Chapter 2 Vocab

Question 1

Activities in which the government acts in a fiduciary capacity either as an agent or trustee for parties outside the government, for
example in the collection of taxes or amounts bequeathed from private citizens, as well as assets held for employee pension plans.

Answer 1

Fiduciary activites

Question 2

Essentially an operating statement that reports on revenues, expenses, and other financing sources and uses. The format of the
statement of activities is different at the government-wide level and the proprietary fund level.

Answer 2

Statement of Activites

Question 3

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.

Answer 3

Fund

Question 4

Legislation that authorizes a government to assess, levy, charge, or otherwise mandate payment of resources (from external
resource providers) and includes a legally enforceable requirement that those resources be used only for the specific purposes
stipulated in the legislation.

Answer 4

enabling registration

Question 5

Funds used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital
outlays, including the acquisition or construction of capital facilities and other capital assets. Capital projects funds exclude those
types of capital related outflows financed by proprietary funds or for assets that will be held in trust for individuals, private
organizations, or other governments.

Answer 5

Capital Projects fund

Question 6

Funds that account for contributions received under a trust agreement in which the investment income of an endowment is
intended to benefit an external individual, organization, or government.

Answer 6

Private purpose trust funds

Question 7

Funds are classified as major if they are significantly large with respect to the whole government. A fund is “major” if (1) total assets,
liabilities, revenues, or expenditures/expenses of the individual governmental or enterprise fund are at least 10 percent of the
corresponding total of assets, liabilities, revenues, or expenditures/expenses for all funds of that category or type (total
governmental or total enterprise funds), and (2) total assets, liabilities, revenues, or expenditures/expenses of the individual
governmental fund or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds
combined.

Answer 7

Major funds

Question 8

Fund balance amounts that are constrained by the government’s intent to be used for specific purposes but are neither restricted
nor committed. Intent should be expressed by (1) the governing body itself or (2) a body (e.g., a budget or finance committee) or
official to which the governing body has delegated the authority to assign amounts to be used for specific purposes

Answer 8

Assigned fund balance

Question 9

Funds used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and
interest. Debt service funds should be used to report resources if legally mandated. Financial resources that are being accumulated
for principal and interest maturing in future years also should be reported in debt service funds.

Answer 9

Debt service funds

Question 10

Core governmental services, such as protection of life and property (e.g., police and fire protection), public works (e.g., streets and
highways, bridges, and public buildings), parks and recreation facilities and programs, and cultural and social services. Also includes
general administrative support, such as data processing, finance, and personnel.

Answer 10

Governmental activites

Question 11

The basis of accounting under which revenues are recorded when earned and expenditures (or expenses) are recorded as soon as
they result in liabilities for benefits received, notwithstanding that the receipt of cash or the payment of cash may take place, in
whole or in part, in another accounting period. See also Accrue and Levy.

Answer 11

Accrual basis

Question 12

Cash or items expected to be converted into cash during the current period or soon enough thereafter to pay current period
liabilities.

Answer 12

Current financial resources

Question 13

Expenditures are recorded when liabilities are incurred pursuant to authority given in an appropriation (q.v.). If the accounts are
kept on the accrual basis (q.v.) or the modified accrual basis (q.v.), this term designates the cost of goods delivered or services
rendered, whether paid or unpaid, including expenses, provision for debt retirement not reported as a liability of the fund from
which retired, and capital outlays. When the accounts are kept on the cash basis (q.v.), the term designates only actual cash
disbursements for these purposes. Note: Encumbrances are not expenditures.

Answer 13

Expenditures

Question 14

Essentially a balance sheet, which reports the government’s fiscal year-end assets, deferred outflow of resources, liabilities, deferred
inflow of resources, and the residual amount or net position.

Answer 14

Statement of net position, expenditures, and changes in fund balances

Question 15

Fund balance amounts that are restricted to specific purposes. Fund balance should be reported as restricted when constraints
placed on the use of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors,
or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation.

Answer 15

Restricted fund balance

Question 16

Fund balance amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the
government’s highest level of decision making authority should be reported as committed fund balance. Those committed amounts
cannot be used for any other purpose unless the government removes or changes the specified use by taking the same type of
action (e.g., legislation, resolution, ordinance) it employed to previously commit those amounts.

