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Current Topics in Accounting > Exam 1 > Flashcards

Exam 1 Flashcards

1
Q

governmental accounting

A

refers to all accounting functions of the public sector in the United States

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2
Q

two levels of government accounting in the U.S.

A

Federal level and state/local level

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3
Q

federal level

A

Federal Accounting Standards Advisory Board (FASAB)

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4
Q

State and local level

A

Government Accounting Standards Board (GASB)

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5
Q

Attributes of a government entity (one or more)

A
  1. Popular election of officers or appointment or approval of a controlling majority of the members of the organization’s governing body by officials of one or more state or local governments
  2. The potential for unilateral dissolution by a government with the net assets reverting to a government
  3. The power to enact and enforce a tax levy
  4. Ability to issue debt directly that pays interest exempt from federal taxation
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6
Q

3 reasons to study GNP accounting

A
  1. Governments and NFP organizations hire accountants
  2. CPA firms and states engage accountants to perform their audits
  3. As citizens and donors we wish to better understand how taxes and charitable donations are used
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7
Q

Organizational Purpose Gov.

A

Provide efficient, effective service to citizens regardless of “profit”

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8
Q

Organizational Purpose NFP

A

Provide efficient, effective service to beneficiaries regardless of profit

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9
Q

Organizational Purpose FP

A

Generate profit for owners

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10
Q

Stakeholders Gov.

A

Creditors, taxpayers, other government oversight, bodies & grantors

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11
Q

Stakeholders NFP

A

Creditors, members, beneficiaries, donors, volunteers, government grantors

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12
Q

Stakeholders FP

A

Creditors, owners/investors

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13
Q

Revenue Sources Gov.

A

taxes and other non-exchange transactions, not voluntary, may or may not receive benefit

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14
Q

Revenue Sources NFP

A

voluntary transactions

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15
Q

Revenue Sources FP

A

sales of goods/services, receives benefit

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16
Q

Longevity Gov.

A

doesn’t go out of business (very rare)

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17
Q

Longevity NFP

A

can go out of business

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18
Q

Longevity FP

A

can go out of business

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19
Q

Relationship with Stakeholders Gov.

A

compelled to use resources for specified purposes & demonstrate accountability

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20
Q

Relationship with Stakeholders NFP

A

compelled to use resources for specified purposes & demonstrate accountability

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21
Q

Relationship with Stakeholders FP

A

can use resources as desired

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22
Q

Role of Budget Gov.

A

expression of public policy; carries authority of law; public information

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23
Q

Role of Budget NFP

A

planning & control document; not public

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24
Q

Role of Budget FP

A

planning & control document; not public

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25
Q

Financial Reporting Document Gov.

A

Annual Comprehensive Financial Report (ACFR)

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26
Q

Financial Reporting Document NFP

A

Annual Report

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27
Q

Financial Reporting Document FP

A

Annual Report

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28
Q

4 federal level standard setters

A

FASAB, GAO (Governmental Accountability Office), U.S. Treasury Department, OMB (Office of Management and Budget)

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29
Q

GASB Concepts Statements: Statement #1- Objectives

A

allow comparison of actual with budgeted results

help users assess financial condition and results of operations

show compliance with laws, rules and regulations

assist in evaluating efficiency and effectiveness

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30
Q

fund

A
  1. represents a part of the activities of some government entity
  2. is a separate accounting entity (resources and activities)
  3. self-balancing set of accounts
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31
Q

general fund

A

the only fund required (1)

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32
Q

governmental (budgetary) funds

A

carry the authority of law

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33
Q

revenues (B/A)

A

B&A

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34
Q

appropriations (B/A)

A

B

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35
Q

encumbrances (B/A)

A

A

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36
Q

expenditures (B/A)

A

A

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37
Q

disbursements (B/A)

A

A

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38
Q

revenues

A

taxes, fees, charges for services, grants

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39
Q

appropriations

A

legally authorized monies allowed to be spent

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40
Q

encumbrances

A

future commitment of resources - P.O.

