Chapter 8 - Governmental Accounting Flashcards
How does the government and non-for-profit organizations use fund accounting?
Government - External reporting & internal accounting
Non-for-Profit - Internal accounting
Main objectives of governmental financial statements
Timeliness
Consistency
Comparability
Who establishes accounting and reporting standards for governments?
GASB
Who establishes accounting and reporting standards for non-for-profit organizations?
FASB
What are the 3 different categories of fund structure?
Governmental funds
Proprietary funds
Fiduciary funds
External reporting requirements for governmental accounting
Government wide presentation (consolidated) and major fund financial statements
Income Statement and Balance Sheet measurement focus for: Government-wide presentations Governmental funds Proprietary funds Fiduciary funds
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
Where are the following funds reported:
Enterprise funds
Internal services funds
Fiduciary funds
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
List of governmental funds
"GRaSPP" General Special Revenue Debt Service Capital Project Permanent
List of proprietary funds
Internal Service
Enterprise
List of fiduciary (trust) funds
"PAPI" Pension Agent Private Purpose Investment
Difference between the measurement focus of current financial resources and economic resources
Current financial resources - No fixed assets and long term debt
Economic resources - Everything, carry over fixed asset and long term debt
Difference between modified accrual accounting and accrual accounting
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
What fund category is subject to fund balance constraints?
Governmental funds
List of fund balance constraints
"NU CAR" Non-spendable Unassigned Committed Assigned Restricted
Fund balance constraints for the specific funds
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
Which of the following lead(s) to the use of fund accounting by a governmental organization?
Financial controls or legal restrictions
Both
Which of the following characteristics of service efforts and accomplishments is the most difficult to report for a governmental entity? Timeliness Consistency Relevance Comparability
Relevance
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:
Restricted
The only fund that should show a positive amount in its unassigned fund balance classification would be the:
General fund
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:
Non-spendable
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:
Negative fund balance - unassigned
Debt service fund resources that are subject to the terms and conditions of a bond indenture would be classified within fund balance as:
Restricted
The most restrictive classification of governmental fund balances listed below is titled:
Committed
Purpose of:
- Budgetary
- Activity
- Encumbrances
- Budgetary - control spending
- Activity - flow of current financial resources
- Encumbrances - record purchase orders
How often are budgetary accounting entries recorded?
Beginning and end of year. Closes out the accounts at the end of the year for the exact amounts booked in the beginning
Journal entry to book budget for governmental funds
DR. Estimated Revenue Control DR. Estimated Other Financing Sources DR. Budgetary Control CR. Appropriations (Approved spending) CR. Estimated Other Financing Uses CR. Budgetary Control
What is the time span that revenue can be recognized?
Collections Jan - Dec of current year and Jan & Feb of next year
*Within 60 days after fiscal year end
When are the following revenues recognized?
- Real estate taxes
- Fines and penalties
- Income tax
- Sales tax
- Restricted grants
- Real estate taxes - billed
- Fines and penalties - billed
- Income tax - collected
- Sales tax - collected
- Restricted grants - when spent
Journal entry to record accrual of real property tax and estimated uncollectibles
Dr. Real property taxes receivable - current
Cr. Revenue - real property taxes
Cr. Allowance for uncollectible taxes receivable - current
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.
I only
Which internal account should Spring Township credit when it issues a purchase order for supplies?
Budgetary control
Expenditures of a governmental unit for insurance extending over more than one accounting period:
May be allocated between or among accounting periods or may be accounted for as expenditures of the period of acquisition.
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?
Non operating revenues
In order to qualify for hedge accounting treatment, a derivative must be:
Effective
Journal entry to record purchase of a capital item
Dr. Expenditure - capital outlay
Cr. Vouchers payable/Cash
Journal entry to record principal payment of non-current debt
Dr. Expenditure - Debt Service
Cr. Cash
What 2 methods can be used for expenditure recognition of current assets? What is the difference?
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
Journal entry to record transfer between funds
Dr. Other financing uses - transfers out, debt service
Cr. Cash
*Not expenditure
Journal entry to record long term debt
Dr. Cash
Cr. Other financing sources - bonds issued
Journal entry to set up encumbrance
Dr. Encumbrance
Cr. Budgetary control
*Reverse at year-end for same amount
What type of fund balance are encumbrances usually included in?
Committed and Assigned
Journal entry to reclassify outstanding purchase orders
Dr. Unassigned fund balance
Cr. Fund balance, committed
*After reversing out encumbrance
Government-wide statement of financial position formula
Assets + Deferred Outflow Resources - Liabilities + Deferred Inflow Resources = Net Position
Governmental fund statement of financial position formula
Assets + Deferred Outflow Resources = Liabilities + Deferred Inflow Resources + Fund Balance
Proprietary fund statement of financial position formula
Encouraged to use:
Assets + Deferred Outflow Resources - Liabilities + Deferred Inflow Resources = Net Position
Fiduciary fund statement of financial position formula
Assets + Deferred Outflow Resources - Liabilities + Deferred Inflow Resources = Net Position
How are derivatives used as investments reported?
Revenue
How are derivatives used for hedging activities reported?
Deferred inflow/outflow of resources
What is the purpose of the following funds? General Special Revenue Debt Service Capital Project Permanent
- 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
When grant is received and it is:
- monitoring
- non-monitoring
it is classified as what type of fund?
- Monitoring = Special Revenue fund
- Non-monitoring = Agent Trust fund
In what two funds are encumbrances not used?
Debt service fund & Permanent fund
Journal entry to record unrestricted government grant
Dr. Cash
Cr. Revenue
Journal entry to record restricted government grants
Dr. Cash
Cr. Revenue collected in advance
Journal entry to recognize restricted revenue
Recognized restricted revenue when spent
Dr. Expenditure
Cr. Vouchers payable/Cash
Dr. Revenue collected in advance
Cr. Revenue
What type of fund do special assessments belong in when:
- Primarily or potentially liable
- Not primarily or potentially liable
- Primarily or potentially liable = Capital Project fund
- Not primarily or potentially liable = Agency Trust fund
How are the following treated on the financial statements for capital project funds:
- Bond premiums
- Bond discounts
- Other bond issue costs
- Bond premiums = other financing source
- Bond discounts = other financing use
- Other bond issue costs = expenditure
Where is bond liability recorded?
Gov’t wide F/S only
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.
d. Both an expenditure and an other financing source
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.
b. Government-wide statement of net position
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. Fund balance
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.
d. Non-operating revenues
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.
c. Due from other funds
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.
d. An unrestricted component of net position
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
c. $10,000
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
d. $500,000
