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Current Topics in Accounting > Exam 2: 4, 5 > Flashcards

Exam 2: 4, 5 Flashcards

1
Q

Capital projects funds

A) Receive all of their money from tax revenues
B) Exist only for the duration of the project for which they are created
C) Record debt issuances as revenues
D) All of the above

A

B) Exist only for the duration of the project for which they are created

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2
Q

Which of the following can be a major source of funding for capital projects funds?

A) Gifts from individuals and corporations
B) Proceeds from issuance of long term debt
C) Grants
D) All of the above

A

D) All of the above

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3
Q

An encumbrance in a capital project fund is created

A) When the project is paid for in full
B) When the work on the project begins
C) When the work on the project is finished
D) When a contract is signed or issued

A

D) When a contract is signed or issued

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4
Q

When a purchase order is issued under a Capital Projects fund, how should the transaction be recorded?

A) Debit Encumbrances and Credit Budgetary Fund Balance – Reserve for Encumbrances
B) Debit Expenditures and Credit Budgetary Fund Balance – Reserve for Encumbrances
C) Debit Expenditures and credit Vouchers payable
D) Debit Encumbrances Control and credit Vouchers payable

A

A) Debit Encumbrances and Credit Budgetary Fund Balance – Reserve for Encumbrances

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5
Q

When a payment is due to a contractor (the work is completed) from capital projects fund resources, the debit would be to:

A) A capital asset account
B) Capital expenditures
C) Encumbrances
D) None of the above, no entry is made until payment

A

B) Capital expenditures

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6
Q

Grant proceeds received from the state for a capital project would be recorded in a capital projects fund of a city government as a (an):

A) Revenue
B) Other Financing Source
C) Direct addition to Fund Balance
D) Other Financing Use

A

A) Revenue

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7
Q

The purpose of fund accounting

A

to segregate those financial resources that have constraints or limitations* on their use so that the government may demonstrate compliance with those limitations.

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8
Q

What reports resources that are not subject to the restrictions?

A

General Fund

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9
Q

fund

A

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

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10
Q

5 types of governmental funds

A

General Fund
Capital Projects
Debt Service
Special Revenue
Permanent

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11
Q

three types of funds

A

governmental
proprietary
fiduciary

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12
Q

2 types of proprietary funds

A

enterprise
internal service

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13
Q

4 types of fiduciary funds

A

Agency
Pension (and other employee benefit) trust
Investment
Private-purpose trust

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14
Q

what basis of accounting for governmental funds

A

modified accrual

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15
Q

what basis of accounting for proprietary funds

A

accrual

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16
Q

what basis of accounting for fiduciary funds

A

accrual

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17
Q

3 fund basis financial statements for governmental

A

Balance Sheet
Statement of Revenues, Expenditures and Changes in Fund Balance
Reconciliation of Governmental Statements to GWS

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18
Q

3 fund basis financial statements for proprietary

A

Statement of Net POSITION
Statement of Revenue, Expenditures and Changes in Fund Net POSITION
Statement of Cash Flows

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19
Q

2 fund basis financial statements for fiduciary

A

Statement of Fiduciary Net POSITION
Statement of Changes in Fiduciary Net POSITION

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20
Q

which fund types are included in government wide financial statements

A

governmental and proprietary

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21
Q

general fund

A

used to account for and report all financial resources not accounted for and reported in another fund

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22
Q

how many general funds for a government

A

1

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23
Q

special revenue

A

Account for and report the proceeds of specific revenue sources that are restricted or committed (does not include assigned) to expenditure for specified purpose other than debt service or capital projects

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24
Q

Build an addition to the Senior Citizens Center

A

capital projects

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25
Q

Repay debt on addition to the Senior Citizens Center

A

debt service

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26
Q

Run or operate the Senior Citizens Center

A

special revenue

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27
Q

accrual

A

Recognize revenues when earned
Match expenses against the revenues when resources or services are used