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41
Q

expenditures

A

resources received - liability exists - payable

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42
Q

disbursements

A

payment of payable

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43
Q

state and local government fund categories (3)

A

fiduciary type, proprietary type, governmental type

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44
Q

fiduciary type

A

acting as an agent or trustee of monies that generally belong to other parties

as such, they cannot be used for the government’s main purposes. for example, a public school district’s main purpose is formal academic teaching, usually K-12)

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45
Q

proprietary type

A

business-type activities

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46
Q

governmental type

A

used for activities that are largely unique to the government environment

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47
Q

fiduciary funds

A

private-purpose trust, investment trust, pension trust, custodial

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48
Q

fiduciary basis of accounting

A

accrual

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49
Q

fiduciary fund-basis financial statements

A

statement of this net position

statement of charges in this net position

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50
Q

proprietary funds

A

internal service, enterprise

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51
Q

proprietary basis of accounting

A

accrual

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52
Q

proprietary fund-basis financial statements

A

statement of net position

statement of revenues, expenses and changes in fund net position

statement of cash flows

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53
Q

governmental funds

A

permanent, debt service, capital project, special revenue, general

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54
Q

governmental basis of accounting

A

modified accrual

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55
Q

governmental fund-basis financial statements

A

balance sheet

statement of revenues, expenditures and changes in fund balances

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56
Q

general fund

A

accounts for most of the basic services provided by the government. Technically, it accounts for and reports all financial resources not accounted for and reported in another fund

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57
Q

capital projects funds

A

account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays. As such, it accounts for the purchase or construction of major capital improvements, except those purchased or constructed by a proprietary (and less commonly, fiduciary) fund

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58
Q

permanent fund

A

account for and report resources that are restricted to the extent that only earning, and not principal, may be used for purposes that support the reporting government’s programs

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59
Q

special revenue funds

A

account for and report the proceeds of specific revenue sources that are restricted or committed (not merely assigned) to expenditure for specific purposes other than debt service or capital projects. Those include activities funded by federal or state grants or by taxes specifically restricted to certain activities

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60
Q

debt service funds

A

account for and report financial resources that are restricted, committed or assigned to expenditure for principal and interest, other than interest or principal on proprietary or fiduciary activities

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61
Q

enterprise funds

A

a fund established for the purpose of measuring net income for a governmental department providing goods or services primarily to outside consumers, in which it is the intent of the government that the department operate on a cost recovery or profitable basis. Resources = sales and service charges

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62
Q

internal service fund

A

a fund established for the purpose of measuring net income to a governmental department providing services primarily to other departments or agencies within the governments, in which it is the intent of the government that the department operate on a cost reimbursement basis. Occassionally provided to other governments

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63
Q

custodial (or agency) fund

A

used to account for resources held by a government entity which are not owned by the entity, but which are payable to some outside party such as another governmental unit

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64
Q

investment trust fund

A

accounts for the external portion of investment pools, governed by a trust government in which the sponsoring government is a trustee

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65
Q

pension (and other employee benefit) fund

A

used to account for pension and employee benefit funds for which the governmental unit is the trustee. The earnings of these assets are used to pay the pensions (or benefit) of public

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66
Q

private-purpose trust funds

A

report all other trust arrangements under which principal and/or income benefit individuals, private organizations or other governments

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67
Q

Annual Comprehensive Financial Report

A

contains the financial report of the governments

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68
Q

State and local governments report various funds to the extent their activities meet the fund criteria. Government funds include

A. Internal service funds
B. Nonexpendable trust funds
C. Enterprise funds
D. Permanent funds

A

D. Permanent funds

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69
Q

The accounting systems of state and local government entities should be organized and operated using which structure?

