F8

Question 1

What are the dual objective of government and not-for-profit reporting?

Answer 1

operational accountability for the entity (government-wide F/S) and fiscal accountability for specific funding(fund F/S).

Question 2

Who uses governmental accounting and reporting principles other than governments? e.g. not-for-profit hospitals?

Answer 2

Not-for-profit organizations run by governments! Nothing else. Other not-for-profit is still FASB.

Question 3

What’s Government Accountability Office?

Answer 3

GAO prescribes government auditing standards.(yellow book standards)

Question 4

What’s the fund structure for governments?

Answer 4

11 fund types grouped into 3 generic categories: governmental funds; proprietary funds; fiduciary funds. They have different accountability objectives and use different accounting principles.

Question 5

What external reporting is required for governments accounting?

Answer 5

fund based and government-wide and their supplementary info. Major fund F/S and aggregate of nonmajor funds, also a reconciliation of fund F/S to government-wide F/S.

Question 6

Which fund types are included in governmental funds(modified accrual, current only)?

Answer 6

GRaSPP- General fund, special Revenue fund, and debt Service fund, capital Projects fund, Permanent fund.

Question 7

Which fund types are included in proprietary funds(full accrual, economic resources measurement)?

Answer 7

Business type activities. SE- internal Service fund (building maintnance), Enterprise fund(utilities system, over 50% self-supported).

Question 8

Which fund types are included in fiduciary funds(full accrual, economic resources measurement)?

Answer 8

PAPI-Pension trust funds, Agency trust funds, Private purpose trust funds, Investment trust funds.

Question 9

When is revenue rec’d under modified accrual (GRaSPP)? e.g. property tax due, property tax paid in advance by taxpayers.

Answer 9

When measurable and available. Available under modified accrual means collectible within the current period or soon enough thereafter (60 days after year end).
property tax due is revenue when billed. property tax in advance is not revenue until earned.

Question 10

What are the 5 degrees of constraints associated with GRaSPP fund equity?

Answer 10

Nonspendable(prepaid expense, inventory), Restricted (by external authority), Commited (formally encumbered), Assigned(not formal), Unassigned. (NU CAR)

Question 11

How are budgeted amounts recorded under governmental modified accrual basis? beginning and ending of year.

Answer 11

In the beginning of year, difference between estimated revenues(tax etc) and appopriation(approved spending) goes into “budgetary control” (fund balance, equity, Cr positive, Dr negative).
Dr estimated revenue control/ other financing source. Cr appropriation control/ estimated other financing use. (because it’s estimated, record on the opposite side of actual accounts)
At the end of year, all buget accounts reversed and closed(same amount, disregard actual actitivies).

Question 12

How are capital purchases(non-current assets) and debt principal payments rec’d under governmental fund (GRaSPP) F/S?

Answer 12

Current year expenditures-capital outlay or expenditure-debt service.

Question 13

When is expenditure rec’d under modified accrual (GRaSPP)? Cash paid or payable rec’d?

Answer 13

When voucher payable is rec’d or debt payment is due, same as accrual accounting.

Question 14

How are current asset purchases rec’d under governmental fund (GRaSPP) F/S?

Answer 14

2 methods. Purchse (expenditure) or Consumption (set up an asset) method. During the year, Dr expenditure Cr asset (inventory) under C method. At year end, if not all consumed, reverse the unconfumed part by Dr asset(inventory), Cr non-spendable fund balance-inventory, under P method.

Question 15

J/E for moving fund $ to other funds under GRaSPP? Receiving fund?

Answer 15

Dr other financing uses, Cr cash.

Dr Cash, Cr other financing sources.(same as receiving long-term debt (bond) proceeds)

Question 16

For governmental funds (GRaSPP), where does other financing sources/ uses show in th F/S? B/S?

Answer 16

Statement of revenues,expenditures, and changes in fund balance (operating statement)
Not balance sheet. B/S shows current asset, current liability and fund balances, that’s all.

Question 17

J/E to record encumbrances under governmental funds? When to use encumbrances?

