay BANs?

Answer 16

1. Replace with long-term debt
2. Pay it off
3. Issue more short-term debt over 5 years (pay BANs with other BANs)

Question 17

Fund Balance

Answer 17

Assets - Liabilities = Fund Balance

Positive better than negative - want more assets than liabilities

Negative - deficit

Question 18

What are the 5 Fund Balance classifications under GASB?

Answer 18

1. Nonspendable - prepaid
2. Committed - internal
3. Assigned - internal
4. Restricted - external
5. Unassigned - working capital/what is left

Question 19

What funds have an unassigned balance?

Answer 19

ONLY the general fund

Question 20

How does the government get a fund balance?

Answer 20

Revenues exceed expenses

Question 21

How much fund balance should the government accumulate?

Answer 21

Roughly between 15-20% of annual expenditures

Higher than 20% can argue that the surplus should be returned to taxpayers

Lower than 15% can argue that taxes need to be raised

Question 22

What does GASB require governments to include in Required Supplementary Information (RSI)?

Answer 22

Must show a statement containing:
1. Original/Final Budget
2. Modified Budget
3. Actual Results

***Variance is NOT required

Question 23

Where are other financing sources reported?

Answer 23

Statement of Revenues, Expenditures, and Changes in Fund Balance

Question 24

Compensated Absences

Answer 24

Paid sick/vacation time

Do NOT accrue wages that will not be paid until further down the road