A. Proprietary fund
B. Fiduciary fund
C. Governmental fund
D. Find

A

D. Fund

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70
Q

When a snowplow purchased by a governmental unit is received, it should be recorded in the general fund as a(n)

A. Encumbrance
B. Expenditure
C. General capital asset
D. Appropriation

A

B. Expenditure

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71
Q

Proprietary fund financial statements are prepared using the

Economic resources measurement focus
Current financial resources measurement focus
Accrual basis
Modified accrual basis

A

Economic resources measurement focus and accrual basis

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72
Q

A public school district should recognize revenue from property taxes levied for its debt service fund when

A. Bonds to be retired by the levy are due and payable
B. Assessed valuations of property subject to the levy are known
C. Funds from the levy are measurable and available to the district
D. Proceeds from collection of the levy are deposited in the district’s bank account

A

C. Funds from the levy are measurable and available to the district

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73
Q

Should a special revenue fund with a legally adopted budget maintain its accounts on an accrual basis and integrate budgetary accounts into its accounting system?

A

Yes, yes

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74
Q

Chase city imposed a 2% tax on hotel charges. Revenues from this tax will be used to promote tourism in the city. Chase should record this tax as what type of nonexchange transaction?

A. Derived tax revenue
B. Imposed nonexchange revenue
C. Government-mandated transaction
D. Voluntary nonexchange transaction

A

A. Derived tax revenue

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75
Q

Park city uses encumbrance accounting and formally integrates its budget into the general fund’s accounting records. For the year ending July 31, the following budget was adopted:

Estimated revenues $30,000,000
Appropriations 27,000,000
Estimated transfer to debt service fund 900,000

When Parks budget is adopted and recorded, park’s budgetary fund balance should have a

A. $3,000,000 credit balance
B. $3,000,000 debit balance
C. $2,100,000 credit balance
D. $2,100,000 debit balance

A

C. $2,100,000 credit balance

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76
Q

During its fiscal year ended June 30, cliff city issued purchase orders totaling $5,000,000 which were properly charged to encumbrances at that time. Cliff received goods and related invoices at the encumbered accounts totaling $4,500,000 before year end. The remaining goods of $500,000 were not received until after year end. Cliff paid $4,200,000 of the invoices received during the year. What amount of cliff’s encumbrances were outstanding at June 30?

A. $0
B. $300,000
C. $500,000
D. $800,000

A

C. $500,000

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77
Q

What is the major difference between an exchange transaction and a nonexchange transaction for governmental units?

A. The relationship between the amount of value given and received

B. Time requirements and whether the transaction is required by law

C. Purpose restrictions placed upon fund balances

D. Whether resources acquired can be further exchanged

A

A. The relationship between the amount of value given and received

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78
Q

Budgetary comparison schedules presented by a state or local government must

A. Be reported for the general fund and each major special revenue fund with a legally adopted budget

B. Be presented instead of budgetary comparison statements included in the basic statements

C. Convert the appropriated budget information to the GAAP basis for comparison with actual amounts reported on that basis

D. Compare only the final appropriated budget with actual amounts

A

A. Be reported for the general fund and each major special revenue fund with a legally adopted budget

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79
Q

The ___ funds are used to account for situations in which the government is acting as a collecting/disbursing agent

A. Special revenue
B. General
C. Enterprise
D. Custodial (Agency)

A

D. Custodial (Agency)

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80
Q

What basis of accounting would the enterprise fund use?

A. Accrual
B. Modified accrual
C. Cash
D. Expended accrual

A

A. Accrual

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81
Q

What are enterprise funds used for?

A. To account for pension and employee benefit funds for which the governmental unit is the trustee

B. To report resources that are legally restricted so only earnings, not principal, may be expended, and for purposes to benefit the government and its citizenry

C. To account for most of the basic services provided by the governmental units

D. To account for resources provided primarily through the use of sales and service charges to parties external to the government

A

D. To account for resources provided primarily through the use of sales and service charges to parties external to the government

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82
Q

The financial accounting standards board (FASB) is the standard setting organization for which of the following reporting organizations?

A. Private not for profits
B. Public not for profits
C. Investor owned business
D. A and c are both correct

A

D. A and c are both correct

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83
Q

The GASB is under the oversight of

A. GAO
B. FASAB
C.FAF
D. FASB

A

C. FAF

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84
Q

Governmental type funds label the excess of assets over liabilities on the balance sheet as:

A. Net assets
B.net fund balance and liabilities
C. Fund balance
D. Assets net of liabilities

A

C. Fund balance

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85
Q

Which of the following is true with respect to the general fund?

