Chapter 8: Governmental Accounting

Question 1

Name the primary authoritative body for GAAP for governmental entities

Answer 1

GASB - Governmental Accounting Standards Board

Question 2

What are the 3 accounting themes addressed by governmental accounting?

Answer 2

1. Fund structure
2. Fund accounting
3. External reporting

Question 3

Identify the major categories of funds used by state and local governmental units

Answer 3

Governmental [GRaSPP]
Propriety [SE]
Fiduciary [PAPI]

Question 4

What terms define the manner and timing of transaction recognition in governmental fund accounting?

Answer 4

Fund accounting principles are defined by:

• measurement focus (how transactions are recognized)
• basis of accounting (when transactions are recognized)

Question 5

What are the objectives of external reporting?

Answer 5

Operational accountability

Fiscal accountability

Question 6

What types of external reports meet the accountability objectives of government?

Answer 6

Operational accountability: Government-wide financial statements
Fiscal accountability: Fund financial statements

Question 7

Name each governmental fund type

Answer 7

G = General fund
R = Special Revenue funds
S = Debt Service funds
P = Capital Project funds
P = Permanent funds

Question 8

what are the fund accounting principles applicable to governmental funds?

Answer 8

Measurement focus: Current financial resources

Basis of accounting: Modified accrual

Question 9

what specialized accounting practices are followed by the governmental funds?

Answer 9

BAE - BAE
Budgetary accounting
Activity (Actual) accounting
Encumbrance accounting

Question 10

name and define the 5 classifications of fund balances used by governmental fund types

Answer 10

Non-spendable: resources that are not available to be spent

Restricted: resources that are constituionally, legislatively, or otherwise externally limited as to use

Committed: Resources that are internally limited as to use by the governments highest level of decision-making authority. MOST strict

Assigned: resources intended to be sued by the government for specific purposes whose constraints do not rise to the level of restricted or committed

Unassigned: residual classification of equity that represents resources that are least limited as to use

Question 11

Name each Proprietary fund type

Answer 11

S = Internal Service funds
E = Enterprise funds

Question 12

what are the fund accounting principles applicable to Proprietary funds?

Answer 12

Measurement focus: economic resources

Basis of accounting: full accrual

Question 13

Name each Fiduciary fund type

Answer 13

P = Pension trust funds
A = Agency funds
P = Private-purpose trust funds
I = Investment trust funds

Question 14

what are the fund accounting principles applicable to Fiduciary funds?

Answer 14

Measurement focus: Economic resources

Basis of accounting: Full accrual

Question 15

Distinguish between alternative measurement focuses

Answer 15

Current Financial Resources (GRSPP):

• No fixed assets are recorded; capital outlays displayed as expenditures
• No depreciation
• No noncurrent liabilities are recorded; debt proceeds displayed as resource inflows
• Principal payments displayed as expenditure
• Premiums and discounts on debt are not amortized; they are included as an increase or decrease of debt proceeds

Economic resources (SE PAPI):

• Fixed assets are recorded
• Noncurrent liabilities are recorded

Question 16

Define Modified Accrual and list the funds that use it as a basis of accounting

Answer 16

Modified accrual:
Revenues should be recognized when measurable and available; expenditures are generally (with the exception of interest expenditures) recognized when fund liability is incurred

Funds using modified accrual basis: GRaSPP