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CPA - FAR > Chapter 8 - Governmental Accounting > Flashcards

Chapter 8 - Governmental Accounting Flashcards

0
Q

How does the government and non-for-profit organizations use fund accounting?

A

Government - External reporting & internal accounting

Non-for-Profit - Internal accounting

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1
Q

Main objectives of governmental financial statements

A

Timeliness
Consistency
Comparability

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2
Q

Who establishes accounting and reporting standards for governments?

A

GASB

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3
Q

Who establishes accounting and reporting standards for non-for-profit organizations?

A

FASB

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4
Q

What are the 3 different categories of fund structure?

A

Governmental funds
Proprietary funds
Fiduciary funds

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5
Q

External reporting requirements for governmental accounting

A

Government wide presentation (consolidated) and major fund financial statements

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6
Q 
Income Statement and Balance Sheet measurement focus for:
Government-wide presentations
Governmental funds
Proprietary funds
Fiduciary funds
A

Government-wide presentations - accrual accounting, economic resources
Governmental funds - modified accrual accounting, current financial resources
Proprietary funds - accrual accounting, economic resources
Fiduciary funds - accrual accounting, economic resources

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7
Q

Where are the following funds reported:
Enterprise funds
Internal services funds
Fiduciary funds

A

Enterprise funds - business type activities in government-wide F/S
Internal services funds - governmental actives in government-wide F/S
Fiduciary funds - presented individually and excluded from government-wide F/S

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8
Q

List of governmental funds

A 
"GRaSPP"
General
Special Revenue
Debt Service
Capital Project
Permanent
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9
Q

List of proprietary funds

A

Internal Service

Enterprise

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10
Q

List of fiduciary (trust) funds

A 
"PAPI"
Pension
Agent
Private Purpose
Investment
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11
Q

Difference between the measurement focus of current financial resources and economic resources

A

Current financial resources - No fixed assets and long term debt
Economic resources - Everything, carry over fixed asset and long term debt

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12
Q

Difference between modified accrual accounting and accrual accounting

A

Modified accrual accounting - recognize revenue when collected or about to collect within 3 months within 60 days after year end
Accrual accounting - recognize revenue when earned

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13
Q

What fund category is subject to fund balance constraints?

A

Governmental funds

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14
Q

List of fund balance constraints

A 
"NU CAR"
Non-spendable
Unassigned
Committed 
Assigned
Restricted
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15
Q

Fund balance constraints for the specific funds

A 
General - All
Special Revenue - No assigned
Debt Service - No non-spendable
Capital Projects - No non-spendable 
Permanent - Only restricted

*Unassigned is positive for general and negative for all others

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16
Q

Which of the following lead(s) to the use of fund accounting by a governmental organization?
Financial controls or legal restrictions

A

Both

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17
Q 
Which of the following characteristics of service efforts and accomplishments is the most difficult to report for a governmental entity?
Timeliness 
Consistency
Relevance
Comparability
A

Relevance

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18
Q

General fund resources that are limited as to use by constraints imposed by law through constitutional or enabling legislation would be classified within fund balance as:

A

Restricted

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19
Q

The only fund that should show a positive amount in its unassigned fund balance classification would be the:

A

General fund

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20
Q

The County Road & Bridge fund is funded by gas taxes whose use is restricted by law to road construction and is properly classified as a special revenue fund. The fund maintains inventories of road signage and road construction materials. Resources associated with those inventories would be classified within fund balance as:

A

Non-spendable

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21
Q

The Baker County Headstart fund, which is properly accounted for as a special revenue fund, overspent its available resources. The deficit in this fund would likely be displayed as:

A

Negative fund balance - unassigned

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22
Q

Debt service fund resources that are subject to the terms and conditions of a bond indenture would be classified within fund balance as:

A

Restricted

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23
Q

The most restrictive classification of governmental fund balances listed below is titled:

A

Committed

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24
Q

Purpose of:

  • Budgetary
  • Activity
  • Encumbrances
A
  • Budgetary - control spending
  • Activity - flow of current financial resources
  • Encumbrances - record purchase orders
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25
Q

How often are budgetary accounting entries recorded?

