Chapter 21 Flashcards
Accountants use the term budgetary integration to describe:
A. The requirement that state and local governments approve balanced budgets
B. The use of specialized budgetary accounts
C. The mandated presentation of budgetary comparisons in conjunction with the basic financial statements
D. The fact that public-sector budgets normally impose legal constraints on spending
Accountants for state and local governments traditionally have integrated special budgetary accounts into the accounting system (budgetary integration) to provide managers with the information they need to ensure and demonstrate budgetary compliance. [Correct response = B]
Which of the following is not a budgetary account?
A. APPROPRIATIONS
B. ESTIMATED REVENUES
C. Expenditures
D. ENCUMBRANCES
To avoid potential confusion with regular general ledger accounts, accountants traditionally have used the convention of ALL CAPITAL LETTERS to distinguish budgetary accounts from general ledger accounts in theoretical discussions of budgeting. [Correct response = C
The appropriate focus of budgetary integration for appropriations normally is:
A. Total appropriations
B. Unspent appropriations
C. Unencumbered appropriations
D. None of the above
Budgetary integration helps managers to focus their attention on the unencumbered balance of appropriations (the amount available for new spending). [Correct response = C
For which of the following revenue sources would budgetary integration likely be most important?
A. Property taxes
B. Parking meter revenues
C. Fines and forfeits
D. Sales taxes
It is important to monitor the realization of estimated revenues so that the budget can be modified on a timely basis, if necessary, to stay in balance. Such monitoring is especially important for more volatile revenue sources (sales taxes). [Correct response = D]
Which of the following expenditure accounts would encumbrance accounting be appropriate?
A. Debt Service
B. Supplies and materials
C. Salaries
D. All of the above
The sole purpose of encumbrance accounting is to prevent the inadvertent overspending of an appropriation. Therefore, encumbrance accounting normally is not used for appropriations where accidental overspending is unlikely (for example, debt service, salaries). [Correct response = B]
Which of the following accounts typically reports a debit balance?
A. ENCUMBRANCES
B. APPROPRIATIONS
C. TRANSFERS OUT
D. None of the above
ENCUMBRANCES function as “virtual” expenditures in the interval between the issuance of a contract or purchase order and its fulfillment and are compared to APPROPRIATIONS. Since the APPROPRIATIONS account is reported as a credit balance, the ENCUMBRANCES account is reported as a debit balance, just like the pending expenditures for which encumbrances serve as placeholders. [Correct response = A]
Which of the following accounts is used to associate a portion of the total budgetary appropriation for the period with individual sub-periods?
A. ALLOWANCES
B. ASSIGNMENTS
C. ALLOCATIONS
D. ALLOTMENTS
There is a potential risk in allowing immediate access to resources intended to fund an entire budget period – managers might spend too much too early, leaving insufficient resources for the balance of the period. To minimize that risk, some governments make annual appropriations available in increments, much like an allowance, based on anticipated patterns of spending (ALLOTMENTS). [Correct response = D]
How is budgetary integration performed in a fully-automated accounting system?
A. Manual adjustments performed throughout the year as outlined in this chapter
B. Automated spending controls made “behind the scenes” which take the place of the adjustments outlined in this chapter
C. None of the above
D. Either A or B
The complexities of manual use of special budgetary accounts have been replaced by automated spending controls. The manual adjustments detailed in this chapter are provided to help to understand the basic control mechanisms that are the foundation of today’s systems of control. [Correct response = B]
Which of the following are not opposites (that is, debit v. credit)?
A. Revenues/ESTIMATED REVENUES
B. Expenditures/APPROPRIATIONS
C. Transfers/ESTIMATED TRANSFERS
D. Expenditures/ENCUMBRANCES
Since the APPROPRIATIONS account is reported as a credit balance, the ENCUMBRANCES account is reported as a debit balance, like the expenditures for which encumbrances serve as placeholders. [Correct response = D]
Which budgetary account would be used to offset a budgetary amendment to increase appropriations with no additional revenues?
A. BUDGETARY CONTROL
B. ENCUMBRANCES
C. Either A or B
D. None of the above
In most cases, the original budget will have to be amended during the period to make adjustments for changes in estimates and circumstances. ENCUMBRANCES function as “virtual” expenditures and would not be used to offset budget amendments. If there is no other estimated revenue source to offset the increase, the amendment is treated as a direct adjustment to the BUDGETARY CONTROL account. [Correct response = A]
What is the point of APPROPRIATIONS.
Its a direct reference against which compare to actual expenditures. So if the government appropriated $100 and actual expenditures is $80, then there is $20 of unspent appropriation for the program, fund, etc.
How do ENCUMBRANCES and APPROPRIATIONS related?
APPROPRIATIONS show how much is allowed for spending, compared against actual expenditures resulting in an unexpended appropriation. ENUMBRANCES function as “virtual” expenditures between the issuance of a contract or purchase order and when an expenditure can be recognized. This allows for the presentation of a “true,” unencumbered appropriation.
How do ALLOTMENTS and APPROPRIATIONS relate?
APPROPRIATIONS show the total amount allowed for spending for a program or fund. However, sometimes its not best to provide a total allowed amount for spending if funding comes in incrementally. ALLOTMENTS provide for anticipated, allowed amounts to compared to expenditures.
For example, if $100 is APPROPRIATED, but $50 is ALLOTTED, then you’d compare the $50 to current expenditures and amounts that may be ENCUMBERED to come up with an UNENCUMBERED ALLOTTED APPROPRIATION.