A. The general fund is considered to be a major fund if the combined total of assets, liabilities, revenues an expenses exceeds 10% of the total of all governmental funds

B. The general fund is always considered to be a major fund when preparing fund basis financial statements

C. The general fund is considered to be a major fund when preparing fund basis financial statements if it bears a financial benefit or burden to the primary government

D. The general fund is not reported as part of the CAFR

A

B. The general fund is always considered to be a major fund when preparing fund basis financial statements

86
Q

Governmental fund statements are prepared using:

A. Economic resources measurement focus and modified accrual basis of accounting

B. Current financial resources measurement focus and modified accrual basis of accounting

C. Economic resources measurement focus and accrual basis of accounting

D. Current financial resources measurement focus and accrual basis of accounting

A

B. Current financial resources measurement focus and modified accrual basis of accounting

87
Q

In addition to a statement of net position, what statements are required in the government wide financial statements?

A. Statement of activities

B. Statement of cash flows

C. Both of the above

D. Neither of the above

A

A. Statement of activities

88
Q

The modified accrual basis is a distinct system of accounting that:

A. Differed from accrual accounting only in its failure to recognize long term assets and liabilities

B. Records expenditures and fund balances

C. Recorded expenses and revenues the same as accrual accounting

D. Is equivalent to cash basis accounting

A

B. Records expenditures and fund balances

89
Q

Which of the following is true with respect to rainy day funds?

A. Rainy day funds are classified as committed if they are created by a resolution or ordinary age that identified the specific circumstances under which the resources may be expended

B. If rainy day funds are available in emergencies or periods of revenues shortfalls they are classified as committed

C. Both a and b

D. Neither a nor b

A

A. Rainy day funds are classified as committed if they are created by a resolution or ordinary age that identified the specific circumstances under which the resources may be expended

90
Q

Property taxes, special assessments and fines and forfeits are types of nonexchange transactions. These are examples of:

A. Government mandated nonexchange transactions

B. Imposed nonexchange transactions

C. Deferred tax revenues

D. Voluntary nonexchange transactions

A

B. Imposed nonexchange transactions

91
Q

The general ledger journal entry in the general fund to record the adoption of a budget would include:

A. A debit to estimated revenues control

B. A credit to estimated other financing sources control

C. A debit to budgetary fund balance-reserve for encumbrances

D. A debit to appropriations control

A

A. A debit to estimated revenues control

92
Q

According to GASB statement no 54 which of the following is an example of a nonspendable fund balance?

A. Resources (such as supplies) that are used in operations rather than converted to cash

B. The corpus of a permanent fund that may not be spent

C. Prepaid insurance

D. All of the above

A

D. All of the above

93
Q

Assume estimated revenues exceed appropriations. When the budget for the general fund is recorded, the journal entry will include:

A. A credit to budgetary fund balance
B. A credit to estimated revenues control
C. A debit to appropriations control
D. A credit to budgetary fund balance — reserve for encumbrances

A

A. A credit to budgetary fund balance

94
Q

Which of the following will increase the fund balance of a government at the end of a fiscal year?

The sum of revenues and other financing sources is more than the sum of expenditures and other financing uses

Expenditures are more than the difference between revenues and the excess of other financing sources over other financing uses

Revenues are less than the sum of expenditures, other financing sources and other financing uses

The sum of fund balance, revenues and other financing sources is more than the sum of expenditures and other financing uses

A

The sum of revenues and other financing sources is more than the sum of expenditures and other financing uses

The sum of fund balance, revenues and other financing sources is more than the sum of expenditures and other financing uses

95
Q

The Fort Worth city council approved and adopted its budget for FY 2017. The budget for the general fund contained the following amounts:

Estimated revenues $1,900,000
Appropriations $1,860,000
Authorized transfer to the debt service fund $30,000

When the general fund budget for FY 2017 is recorded, indicate whether each of the following accounts should be debited (D), credited (C), or is not affected (N)

