Ch. 4 Flashcards
Why is the general fund so important?
Every government has a general fund.
Reports on all day-to-day operations.
Bulk of activities (fixing roads, fire protection, police protection, etc)
What is a top-down system?
Larger government collects taxes and filters money down back to smaller governments.
What can be an issue with governments?
Each government has a responsibility to ITS residents.
They all act and operate separately even though they are really all connected.
Special Revenue Fund
Revenue restricted for certain purposes.
**Do NOT make the mistake of only having special revenue fund if the funds are restricted
What is accrual accounting based on?
GAAP and FASB
What is modified accrual accounting based on?
GASB
What basis of accounting is used for proprietary and government-wide?
Full accrual accounting
What basis of accounting is used for governmental funds?
Modified accrual accounting
***almost cash basis
What is the fundamental difference between available and earned?
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
What is meant by measurable?
HAVE to measure it to record it
What is meant by available?
Have money and control over it, or coming in a short enough time to pay bills
***Within current year or 60 days
Expenditures
Outflows of resources - expenses with certain exceptions
Recorded when a liability is incurred
Under GASB - except long-term liabilities - 60 day rule
TAN
Tax Anticipation Note
Most school districts use these
Short-term borrowing
BAN
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
RAN
Revenue Anticipation Note
Start laying money out but expecting revenue
Short-term borrowing
How can a government pay BANs?
- Replace with long-term debt
- Pay it off
- Issue more short-term debt over 5 years (pay BANs with other BANs)
Fund Balance
Assets - Liabilities = Fund Balance
Positive better than negative - want more assets than liabilities
Negative - deficit
What are the 5 Fund Balance classifications under GASB?
- Nonspendable - prepaid
- Committed - internal
- Assigned - internal
- Restricted - external
- Unassigned - working capital/what is left
What funds have an unassigned balance?
ONLY the general fund
How does the government get a fund balance?
Revenues exceed expenses
How much fund balance should the government accumulate?
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
What does GASB require governments to include in Required Supplementary Information (RSI)?
Must show a statement containing:
1. Original/Final Budget
2. Modified Budget
3. Actual Results
***Variance is NOT required
Where are other financing sources reported?
Statement of Revenues, Expenditures, and Changes in Fund Balance
Compensated Absences
Paid sick/vacation time
Do NOT accrue wages that will not be paid until further down the road