A

Beginning and end of year. Closes out the accounts at the end of the year for the exact amounts booked in the beginning

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26
Q

Journal entry to book budget for governmental funds

A 
DR. Estimated Revenue Control
DR. Estimated Other Financing Sources
DR. Budgetary Control 
CR. Appropriations (Approved spending)
CR. Estimated Other Financing Uses
CR. Budgetary Control
27
Q

What is the time span that revenue can be recognized?

A

Collections Jan - Dec of current year and Jan & Feb of next year
*Within 60 days after fiscal year end

28
Q

When are the following revenues recognized?

  • Real estate taxes
  • Fines and penalties
  • Income tax
  • Sales tax
  • Restricted grants
A
  • Real estate taxes - billed
  • Fines and penalties - billed
  • Income tax - collected
  • Sales tax - collected
  • Restricted grants - when spent
29
Q

Journal entry to record accrual of real property tax and estimated uncollectibles

A

Dr. Real property taxes receivable - current
Cr. Revenue - real property taxes
Cr. Allowance for uncollectible taxes receivable - current

30
Q 
Which event(s) is(are) supportive of interperiod equity as a financial reporting objective of a governmental unit?
I. A balanced budget is adopted.
II. Residual equity transfers out equals residual equity transfers in.
A

I only

31
Q

Which internal account should Spring Township credit when it issues a purchase order for supplies?

A

Budgetary control

32
Q

Expenditures of a governmental unit for insurance extending over more than one accounting period:

A

May be allocated between or among accounting periods or may be accounted for as expenditures of the period of acquisition.

33
Q

How should state appropriations to a state university choosing to report as engaged only in business-type activities be reported in its statement of revenues, expenses, and changes in net position?

A

Non operating revenues

34
Q

In order to qualify for hedge accounting treatment, a derivative must be:

A

Effective

35
Q

Journal entry to record purchase of a capital item

A

Dr. Expenditure - capital outlay

Cr. Vouchers payable/Cash

36
Q

Journal entry to record principal payment of non-current debt

A

Dr. Expenditure - Debt Service

Cr. Cash

37
Q

What 2 methods can be used for expenditure recognition of current assets? What is the difference?

A

1) Purchase Method
Buying item - Dr. Expenditure, Cr. Vouchers Payable
Use of item - no entry
On-hand at year end - Dr. Inventory, Cr. Non-spendable fund balance - inventory

2) Consumption Method
Buying item - Dr. Inventory, Cr. Vouchers Payble
Use of item - Dr. Expenditure, Cr. Inventory
On-hand year end - No entry

38
Q

Journal entry to record transfer between funds

A

Dr. Other financing uses - transfers out, debt service
Cr. Cash

*Not expenditure

39
Q

Journal entry to record long term debt

A

Dr. Cash

Cr. Other financing sources - bonds issued

40
Q

Journal entry to set up encumbrance

A

Dr. Encumbrance
Cr. Budgetary control

*Reverse at year-end for same amount

41
Q

What type of fund balance are encumbrances usually included in?

A

Committed and Assigned

42
Q

Journal entry to reclassify outstanding purchase orders

A

Dr. Unassigned fund balance
Cr. Fund balance, committed

*After reversing out encumbrance

43
Q

Government-wide statement of financial position formula

A

Assets + Deferred Outflow Resources - Liabilities + Deferred Inflow Resources = Net Position

44
Q

Governmental fund statement of financial position formula

A

Assets + Deferred Outflow Resources = Liabilities + Deferred Inflow Resources + Fund Balance

45
Q

Proprietary fund statement of financial position formula

A

Encouraged to use:

Assets + Deferred Outflow Resources - Liabilities + Deferred Inflow Resources = Net Position

46
Q

Fiduciary fund statement of financial position formula

A

Assets + Deferred Outflow Resources - Liabilities + Deferred Inflow Resources = Net Position

47
Q

How are derivatives used as investments reported?

A

Revenue

48
Q

How are derivatives used for hedging activities reported?

A

Deferred inflow/outflow of resources

49
Q 
What is the purpose of the following funds?
General
Special Revenue
Debt Service
Capital Project
Permanent
A
  • General - general activities not accounted by any fund; most powerful fund
  • Special Revenue - revenue & expenditures legally restricted or committed for specific purposes other than debt service or capital projects. Resources are expendable
  • Debt Service - Accumulation of debt and investments and payment of currently due interest and principal on LTD for GRaSPP funds only
  • Capital Project - Established for construction or purchase or leasing of significant fixed assets used by GRaSPP funds only
  • Permanent - Report resources legally restricted to extent that only earnings may be used for purpose that supports benefit of public
50
Q

When grant is received and it is:
- monitoring
- non-monitoring
it is classified as what type of fund?