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28
Q

modified accrual

A

Recognize revenues when measurable and available
(available to pay this year’s bills— for example, property taxes received within 60 days of year end)

Recognize expenditures when the liability is incurred AND goods or services are received — no attempt to match to revenues, match to period of occurrence most common
Exception — recognize interest and principal payments as expenditures when DUE

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29
Q

taxes

A

a burden or charge imposed or voted by a legislative power upon persons or property to raise money for public purposes

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30
Q

levy rate

A

taxing district’s annual budget / total assessed value

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31
Q

journal entry to record property tax levy

A

Dr. Taxes Receivable
Cr. Revenue

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32
Q

journal entry to record collection of property taxes

A

Dr. Cash
Cr. Taxes Receivable

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33
Q

uncollectible amounts

A

revenues are effectively reduced by the amount of the estimate

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34
Q

journal entry to record the placement of an order of supplies

A

Dr. Encumbrances
Cr. Budgetary Fund Balance - Reserve for Encumbrances

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35
Q

When taxes are levied specifically for payment of interest and principal on long-term debt, those taxes are recognized:

A) As revenues in the General Fund with transfers made to the debt service funds for payments
B) As revenues in the debt service fund
C) As revenues in the capital projects fund with transfers made to the debt service funds for payments
D) As Other Financing Sources in the debt service fund

A

B) As revenues in the debt service fund

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36
Q

With respect to Debt Service Funds, which of the following is not correct?

A) Typically, resources are provided through transfers from the General Fund or other funds
B) There are two types of debt service expenditures: interest and principal
C) In most cases, interest and principal payments are not recorded until payment is due
D) Encumbrances are recorded to reflect principal payments that are expected to come due within the current accounting period

A

D) Encumbrances are recorded to reflect principal payments that are expected to come due within the current accounting period

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37
Q

If taxes are levied by the General Fund, and then are subsequently transferred to the debt service fund, the taxes are:

A) Recorded as revenues of the debt service fund
B) Included in the revenues of the General Fund and are also reported by the General Fund as transfers out to the debt service fund
C) Included as transfers out in the General Fund but are not as revenue in that fund
D) Recorded as an expense and voucher payable by the General Fund and are recorded as a revenue and receivable by the debt service fund

A

B) Included in the revenues of the General Fund and are also reported by the General Fund as transfers out to the debt service fund

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38
Q

A transfer from the General Fund to a debt service fund to make annual payments on principal and interest would be recorded in the debt service fund as a(n):

A) Other Financing Source
B) Revenue
C) Direct addition to Fund Balance
D) Other Financing Use

A

A) Other Financing Source

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39
Q

The Debt Service Fund received a cash transfer of $25,000 from the Capital Projects Fund after a capital project was completed. The entry to record this transaction in the Debt Service Fund is:

A) Debit to Cash and a credit to Revenues for $25,000
B) Debit to Due from Other Funds, credit to Other Financing Sources - Transfers In for $25,000 Cash
C) Debit to Cash and credit Other Financing Sources - Transfers In for $25,000
D) Debit to Accounts Receivable, credit to Other Financing Sources - Transfers In for $25,000

A

C) Debit to Cash and credit Other Financing Sources - Transfers In for $25,000

40
Q

Which of the following statements is true about the flow of resources into a debt service fund?

A) Special assessments levied specifically to pay for downtown garbage collection are recognized as revenues of the debt service fund
B) Dedicated taxes levied for payment of principal and interest on long-term debt are recorded in the debt service fund as revenues
C) Taxes levied and collected by the General Fund and then transferred to a debt service fund are recognized as revenues of the debt service fund
D) Premium on bonds, issued to finance acquisition of a capital asset, is recorded as revenue in a debt service fund

A

B) Dedicated taxes levied for payment of principal and interest on long-term debt are recorded in the debt service fund as revenues