  1. Estimated revenues
  2. Budgetary Fund Balance
  3. Appropriations
  4. Estimated other financing uses
  5. Expenditures
A
  1. D
  2. C
  3. C
  4. C
  5. N
96
Q

The complete Annual Comprehensive Financial Report (ACFR / CAFR) is (recommended/required)

A

recommended

97
Q

minimum parts of ACFR

A

1) Management’s discussion and analysis
2) Basic Financial Statements (Government-wide, Fund Basis, and Footnotes)
3) Required supplementary information (other than MD&A)

98
Q

3 main sections of the ACFR

A

1) Introductory
2) Financial
3) Statistical

99
Q

is the introductory section of the ACFR audited

A

no

100
Q

what does the introductory section of the ACFR include

A

Table of contents
Letter of transmittal
Miscellaneous items such as organizational
chart or names of chief government officers

101
Q

what is included in the financial section of the ACFR

A

Auditor’s report
Management Discussion & Analysis (MD&A)
Financial Statements & Notes
Required Supplementary Information (RSI)
Combining statements - more details about main statements, if needed

102
Q

are the financial statements & notes of the acfr audited

A

yes

103
Q

what are the two parts of the basic financial statements

A

1) Government-wide financial statements
2) Fund-basis financial statements

104
Q

what are the two parts of the government-wide financial statements

A

1) Government-wide statement of net position
2) Government-wide statement of activities

105
Q

what are the three parts of the fund basis financial statements

A

1) governmental type funds
2) proprietary funds
3) fiduciary funds

106
Q

what are the three parts of the governmental type funds

A

1) Balance Sheet
2) Statement of Revenues, Expenditures and Changes in Fund Balances
3) Reconciliation of government statements to government-wide statements

107
Q

what are the three parts of proprietary funds

A

1) statement of net position
2) statement of revenues, expenses, and changes in fund net position
3) statement of cash flows

108
Q

what are the two parts of fiduciary funds

A

1) statement of fiduciary net position
2) statement of changes in fiduciary net position

109
Q

fund

A

Fiscal and Accounting entity with a self-balancing set of accounts recording cash and other financial resources

110
Q

governmental (5 types)

A
  1. General Fund
  2. Capital Projects
  3. Permanent
  4. Special Revenue
  5. Debt Service
111
Q

proprietary (2 types)

A
  1. Enterprise
  2. Internal Service
112
Q

fiduciary (4 types)

A
  1. Custodial (Agency)
  2. Pension (and other employee benefit) trust
  3. Investment
  4. Private-purpose trust
113
Q

governmental basis of accounting

A

modified accrual

114
Q

proprietary basis of accounting

A

accrual

115
Q

fiduciary basis of accounting

A

accrual

116
Q

Included in GWS: governmental

A

yes

117
Q

Included in GWS: proprietary

A

yes

118
Q

Included in GWS: fiduciary

A

no

119
Q

Statement of Net Position

A

(measures assets and liabilities using the economic resource measurement focus, similar to business balance sheets)

120
Q

Statement of Activities

A

(measures revenues and expenses using the accrual basis, similar to business income statements)

121
Q

how are the assets listed in the government-wide statement of net position?

A

in order of liquidity

122
Q

three categories of net position

A
  1. Net Investment in capital assets
  2. Restricted
  3. Unrestricted
123
Q

government-wide statement of activities

A

This statement shows the net ‘cost’ of activities after deducting the revenues that can be directly attributed to each function

General revenues, such as property taxes, are then added at the bottom to get the “Change in net position”

124
Q

governmental funds

A

general citizen service

125
Q

proprietary funds

A

business-like activities such as water utility

126
Q

fiduciary funds

A

holding money in trust for others

127
Q

what fund is always considered a major fund

A

general fund

128
Q

characteristics to be a major fund

A

Fund has 10% of the total assets, liabilities, revenues, or expenditures in the GOVT category, and
5% of total the total assets, liabilities, revenues, or expenditures of GOVT + ENTERPRISE amounts
Or ANY fund may be designated MAJOR if reporting that FUND separately would be useful

129
Q

how are expenditures classified

A

by character (time or interperiod equity issues)

130
Q

reconciliation schedules

A

This schedule reconciles the changes in net assets/position shown on the government-wide and the fund-level statements

131
Q

why is reconciliation necessary

A

because the government-wide statements are on the accrual basis, and government fund statements are on the modified accrual basis

132
Q

budgetary comparison schedule

A

Shows the original budget and the final revised budget after revisions during the year. Variance column is useful, but optional.

