F8: Modified Accrual Accounting

Question 1

“GRaSPP” means what?

Answer 1

• G-General fund
• R- special Revenue fund
• and
• S-debt Service fund
• P-capital Projects fund
• P-Permanent fund

Question 2

Major difference between governmental fund accounting and commercial GAAP

Answer 2

• There is no profit motive in governmental fund, thus there is no income determination
• Instead, “BAE” is used

Question 3

“BAE”

Answer 3

B- Budgetary accounting
A- Activity accounting
E- Encumbrance accounting

Question 4

Budgetary accounting helps what?

Answer 4

Control spending

Question 5

Activity accounting emphasizes what?

Answer 5

Flow of current financial resources

Question 6

Encumbrance accounting helps what?

Answer 6

Record purchase orders

Question 7

Budgetary accounting may use what type of basis of accounting?

Answer 7

Cash basis or modified accrual basis

Question 8

3 Sources of Governmental Resources: Revenues

Answer 8

1- Taxes- income and sales
2- Taxes- property and real estate
3- Fines and penalties

Question 9

2 Sources of Governmental Resources: Other Financing Sources

Answer 9

1- Debt proceeds (bonds and notes)

2- Interfund transfers

Question 10

Budgetary accounts are posted how many times during the year?

Answer 10

Twice, unless a supplemental appropriation is made

Question 11

The difference between estimated revenues and appropriations goes to what account?

Answer 11

“Budgetary Control”

Question 12

The journal that records the budgeted amounts for estimated revenue and appropriations is posted on what side of the T-account?

Answer 12

The opposite side compared to actual amounts

Question 13

At the end of the year, the budget is:

Answer 13

• Reversed and closed

- Journal at end is always same amount as the original journal entry

Question 14

Emphasis in the “activity” section is on what?

Answer 14

The flow of current financial resources

Question 15

What method of accounting is not used in the “activity” section?

Answer 15

Matching principle

Question 16

Governmental fund revenues are recorded when?

Answer 16

When measurable and available (no to exceed 60 days after year-end)

Question 17

What are some transactions classified as derived tax revenues?

Answer 17

• Commercial sales (sales tax)

- Taxpayer income (income taxes)

Question 18

What are some transactions classified as imposed non-exchange revenues?

Answer 18

• Fines

- Property Taxes

Question 19

What is a type of transaction that would be classified as a voluntary non-exchange transaction?

Answer 19

-Grants

Question 20

In government fund types, these 3 items are treated as current year expenditures

Answer 20

1- Capital purchases
2- debt services payments
3- operating expenditures

Question 21

Principal payment on debt is considered what?

Answer 21

A debt service expenditure

Question 22

Police cars and the officers’ salaries are both treated as what?

Answer 22

Expenditures

Question 23

2 Alternatives for Current Asset Expenditure Recognition

Answer 23

1- Purchase Method

2- Consumption Method

Question 24

How to use Purchase Method

Answer 24

• Expenditure assets when purchased

- Reverse (setup as a current asset) for items not used and still on hand

Question 25

How to use Consumption Method

Answer 25

• Setup as a current asset when purchased

- Expenditure items as consumed (per periodic physical count)

Question 26

How are transfers between funds accounted for?

Answer 26

Not an expenditure, but represent the use of financial resources, so account “Other financing uses” account is used

Question 27

5 Further Classifications of Government Expenditures

Answer 27

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)

Question 28

How are fixed assets accounted for in government funds?

Answer 28

As an expenditure (never capitalized)

Question 29

Why are fixed assets accounted for that way in government funds?

Answer 29

Because they are not expected to contribute to the generation of revenue

Question 30

How are long-term debts accounted for in government funds?

Answer 30

• As “other financing resources”

- Do not carry or record the long-term debt

Question 31

How is the repayment of long-term debts recorded in government funds?

Answer 31

As expenditures of both principal and interest

Question 32

Encumbrances definition

Answer 32

Commitment of funds for purchase orders

Question 33

Why are encumbrances used in government funds?

Answer 33

To prevent overspending of appropriations