Chapter 8 Section 2: Modified Accrual Accounting Flashcards
Define budgetary, activity, and encumbrance
Budget: control spending
Activity: flow of current financial resources
Encumbrance: record purchase orders
Explain BAE - BAE
Book and close the same amounts for budget, activity, and encumbrance
Explain budgetary accounts
Estimates that have the opposite balance of the real accounts
When are real estate taxes and fines and penalties recorded as revenue?
When levied
When are income and sales taxes recorded as revenue?
When received
How do you treat the purchase of a fixed asset?
As an expenditure
Explain the two methods for recognizing fixed asset expenditures
Purchase: expenditure when purchased, and reverse for items not used during the period
Consumption: set up as a current asset when purchased, and expenditure items as consumed
Explain transfers
They are not an expenditure, but they are a use of resources
How are proceeds from long-term debt treated?
As other financing sources. LT debt is not recorded.
Why do encumbrances exist?
Because they need to reflect not just the expenditures - also the obligations to spend
What if an encumbrance is outstanding at year end?
If appropriations do not lapse, reverse the JE and include outstanding encumbrances in a different fund balance, like committed.