The ‘actual’ figures may not be the same as those shown on the Statement of Revenues and Expenditures. The Actual column should reflect the basis of accounting assumed in the budget.

Need to show a reconciliation when budget basis is not the same as that on fund statements.

133
Q

summary of significant accounting policies

A

Explains which funds use accrual and which use modified accrual basis
Gives the choice made whenever more than one approach is allowed
Explains what is included in the financial statements

134
Q

major RSI items

A

Management Discussion and Analysis (precedes financial section)

May include Budgetary Comparison Schedule

Information about infrastructure assets if modified approach is used

Information about pension funding progress

Schedules for external risk pools

135
Q

A city government issued general obligation bonds to finance the construction of a new jail

A
  1. Capital Projects
  2. Governmental
  3. Modified
  4. Yes
136
Q

A tax of $1.00 per residential phone number is collected by a city government from the phone company. This amount is required by state law to be used for the operation of the 911 emergency phone system.

A
  1. Special Revenue
  2. Governmental
  3. Modified
  4. Yes
137
Q

A county government expended $1 million to expand the water treatment plant.

A
  1. Enterprise
  2. Proprietary
  3. Accrual
  4. Yes
138
Q

A donor signed a trust agreement and provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships.

A
  1. PPT
  2. Fiduciary
  3. Accrual
  4. No
139
Q

A donor provided $50,000 to be used to purchase newspaper and magazine subscriptions for the public library. There is no requirement that the original principal may not be spent

A
  1. Special revenue
  2. Governmental
  3. Modified
  4. Yes
140
Q

A city government sold surplus street maintenance trucks for $10,000.

A
  1. General Fund
  2. Governmental
  3. Modified
  4. Yes
141
Q

A city government contributed $500,000 to a pension trust administered by the city for its teachers, public safety employees, and employees of the water department

A
  1. General Fund
  2. Governmental
  3. Modified
  4. Yes
142
Q

modified accrual accounting

A

a distinct system of accounting that contains financial statement elements that appear nowhere else.

143
Q

how are revenues recognized using the modified accrual basis of accounting

A

measurable and available

144
Q

what is used instead of expenses in modified accrual accounting

A

expenditures

145
Q

3 types of permanent accounts

A

1) Assets
2) Liabilities
3) Fund Balances

146
Q

2 types of accounts that are closed at year end

A

1) Budgetary accounts
2) Financial Statement Activity Accounts

147
Q

what is the measurement focus of modified accrual

A

current financial resources measurement focus - no long-term assets & no long-term liabilities

148
Q

fund balance

A

serves a purpose similar to retained earnings, in that activity accounts are closed to this account at the end of each accounting period.

Net resources that are currently available for future spending.

149
Q

GASB 54 - Establishes the Reporting of Fund Balances

A

to provide clearer fund balance classifications.
Users want to know whether the use of amounts reported in governmental funds is constrained and how binding those constraints are

150
Q

5 categories of fund balances for governmental type funds

A

nonspendable, restricted, committed, assigned, unassigned

151
Q

nonspendable

A

equals the balance of supplies inventories in the asset section of the balance sheet

152
Q

restricted

A

by outside parties through grant agreements and and bond covenants

153
Q

committed

A

restricted by City Council as a reserve for revenue shortfalls (general fund) and by contractual obligation (capital projects fund)

154
Q

assigned

A

residual balance of the special revenue and capital projects fund, includes amounts assigned within the general fund by expressed intent (e.g. purchase orders)

155
Q

unassigned

A

the residual balance of the general fund

156
Q

encumbrances

A

Purchase orders, basically. Intent
to spend money

no separate reporting within the fund balance section of the governmental funds’ balance sheet

157
Q

negative balances

A

Statement 54 does not permit the reporting of negative restricted, committed or assigned fund balances. If this occurs, the government should reduce any assigned fund balances (in that fund) by the amount of the negative balance.
The rationale is that if expenditures exceed restricted or committed resources, then funds have in effect been reallocated to the purpose used.

