Chapter 18

Question 1

What is the primary objective of governmental financial reporting?

Answer 1

Accountability is the primary objective of all governmental financial reporting. It is a broad concept that is based on the public’s right to know.

Question 2

Define interperiod equity

Answer 2

Financial resources received during a period should suffice to pay for the services provided during that period

Question 3

The equity interest in a discretely presented component unit must be reported as

Answer 3

an asset.

Question 4

Define special revenue funds

Answer 4

A special revenue fund is used to account for the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects

Question 5

Define the general fund

Answer 5

used to account for all financial resources of a governmental unit that are not accounted for in another fund

Question 6

Define internal service funds

Answer 6

Generally are used for activities that provide goods and services to other subunits of the primary government and its component units or to other governments on a cost-reimbursement basis.

Question 7

Define permanent fund

Answer 7

account for resources that are restricted to the use of earnings for the benefit of the government or its citizens. An example is a perpetual-care fund for a public cemetery.

Question 8

Define enterprise funds

Answer 8

These funds (1) account for a government’s business-type activities, (2) serve defined customer groups, and (3) are generally financed through fees.

Question 9

What types of government funds use accrual accounting?

Answer 9

Proprietary and Fiduciary funds

Question 10

Define blended presentation

Answer 10

Component units that are, in substance, the same as the primary government are reported using the blending method.

Question 11

Define special purpose governments

Answer 11

is a legally separate entity that is a component unit or other stand-alone government. If it engages in one governmental program, it is reported as a special-purpose government.

Question 12

List Proprietary funds

Answer 12

1. Enterprise funds

2. Internal Service Funds

Question 13

List fiduciary funds

Answer 13

1. Trust funds

2. Agency funds

Question 14

revenue recognition on the modified accrual basis requires

Answer 14

1. the criteria for nonexchange transactions be met

2. the resources be available.

Question 15

When are property tax revenues recognized?

Answer 15

in the period for which they were levied

Question 16

What basis of accounting is required for government wide financial accounting?

Answer 16

Accrual

Question 17

Imposed nonexchange revenues other than from property taxes (e.g., fines, penalties, and forfeitures) are recognized

Answer 17

1. the resources are required to be used, 2. their use is first allowed by the time requirements.

Question 18

Governmental fund revenues are increases in fund financial resources other than from

Answer 18

(1) interfund transfers
(2) debt issue proceeds
(3) redemptions of demand bonds

Question 19

A comprehensive annual financial report (CAFR) includes?

Answer 19

The CAFR includes introductory, financial, and statistical sections.

Question 20

introductory section of the CARF contains the following:

Answer 20

1. Letter of transmittal from the appropriate government officials
2. Organization chart
3. Names of principal officers

Question 21

The financial section of the CARF contains the following:

Answer 21

1. MD&A and Auditor’s Report
2. Government-Wide
3. Fund Financial Statements
4. Notes
5. Budgetary Schedule

Question 22

The statistical section of the CARF contains the following

Answer 22

1. Financial Trends
2. Revenue Capacity
3. Debt Capacity
4. Demographics
5. Operating Information

Question 23

CARF notes to the financial statements include the following?

Answer 23

1. Governmental activities,
2. Business-type activities,
3. Major funds, and
4. Nonmajor funds in the aggregate.

Question 24

CARF RSI includes the following?

Answer 24

(1) schedules
(2) statistical data
(3) budgetary comparison schedules
(4) other information that is an essential part of financial reporting

Question 25

For most governments, the budget is legally enforceable?

Answer 25

True

Question 26

Define appropriated budget

Answer 26

the operating budget for a governmental entity

Question 27

how many years does a governmental Capital budget cover?

Answer 27

As many as 5 years

Question 28

When is a fixed budget appropriate for a governmental entity?

Answer 28

in which expenditures and level of activity are set by legislative authorization.

Question 29

Budget integration should be done for the following governmental funds:

Answer 29

1. The general fund
2. Special revenue funds
3. Other funds with numerous transactions

Question 30

The revenues are debited and appropriations credited in a governmental budget?

Answer 30

True

Question 31

What do you do with significant encumbrances?

Answer 31

Disclose in the notes

Question 32

The journal entry for approval of a PO

Answer 32

DR. Encumbrances Control

CR. Encumbrances outstanding

Question 33

Balance sheet equation Governmental accounting

Answer 33

Assets + Deferred Outflows = Liabilities + Deferred inflows + Fund Balances

Question 34

Any fund must be reported as major if total revenues, expenditures or expenses, assets, or liabilities (excluding extraordinary items) of the fund

Answer 34

(1) are at least 10% of the corresponding element total (assets, etc.) for all funds of the same category or type, that is, for all governmental or all enterprise funds, and (2) the same element that met the 10% standard is at least 5% of the corresponding element total for all governmental and enterprise funds in the aggregate.