F8: Modified Accrual Accounting Flashcards
“GRaSPP” means what?
- G-General fund
- R- special Revenue fund
- and
- S-debt Service fund
- P-capital Projects fund
- P-Permanent fund
Major difference between governmental fund accounting and commercial GAAP
- There is no profit motive in governmental fund, thus there is no income determination
- Instead, “BAE” is used
“BAE”
B- Budgetary accounting
A- Activity accounting
E- Encumbrance accounting
Budgetary accounting helps what?
Control spending
Activity accounting emphasizes what?
Flow of current financial resources
Encumbrance accounting helps what?
Record purchase orders
Budgetary accounting may use what type of basis of accounting?
Cash basis or modified accrual basis
3 Sources of Governmental Resources: Revenues
1- Taxes- income and sales
2- Taxes- property and real estate
3- Fines and penalties
2 Sources of Governmental Resources: Other Financing Sources
1- Debt proceeds (bonds and notes)
2- Interfund transfers
Budgetary accounts are posted how many times during the year?
Twice, unless a supplemental appropriation is made
The difference between estimated revenues and appropriations goes to what account?
“Budgetary Control”
The journal that records the budgeted amounts for estimated revenue and appropriations is posted on what side of the T-account?
The opposite side compared to actual amounts
At the end of the year, the budget is:
- Reversed and closed
- Journal at end is always same amount as the original journal entry
Emphasis in the “activity” section is on what?
The flow of current financial resources
What method of accounting is not used in the “activity” section?
Matching principle
Governmental fund revenues are recorded when?
When measurable and available (no to exceed 60 days after year-end)
What are some transactions classified as derived tax revenues?
- Commercial sales (sales tax)
- Taxpayer income (income taxes)
What are some transactions classified as imposed non-exchange revenues?
- Fines
- Property Taxes
What is a type of transaction that would be classified as a voluntary non-exchange transaction?
-Grants
In government fund types, these 3 items are treated as current year expenditures
1- Capital purchases
2- debt services payments
3- operating expenditures
Principal payment on debt is considered what?
A debt service expenditure
Police cars and the officers’ salaries are both treated as what?
Expenditures
2 Alternatives for Current Asset Expenditure Recognition
1- Purchase Method
2- Consumption Method
How to use Purchase Method
- Expenditure assets when purchased
- Reverse (setup as a current asset) for items not used and still on hand
How to use Consumption Method
- Setup as a current asset when purchased
- Expenditure items as consumed (per periodic physical count)
How are transfers between funds accounted for?
Not an expenditure, but represent the use of financial resources, so account “Other financing uses” account is used
5 Further Classifications of Government Expenditures
1- function or program (example: public safety)
2- organizational unit (example: police and fire department)
3- activity (example: drug or highway safety)
4- character (current exp, capital outlays, debt service, or intergovernmental)
5- object classes (chart of accounts)
How are fixed assets accounted for in government funds?
As an expenditure (never capitalized)
Why are fixed assets accounted for that way in government funds?
Because they are not expected to contribute to the generation of revenue
How are long-term debts accounted for in government funds?
- As “other financing resources”
- Do not carry or record the long-term debt
How is the repayment of long-term debts recorded in government funds?
As expenditures of both principal and interest
Encumbrances definition
Commitment of funds for purchase orders
Why are encumbrances used in government funds?
To prevent overspending of appropriations