If a deficit remains once all assigned fund balances are zero, the remaining negative amount should be reported as unassigned fund balance.

158
Q

$150,000 unexpended proceeds of a state grant required by law to be used for health education

A

restricted

159
Q

$15,500 of prepaid insurance

A

nonspendable

160
Q

$600,000 rainy day fund approved by city council for use under specified circumstances

A

committed

161
Q

$125,000 provided for contractual obligations for capital projects

A

committed

162
Q

$16,000 unexpended proceeds of a tax required by law to be used for emergency 911 services

A

restricted

163
Q

$715,500 to be used to fund government operations in the future

A

unassigned

164
Q

$200,000 budget stabilization fund to be used in the event of revenue shortfall

A

unassigned

165
Q

revenues

A

defined as all other inflows and include taxes, charges for services, and amounts provided by other entities such as the state or federal government

166
Q

other financing sources

A

include transfers in from other funds and the proceeds of long-term borrowing

167
Q

expenditures

A

Bill is received that will be settled with current financial resources in the fund

168
Q

examples of expenditures

A

salaries (current), land, buildings or equipment (capital) or for payment of interest and principal on debt (debt service).

169
Q

other financing uses

A

Transfers out of a fund to other funds

170
Q

three outflow classifications

A

CURRENT, CAPITAL OUTLAY, and DEBT SERVICE

171
Q

current

A

typically classified by function: General government, public safety, streets and highways

172
Q

nonexchange transactions

A

transactions in which a government receives resources without directly giving equal value in exchange

173
Q

most common forms of nonexchage transactions

A

tax revenues and intergovernmental grants

174
Q

eligibility requirements for nonexchange transactions

A

required characteristics of recipients, time requirement, reimbursement, contingencies

175
Q

required characteristics of the recipient

A

recipient must have the characteristics specified by the provider.

176
Q

reimbursement

A

For those grants and gifts that are payable only upon the incurrence of qualifying outlays, revenues would be recognized only when the expenditures have been incurred

177
Q

contingencies

A

resources pledged with this are not recognized as revenue until it has been met

178
Q

four types of nonexchange transactions

A

Imposed nonexchange revenues

Derived tax revenues

Government mandated transactions

Voluntary nonexchange transactions

179
Q

imposed nonexchange revenues examples

A

property tax, special assessments, fines/forfeits

180
Q

derived tax revenues examples

A

sales, income, motor fuel taxes

181
Q

government mandated transaction examples

A

federal government requires lower level expenditures

182
Q

voluntary nonexchange transaction examples

A

grants, donations

183
Q

imposed nonexchange revenue accounting basis

A

modified

184
Q

imposed nonexchange revenue

A

Record the receivable (and an allowance for uncollectibles) when an enforceable claim exits.
Revenues should be recognized in the period for which the taxes are levied (i.e. budgeted), but are also subject to the 60 day rule. Revenues expected to be collected > 60 days after year-end are deferred

185
Q

property taxes levied journal entry

A

Taxes Receivable ………Dr
Estimated Uncollectible Taxes ….…..Cr
Revenues……….. .……………….….Cr

186
Q

deferral of portion expected to be collected > 60 days after year end (property taxes)

A

Revenues ………………Dr
Deferred (Inflows) Property Taxes ….Cr

187
Q

derived tax revenue accounting basis

A

modified

188
Q

derived tax revenue

A

Record the receivable when the taxpayer’s underlying transaction takes place.

Revenues should be recognized when available and measurable. Revenues not expected to be collected in time to settle current liabilities are deferred (i.e. available and measurable criteria).

