F8: Modified Accrual Accounting Flashcards
When are governmental fund revenues recorded?
When measurable and available - this means the collection period does not exceed 60 days after fiscal year end.
Governmental fund revenues often arise from non-xc transactions. What is a non-xc transaction and the types?
Non xc transactions are those in which government gives or receives value without directly giving or receiving equal value in return. (wheres exchange transactions are generally found in commercial accounting). The types:
1) Derived tax revenues - represent taxes imposed on or derived from exchange transactions, such as commercial sales (sales taxes), taxpayer income (income taxes), etc
2) Imposed non-xc revenues - represent taxes on non-xc transactions (fines) or wealth (property taxes)
3) government-mandated non-xc transactions - higher level of gov’t provides funds and mandates certain activities by another level of government (ex: county) such as environmental cleanup
4) voluntary non-xc transactions - government receives resources and does not provide equal value (ex: grant agreements)
What are encumbrances?
Open purchase orders represent an encumbrance or commitment of the available appropriations of a government.
DR Encumbrances
CR Budgetary Control
What is the JE when property taxes are recorded (levied)?
DR Property Taxes Receivable
CR Allowance for uncollectable property taxes
CR Revenues
What is the JE when encumbrance account is decreased?
DR Budgetary Control
CR Encumbrances
What is the JE when appropriations are recorded?
DR Budgetary Control
CR Appropriations
What is the JE when budget is recorded?
DR Estimated Revenues
CR Appropriations
CR Budgetary Control
What are the different classification of government expenditures?
1) Function - activities aimed at accomplishing a major service or regulatory responsibility (ex: public safety, highway, education)
2) Program - activities, operations, or organization units that are directed to the attainment of specific purposes or objectives (drug addiction, elderly programs)
3) Organizational Unit - may be responsible for carrying out different programs. ex: police and fire departments
4) Activity - provides data for calculating expenditures per unit of activity. Activity is a specific and distinguishable line of work performed by organizational unit.
5) Character - determining the basis of fiscal period the expenditure are to benefit : Current expenditures (benefit current period), capital outlays (current and future), debt service (prior, current, future) , intergovernmental (transfers)
6) Object classes - chart of accounts. classify according to types of items purchased or services obtained (ex: supplies, principal and interest payments, debt service)
What are expenditures?
Expenditures are decreases in net financial resources other than through interfund transfers. General fixed assets purchased with general fund resources should be recorded as expenditures in the general fund.
DR Expenditures
CR Vouchers Payable
how should expenditures of a governmental unit for insurance extending over more than one accounting period be allocated?
May be allocated between or among accounting periods or may be accounted for as expenditures of the period of acquisition. Non spendable current resources such as inventories or prepaids may be recorded using either the consumption or the purchases method.
What are sources of governmental resources?
1) REVENUE a - income and sales taxes b - property and real estate taxes c - fines and penalties 2) OTHER FINANCING SOURCES a - debt proceeds (bonds and notes) b - interfund transfers
When is an encumbrance account debited?
When a purchase order is approved.
DR Encumbrances
CR Budgetary Control
When is a voucher payable recorded?
When goods are received.
DR Expenditures
CR Vouchers Payable
DR Budgetary Control
CR Encumbrances
The encumbrances entry is reversed.
What is the JE when taxpayers are billed for property taxes?
DR Property Taxes Receivable
CR Revenues
When is the estimated revenues control account balance eliminated?
When the budgetary accounts are closed as the estimated revenues controls account is CREATED when the budget is recorded
Encumbrances outstanding at YE in a state’s general fund would most likely be represented as ?
As a fund balance commitment in the general fund. Encumbrances are commitments or assignments of fund balance representing the amount of unperformed contracts for G&S. they do not represent expenditures or liabilities at YE.
When is revenue from property taxes recognized?
When measurable and available.
How are equipment purchases recorded?
equipment purchases would be classified as a capital outlay expenditure in the governmental fund F/S. general fund is a government fund that uses the current financial resources measurement focus and the modified accrual basis of accounting. under current financial resources measurement focus , all FA acquisitions are recorded as expenditures
Do governmental funds record depreciation expense?
no because depreciation expense does not reflect the use of financial resources (governmental funds is the flow of financial resources)
for governmental fund accounting, what are the three BAE accounting issues?
B = budgetary accounting A = activity emphasizes flow of current financial resources E = encumbrances used to record purchase orders
book in the beg, close the same amount at the end.
what is budgetary accounting used for?
control EXPENDITURES and to account for the levy of taxes sufficient to cover estimated expenditures.
balanced budget support inter period equity as an objective of public administration and fiscal accountability
budgets anticipate revenues and appropriates them for CURRENT operations.
budgetary accounts are ESTIMATED accounts.
how many times are budgetary accounts posted during the year?
2 times - beg and end of the year.
what is the JE in the beg of the year to record budgeted amounts for estimated revenue and approved expenditures (appropriations)?
the difference between estimated revenues and appropriations is called BUDGETARY CONTROL. – like the “equity” account.
DR estimated revenue control
DR estimated other financing sources (transfers from other funds)
DR budgetary control (negative/deficit)
CR appropriations controls (approved spending)
CR estimated other financing uses (transfers TO other funds)
CR budgetary control (positive/surplus)
what is the JE at the end of the year to reverse and close out the budget?
JE to reverse the budget is always for the same dollar amount as original JE.
DR appropriations
DR estimated other financing sources (transfers TO other funds)
DR budgetary control (positive)
CR estimated revenue control
CR estimated other financing sources (transfers from other funds)
CR budgetary control (negative)