41
Q

Journal entry to receive goods

A

Dr. Budgetary Fund Balance - Reserve for Encumbrances
Cr. Encumbrances

42
Q

journal entry for an invoice

A

Dr. Expenditures
Cr. Accounts Payable

43
Q

journal entry for payment of an invoice

A

Dr. Accounts Payable
Cr. Cash

44
Q

short-term borrowing

A

Since governmental funds recognize
obligations requiring current financial resources to settle, current borrowings are recorded in the same manner as commercial businesses

45
Q

The principal of permanent funds must be classified as ___ Fund Balance

1) Nonspendable
2) Restricted
3) Committed
4) Unassigned

A

1) Nonspendable

46
Q

The portion of a permanent fund which is spendable should typically be reported as ___ Fund

A) Assigned
B) Committed
C) Restricted
D) Nonspendable

A

A) Assigned

47
Q

If a trust is to be used for the benefit of individuals, private organizations or other governments, the following fund(s) should be used:

A) Special revenue fund
B) Permanent fund
C) Private purpose trust fund
D) General fund

A

C) Private purpose trust fund

48
Q

Siler City receives a trust donation for the purpose of maintaining flower beds in city parks, but the donor does not specify that the principal must be maintained (in other words, the principal can be spent). This type of trust would be most appropriately accounted for in a:

A) Permanent Fund
B) Special Revenue Fund
C) Private Purpose Trust Fund
D) General Fund

A

B) Special Revenue Fund

49
Q

Which of the following should be accounted for in a permanent fund?

A) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to maintain the city war memorials
B) A gift of $100,000 to a school board, to be given out $10,000 a year to the class valedictorian as a college scholarship
C) A gift of $100,000 to a city, to be expended next year to purchase books for the city library
D) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to distribute to one or more nonprofit groups

A

A) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to maintain the city war memorials

50
Q

journal entry to record short term tax anticipation notes

A

Dr. Cash
Cr. Tax Anticipation Note Payable

51
Q

interfund transactions

A

Transactions between funds

52
Q

why are interfund transactions of particular interest to financial statement preparers and users

A

failure to properly report these transactions results in two funds being misstated

53
Q

how are interfund transactions identified

A

in the accounts of the affected funds

54
Q

3 types of interfund transactions

A

Interfund Services (Quasi-external) transactions (including loans between funds)

Reimbursements

Funds Transfers

55
Q

transfers

A

Any assignment of resources from
one fund to another where there is no expectation that the amounts will be repaid

56
Q

Other Financing Sources

A

Transfers Into a Fund, not revenue

57
Q

Other Financing Uses

A

Transfers Out, not expenditures

58
Q

special items

A

significant transactions that are either unusual or infrequent but within the control of management

59
Q

example of a special item

A

sale of a capital asset

60
Q

two parts of the closing process for government type funds

A

Close budgetary accounts (NEW)

Close Revenues, expenditures, encumbrances, and related other financing sources or uses to Fund Balance

61
Q

what are the budgetary accounts closed to

A

budgetary fund balance

62
Q

journal entry to close the budgetary accounts

A

Dr. Appropriations
Dr. Estimated Other Financing Uses
Dr./Cr. Budgetary Fund Balance
Cr. Estimated Revenues
Cr. Estimated Other Financing Sources

63
Q

what are activity accounts closed to

A

fund balance

64
Q

5 categories of fund balance

A

Nonspendable
Restricted
Committed
Assigned
Unassigned (General Fund residual)

65
Q

which governmental funds are on a modified accrual basis

A

all

66
Q

which governmental funds use the current financial resources focus

A

all

67
Q

which governmental funds record budgets

A

general and special revenue funds

68
Q

which governmental funds use encumbrances

A

general, special revenue, capital projects funds

69
Q

which governmental funds have an indefinite life

A

general and permanent funds

70
Q

capital projects funds

A

Account for and report financial resources that are restricted, committed or assigned to expenditure for capital outlays

71
Q

examples of capital projects funds

A

buildings, police cars, textbooks, courthouse, highways, schools

71
Q

2 examples of other financing sources (OFS)