189
Q

income tax withholdings are received journal entry

A

Cash …………………….Dr
Revenues ……………………………Cr

190
Q

additional income taxes expected to be received after year end. part of this will not be received in time to be available for current liabilities journal entry

A

Taxes Receivable ……….Dr
Revenues …………….……………………Cr
Deferred Revenues – Income Taxes ……Cr

191
Q

government-mandated and voluntary nonexchange revenues accounting method

A

modified

192
Q

government-mandated and voluntary nonexchange revenues

A

Record the receivable and the revenue when all eligibility requirements have been met.
Many of these are reimbursement grants. In this case, revenue is recognized only when qualified expenditures have been incurred

Advance receipts are deferred until expenditures are incurred. Revenue recognition is subject to the available and measurable criteria.

193
Q

reimbursement type grants journal entries

A

Expenditures ……… …..Dr
Accounts Payable/Cash ……………..Cr
2. Due from grantor ……… Dr
Revenues ……..……………………Cr

194
Q

Advance funded grant: (less common)
1. Receipt of advance funding.
2. Incur qualified expenditures and recognize revenue

journal entries

A

Cash ……………………Dr
Deferred Revenues – Grants ………..Cr

2a. Expenditures Control ……Dr
Accounts Payable/Cash ……………..Cr
2b. Deferred Revenues –
Grants .. ……… Dr
Revenues …………………Cr

195
Q

expenditure cycle step #1

A

City Council approves the fiscal year budget for the general fund

196
Q

expenditure cycle step #2

A

City departments issue purchase orders for goods and services

197
Q

expenditure cycle step #3

A

goods and services are received and invoices are presented for payment

198
Q

expenditure cycle step #1 journal entries

A

Dr. estimated revenues
Dr. Estimated other financing sources
Cr. Appropriations
Cr. Cr. Estimated other financing uses
Cr. Budgetary fund balance

To record the budget

199
Q

expenditure cycle step #2 journal entry

A

Dr. encumbrances
Cr. Budgetary fund balance - reserve for encumbrances

to establish the encumbrance (issue P.O.)

200
Q

expenditure cycle step #3 journal entries

A

Dr. Budgetary fund balance - reserve for encumbrances
Cr. encumbrances

to reverse the encumbrance

Dr. expenditures (current)
Cr. accounts payable

to record the liability

201
Q

is an encumbrance a liability

A

An encumbrance is not a liability since the goods or services have merely been ordered, not received

202
Q

why record encumbrances

A

To prevent over-spending, outstanding orders are entered into the books

203
Q

Place an order for $150,000 which consists of three mini-buses costing $50,000 each. Recorded as:

A

Dr. Encumbrances 150,000
Cr. Budgetary Fund Balance -
Reserve for Encumbrances 150,000

204
Q

Assume two of the buses arrive, but with freight, they cost $102,000 instead of $100,000

A

First, reverse a part of the encumbrances:
Dr. Budgetary Fund Balance -
Reserve for Encumbrances 100,000
Cr. Encumbrances 100,000
Second, record the actual amount of expenditure:
Dr. Capital Expenditure 102,000
Cr. Accounts Payable 102,000

205
Q

estimated revenues

A

Revenues to be raised pursuant to law during a budget period

206
Q

appropriation

A

legal authorization for the government to incur liabilities for purposes specified in the appropriations statue or ordinance

207
Q

estimated other financing sources and estimated other financing uses

A

budgetary accounts reflecting anticipated inflows and outflows of resources from sources other than revenues and expenditures

208
Q

budget revisions

A

may be necessary during the year due to changes in revenue projections or operating conditions … for example, electricity price increases, decrease in sales taxes due to low consumer spending

usually are taken back to the appropriate legislative body for approval, although some jurisdictions may allow some percentage of the budget to be transferred between accounts

209
Q

recording a budget revision

A

Budgetary Fund Balance 150,000
Appropriations 70,000
Estimated Revenues 80,000

210
Q

budgetary comparison schedule

A

Both the original and the final adjusted
budget is shown

The revised appropriations are compared to the Actual Expenditures for the current period plus Outstanding Encumbrances

A variance column is typically shown, but is optional

211
Q
A

Current Topics in Accounting (5 decks)

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