Answer 17

For spending control for purchases per government policy, not for routine(recurring) expenditures.
At purchase order: Dr encumbrances, Cr Budgetary control. At actual invoice(voucher): reverse encumbrance and then record expenditure: Dr expenditure, Cr cash/voucher payable. If still open at year end, reverse it to fund balance-committed or assigned (B/S). In the following year at invoice, Dr expenditure-PRIOR year, Cr cash.

Question 18

Net position vs fund balance?

Answer 18

Full acruals have “net position” on balance sheet. Fund balance is for modified acrual method (governmental funds) only.

Question 19

How are derivative instruments valued by government accounting?

Answer 19

Investment- at fair value, changes in value is investment revenue.
Hedging activity- at fair value, changes in value is deferred outflows or deferred inflows of resources.

Question 20

How to record refinance/refunding of debt when there is “gain” or “loss” by government?

Answer 20

The difference is rec’d as deferred outflow or inflow, and then amortized to/offset future interest expense over the shorter of old or new debt life.

Question 21

How to treat debt issue cost by government? expense or capitalize?

Answer 21

Expensed. Diff from FASB.

Question 22

How to account for SIR AGE items of government’s pension plans?

Answer 22

Very similar to GAAP rules.

SIR items are expensed. unearned portion of AGE items are in Deferred inflows/outflows, just like OCI under GAAP.

Question 23

What category is a state grant fund for operating a youth center?

Answer 23

special Revenue fund (legally(government or grantor) restricted or commited and expendable) of GRaSPP. All expendable trust activities should be special revenue fund instead of fiduciary funds.

Question 24

When grants are received, is it a special revenue fund or agency trust fund?

Answer 24

Special revenue fund if the recipient govenment monitors and/or determines eligibility.
Capital grants go to capital project fund.

Question 25

Which GRaSPP funds don’t record Encumbrances?

Answer 25

Debt service fund and permanent fund.

Question 26

What types of debt does debt service fund “serve”?

Answer 26

GRaSPP funds debt only. SEPAPI carry and pay their own debts.

Question 27

How to rec assets from interfund transfer and investment income by debt service fund?

Answer 27

Interfund transfer- Cr interfund transfer (other financing sources). Investment income- Cr revenue.

Question 28

What are the items in the liability section of a debt service fund B/S?

Answer 28

currently due debts only since it’s GRaSPP fund.

Question 29

When to rec revenue when receiving capital grants?

Answer 29

Unrestricted-immediatly.

Restricted-deferred until spent(thus earned), applies to all restricted grant(full accrul and modified).

Question 30

How to close a GRaSPP fund at year end?

Answer 30

Reverse Budget and Encumrances(if any) for same amount. Reverse Activities for actual amount.

Question 31

Are all resources in a internal service fund expendable?

Answer 31

NO. Full accruals are like private companies. Capital should be maintained (hence proprietary).

Question 32

What are the categories under Net position for SEPAPI funds?

Answer 32

Net position is the equity of fund-Restricted(by external), Unrestricted, Net investment in capital assets.

Question 33

Are full sets of F/S required for SEPAPI funds?

Answer 33

SE(Propreitary)-yes.

PAPI(Fiduciarary)- statement of cash flow not required.

Question 34

Who can be the recipient of a government “agency trust fund”?

Answer 34

Another fund, individual or firm, other government. so anybody.

Question 35

Which govenment fund does not record expense (expenditure) or revenue?

Answer 35

agency trust fund. No net position no income statement no cash flow. Just a mailman.

Question 36

How are capital G/L rec’d for private purpose trust fund?

Answer 36

adjustment to fund principal not to income.

Question 37

Where is escheat property reported in governmental accounting?

Answer 37

Private purpose trust fund.

Question 38

For GRaSPP funds, how to record proceeds from sale of capital assets?

Answer 38

Not revenue. Other financing sources. GRaSPP revenue can only be derived tax(from exchanged transactions, sales,income) and some non-exchange revenues.

Question 39

If a general fund makes payment to a pension trust fund, is it expenditure or other financing uses (interfund transfer)?

Answer 39

Expenditure.