Answer 16

Committed fund balance

Question 17

A generic classification used by the GASB to refer to all funds other than proprietary and fiduciary funds. The General Fund, special
revenue funds, capital projects funds, debt service funds, and permanent funds are the types of funds referred to as governmental
funds.

Answer 17

Governmental funds

Question 18

Charges incurred, whether paid or unpaid, for operation, maintenance, interest, and other charges presumed to benefit the current
fiscal period.

Answer 18

Expenses

Question 19

The residual classification for the general fund that represents fund balance that has not been assigned to other funds and that has
not been restricted, committed, or assigned to specific purposes within the general fund. The general fund should be the only fund
that reports a positive unassigned fund balance amount.

Answer 19

unassigned fund balance

Question 20

Attention on measuring the total economic resources that flow in and out of the government rather than on measuring current
financial resources only.

Answer 20

economic resources management focus

Question 21

Funds used to account for the assets, liabilities, net position, and changes in net position corresponding to the equity of the external
participants.

Answer 21

investment trust funds

Question 22

Funds used to account for and report resources that are restricted to the extent that only earnings, and not principal, may be used
for purposes that support the reporting government’s programs—that is, for the benefit of the government or its citizenry.
Permanent funds do not include private purpose trust funds, which should be used to report situations in which the government is
required to use the principal or earnings for the benefit of individuals, private organizations, or other governments.

Answer 22

permanent funds

Question 23

Commercial type activities of a government, such as public utilities (e.g., electric, water, gas, and sewer utilities), transportation
systems, toll roads, toll bridges, hospitals, parking garages and lots, liquor stores, golf courses, and swimming pools

Answer 23

Business type activites

Question 24

Funds consisting of resources received and held by the government as a custodian for others; for example, taxes collected and held
by a municipality for a school district. Note: Sometimes resources held by a government for other organizations are handled through
a custodial fund known as a pass-through fund.

Answer 24

Custodial funds

Question 25

Sometimes referred to as income-determination, business-like, or commercial-type funds of a state or local government. Examples
are enterprise funds and internal service funds.

Answer 25

Propietary funds

Question 26

A fund used to account for all transactions of a government that are not accounted for in another fund. Note: The General Fund is
used to account for the ordinary operations of a government that are financed from taxes and other general revenues.

Answer 26

General fund

Question 27

The fund balance classification that includes amounts that cannot be spent because they are either (1) not in spendable form or (2)
legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected
to be converted to cash (e.g., inventories and prepaid amounts). It also includes the long term amount of loans and notes receivable,
as well as property acquired for resale.

Answer 27

nondespendable fund balance

Question 28

See Public Employee Retirement Systems.

Answer 28

Pension trust fund

Question 29

Collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period

Answer 29

available

Question 30

A fund established to finance and account for the acquisition, operation, and maintenance of governmental facilities and services
that are entirely or predominantly self supporting by user charges; or for when the governing body of the government has decided
periodic determination of revenues earned, expenses incurred, and/or net income is appropriate. Governmentally owned utilities
and hospitals are ordinarily accounted for by enterprise funds.

Answer 30

enterprise fund

Question 31

The difference between governmental fund assets and liabilities, the fund equity (q.v.). Fund balance for governmental funds should
be reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor
constraints on the specific purposes for which amounts in those funds can be spent. See Assigned Fund Balance, Committed Fund
Balance, Nonspendable Fund Balance, Restricted Fund Balance, and Unassigned Fund Balance.

Answer 31

fund balance

Question 32

Funds used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for
specified purposes other than debt service or capital projects. After the fund is established, it usually continues year after year until
discontinued or revised by proper legislative authority. An example is a motor fuel tax fund used to finance highway and road
construction.

Answer 32

special revenue fund

Question 33

The operating statement prepared by governmental funds using the modified accrual basis of accounting. The difference between
revenues and other financing sources and expenditures and other financing uses is reported as the change in fund balances.

Answer 33

changes in fund balance

Question 34

Funds established to finance and account for services and commodities furnished by a designated department or agency to other
departments and agencies within a single government or to other governments. Amounts expended by the fund are restored
thereto either from operating earnings or by transfers from other funds, so that the original fund capital is kept intact. Formerly
called a working capital fund or intragovernmental service fund

Answer 34

internal service fund

Question 35

A statement that reports the balances of assets, deferred outflows of resources, liabilities, deferred inflows of resources and equites
of a government fund at a specified date, properly classified to exhibit financial position of the fund or unit at that date

Answer 35

balance sheet