A
  • Monitoring = Special Revenue fund

- Non-monitoring = Agent Trust fund

51
Q

In what two funds are encumbrances not used?

A

Debt service fund & Permanent fund

52
Q

Journal entry to record unrestricted government grant

A

Dr. Cash

Cr. Revenue

53
Q

Journal entry to record restricted government grants

A

Dr. Cash

Cr. Revenue collected in advance

54
Q

Journal entry to recognize restricted revenue

A

Recognized restricted revenue when spent
Dr. Expenditure
Cr. Vouchers payable/Cash

Dr. Revenue collected in advance
Cr. Revenue

55
Q

What type of fund do special assessments belong in when:

  • Primarily or potentially liable
  • Not primarily or potentially liable
A
  • Primarily or potentially liable = Capital Project fund

- Not primarily or potentially liable = Agency Trust fund

56
Q

How are the following treated on the financial statements for capital project funds:

  • Bond premiums
  • Bond discounts
  • Other bond issue costs
A
  • Bond premiums = other financing source
  • Bond discounts = other financing use
  • Other bond issue costs = expenditure
57
Q

Where is bond liability recorded?

A

Gov’t wide F/S only

58
Q

When a capital lease of a governmental unit represents the acquisition of a general fixed asset, the acquisition should be reflected in fund financial statements as:

a. Neither an expenditure nor an other financing source.
b. An other financing source but not as an expenditure.
c. An expenditure but not as an other financing source.
d. Both an expenditure and an other financing source.

A

d. Both an expenditure and an other financing source

59
Q

The portion of special assessment debt maturing in 5 years, to be repaid from general resources of the government, should be reported in the:

a. Agency fund.
b. Government-wide statement of net position.
c. Capital projects fund.
d. General fund.
A

b. Government-wide statement of net position

60
Q

A state had general obligation bonds outstanding that required payment of interest on July 1 and January 1 of each year. State law allowed for the general fund to make debt payments without the use of a fiscal agent. The fiscal year ended June 30. Which of the following accounts would have decreased when the state paid the interest due on July 1?

a. Fund balance.
b. Interest expenditures.
c. Interest payable.
d. Interest expense.
A

a. Fund balance

61
Q

Shared revenues received by an enterprise fund of a local government for operating purposes should be recorded in fund financial statements as:

a. Operating revenues.
b. Other financing sources.
c. Interfund transfers.
d. Non-operating revenues.
A

d. Non-operating revenues

62
Q

Which of the following does not affect an internal service fund’s change in net position?

a. Interfund transfers out.
b. Depreciation expense on its fixed assets.
c. Due from other funds.
d. Interfund transfers in.
A

c. Due from other funds

63
Q

A city council designates funds in the enterprise fund for future equipment replacement. The enterprise fund should report this as:

a. A designated component of net position.
b. A restricted component of net position.
c. A net investment in capital assets.
d. An unrestricted component of net position.
A

d. An unrestricted component of net position

64
Q

A government makes a contribution to its pension plan in the amount of $10,000 for year 1. The actuarially-determined annual required contribution for year 1 was $13,500. The pension plan paid benefits of $8,200 and refunded employee contributions of $800 for year 1. What is the pension expenditure for the general fund for year 1?

a. $13,500
b. $8,200
c. $10,000
d. $9,000
A

c. $10,000

65
Q 
Lily City uses a pay-as-you-go approach for funding postemployment benefits other than pensions. The city reports no other postemployment benefits (OPEB) liability at the beginning of the year. At the end of the year, Lily City reported the following information related to OPEB for the water enterprise fund:
Benefits paid
$ 100,000
Annual required contribution
500,000
Unfunded actuarial accrued liability
800,000
What amount of expense for OPEB should Lily City's water enterprise fund report in its fund level statements?
	a.	$1,400,000
	b.	$600,000
	c.	$100,000
	d.	$500,000
A

d. $500,000

CPA - FAR (8 decks)

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