A
  1. Proceeds from issuance of long-term debt (i.e. bonds)
  2. Transfers from other funds
71
Q

6 common sources of funds

A
  1. Proceeds from issuance of long-term debt (i.e. bonds)
  2. Transfers from other funds
  3. Grants from other gov’t units (Intergovernmental)
  4. Dedicated taxes
  5. Donations/gifts from individuals and corporations
  6. Interest earned on funds held
72
Q

4 examples of revenues

A
  1. Grants from other gov’t units (Intergovernmental)
  2. Dedicated taxes
  3. Donations/gifts from individuals and corporations
  4. Interest earned on funds held
73
Q

Other financing uses (OFU)

A

Accounts for construction or acquisition expenditures
Does not report the long-term asset in the CP fund—Treated as expenditure in the fund
Long-term asset is listed in government-wide Statement of Net Position

74
Q

journal entry to record a bond issue

A

Dr. Cash
Cr. Other financing sources: Bond Proceeds

75
Q

what are bond proceeds considered

A

other financing source

75
Q

debt service funds

A

Account for and report financial resources that are restricted, committed or assigned to expenditure for principal and interest

75
Q

uses of debt service funds

A

Sinking fund and payments on bonds
Payments on long-term notes
Payments on capital lease

76
Q

4 sources of debt service financing

A
  1. Transfers
  2. Refinancing bond proceeds
  3. Taxes earmarked for debt service (including special assessments)
  4. Special assessments levied against property
77
Q

Exception to expenditure recognition under the modified accrual basis

A

Most expenditures are recorded when the liability is incurred
EXCEPT for interest and principal on long term debt:
Interest and principal on long term debt is record in the DSF as an expenditure when DUE

78
Q

permanent funds

A

should be used to 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, benefit many

79
Q

2 characteristics of permanent funds

A

Contribution of a principal amount from a donor which is to be invested in perpetuity
Earnings in the fund are designated to a purpose that benefits the government or its citizens

80
Q

Trust is to be used to benefit the government or its citizenry examples (principal nonspendable, earnings assigned)

A

Cemetery perpetual care or funds established to support libraries, museums or zoos

81
Q

2 categories of trusts to be used to benefit the government or its citizenry

A

expendable and non-expendable

82
Q

expendable

A

Trust does not distinguish between earnings and principal. Both may be expended for the purpose provided

83
Q

non-expendable

A

Trust stipulates that earnings only (not principal) may be expended for the purpose provided

84
Q

who do expendable and non-expendable trusts benefit

A

many

85
Q

appropriate fund to record expendable trust

A

special revenue fund

86
Q

appropriate fund to record non-expendable trust

A

permanent fund

87
Q

Trust is to benefit individuals, private organizations, or other governments examples (principal nonspendable, earnings assigned or restricted)

A

Scholarship funds or funds intended to benefit families of police or firemen killed on duty

88
Q

appropriate fund to record trusts to benefit individuals, private organizations, or other governments (usually non-expendable)

A

private purpose trust (fiduciary)

89
Q

Trust is to benefit individuals, private organizations, or other governments benefit who

A

little

90
Q

balance sheet

A

Must present separate columns for the General Fund, each major fund, and a single column for nonmajor funds
Governments may show nonmajor funds separately, if it does not make the reports too cumbersome

The difference between assets and liabilities is termed Fund Balance and is reported as Nonspendable, Restricted, Committed or Assigned. Only the General Fund reports Unassigned fund balance.

91
Q

statement of revenues, expenditures and changes in fund balance

A

The Statement will have columns for the same GF, Major, and Nonmajor funds used in the Balance Sheet
Format:
Revenues
- Expenditures
+ or - Other Finance Sources/Uses
+ or - Special Items
= Change in Fund Balance
+ Beginning Bal
= Ending Fund Balance

92
Q

3 types of character classifications for expenditures

A

Current,
Debt Service,
Capital Outlay

93
Q
A

Current Topics in Accounting (5 decks)

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