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FAR > F8 - NFP Accounting and Governmental Accounting: Part 1 > Flashcards

F8 - NFP Accounting and Governmental Accounting: Part 1 Flashcards

1
Q

What does FASB say about NFP accounting?

A
  1. External FS must focus on basic info for the org as a whole.
  2. Fund accounting is not used for external reporting, but can be used for internal purposes.
  3. FASB only mandates private NFPs, for governmental NFPs there is GASB.
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2
Q

What happens when restrictions are met in the same period that the contributions were received?

A

Contributions may be recorded as contribution revenue wo donor restriction, as long as it is dlsclosed and consistently done.

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3
Q

How do you classify restricted contributions in the statement of Cash Flows?

A

Under Financing Activities.

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4
Q

What is the criteria that makes the NFP to not need to recognize contributions of art pieces?

A
  1. Items are held for exhibition/research.
  2. Items are protected, preserved.
  3. Items are subject to policy that says proceeds must be used to replace those items with other art pieces. Kinda like REG involuntary conversions.
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5
Q

What are things you NEVER NET on the Statement of Activities (P&L)?

A

Major fundraising events that represent major sources of revenue.

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6
Q

How do you record a pledge receivable?

A

As support with donor restrictions @ PV. It is considered restricted because it has a time restriction (I will get it in the future, not now).

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7
Q

How do you record donated services?

A

Donated Service Expense
Contribution Revenue
So it is part of income, and part of expenses (net to zero).

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8
Q

How do you record contributions that are above FV of things received?

A

You net the contribution… Just like REG charitable contributions, when you buy a dinner for $500 but they give you a McDonalds burger meal, your net donation is $490.

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9
Q

What is the criteria to record donated/contributed services?

A 
SOME! 
S = Specialized skill
O = Otherwise needed and 
M = Measured
E = Easily.
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10
Q

How do you record donated/contributed property?

A

As support in the Statement of Activities (P&L) and Assets in the Statement of Financial position (BS). Everything is reported @ FV.

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11
Q

What is a refundable advance?

A

A liability account that records donations with conditional promises. Ex: I will give you $1M if you raise another $1M.

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12
Q

What is revenue without donor restrictions for educational institutions?

A

Assessed Tuition
(-) Canceled classes
(=) Gross Revenue!

NOTE!!!! Scholarship, waivers, stipends are EXPENSES! and not netted against revenue!

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13
Q

How do you record donated/contributed stocks when received?

A

@ FV on the date of donation.

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14
Q

What is a financially interrelated NFP organization?

A

Must share two characteristics:
1. One must be able to influence the operating and financial decisions of the other.
AND
2. Have an ongoing economic interest in the net assets of the other.

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15
Q

How do you record marketable equity/debt securites for YE?

A

@ Market Value (quoted prices) at the date of the BS date.

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16
Q

What does dividends received do to net assets?

A

It increases net assets.

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17
Q

How do you record funds received that were initially pledged to another NFP?

A

As an increase in assets (because you get the cash) and increase in liabilities (because you owe it to the ultimate NFP the money was pledged to).

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18
Q

When NFPs are financially interrelated, how do you account for the receipts?

A

The beneficiary records an income for the receipts (credit) and an increase in the interest in the other NFP (debit).

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19
Q

When is a donation considered a liability and not a contribution?

A

When there is no variance power to the donation. If the donor gives that money for A SPECIFIC PURPOSE, there is no variance power.

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20
Q

What is fund accounting useful for?

A

To monitor compliance (legal restrictions) and spending (financial control).

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21
Q

How many funds does a government need to have?

A

As many as long as they comply with legal requirements and sound financial admin.

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22
Q

What is the paramount objective of financial reporting by governments?

A

Accountability.

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23
Q

What are the characteristics of financial reporting by governments?

A
  1. Comparability.
  2. Consistency.
  3. Understandability.
  4. Reliability.
  5. Relevance.
  6. Timeliness.
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24
Q

Who are the 3 primary users of government FS?

A
  1. Citizens of the jurisdictions.
  2. Legislators.
  3. Investors and creditors.
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25
Q

What is does intraperiod equity mean?

A
  1. Balanced budgets = government lives with what they earn.

2. Assess if my grandchildren will have to pay taxes for what the government spends today.

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26
Q

What is residual equity?

A

NOT THE ANSWER! This is an obsolete term.

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27
Q

What are the governmental accounting themes?

A
  1. Fund structure.
  2. External reporting.
  3. Fund accounting.
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28
Q

What are the 3 generic categories for fund types?

A
  1. Governmental funds.
  2. Proprietary funds.
  3. Fiduciary funds.
29
Q

What is the primary emphasis in accounting for governmental funds?

A

The primary emphasis is the flow (materile reggaetonnnnnnnn) of currrent financial resources (no long term, no fixed assets).
Flow materile reggaeton = Sources, uses and balances.

30
Q

What is the focus for each of the 3 generic categories of fund types?

A
  • Governmental funds = Measurement focus and Mod Accrual basis of acct.
  • Proprietary funds & Fiduciary funds = Economic resources focus (income) and accrual basis of acct.
31
Q

What are the funds that are part of the Governmental fund?

A

GRaSPP = GPSDC

  1. General Fund.
  2. Permanent Funds.
  3. Special Revenue Fund.
  4. Debt Service Funds.
  5. Capital Projects Funds.
32
Q

What are the funds that are part of the Proprietary funds?

A

SE = IRS-E

  1. Internal Service Funds = charge other depts for services provided.
  2. Enterprise Funds = To build the big stuff that govts provide. Ex. Sewer, airport, etc. Treat like a customer/commercial!
33
Q

What are the funds that are part of the Fiduciary funds?

A

CIPPOE

  1. Custodial Funds.
  2. Investment Trust Funds.
  3. Private Purpose Trust Funds.
  4. Pension and Other EE Benefits Trust Funds.
34
Q

What are the basic bitches of modified accrual basis?

A
  1. Revenue is recognized when measurable and available to pay for expenses of the period. (Everything is CURRENT!!!)
  2. Expenses are recorded when the liability is incurred.
35
Q

What is the basic bitch of permanent funds?

A

Accounts for resources whose Expenses are limited to earnings (interest income, and not principal).

36
Q

What is the basic bitch of Special Revenue?

A

Accounts for resources whose Expenses are fully expendable.

37
Q

How do you record the purchase of fixed assets in the general fund?

A

As an expenditure (expense)!
Expenditures
Vouchers Payable

38
Q

What are encumbrances?

A

Resources committed future expenditures (purchase orders). They are NOT recorded when goods and services are received but recorded when they are designated.

39
Q

What are appropriations?

A

Total authorized expenditures for the current period, and they are recorded when the budget is integrated to the accounting system.
These are estimates, but not actual expenditures.

40
Q

Why do we have to say expenditure?

A

Because Expenses is for commercial accounting and the government has to be their own self….ugh!
So NOTE! All JEs/accounts have to have the word EXPENDITURE and not EXPENSE!

41
Q

What is the JE to record the budget at BOY?

A

Estimated Revenue Control
Budgetary Control (Negative)*
Appropriations Control
Budgetary Control (Positive)*

This is reversed at EOY.

42
Q

What is the formula for Budgetary Control?

A

Estimated Revenues
(-) Appropriations Control
(=) Budgetary Control (debit)/credit

43
Q

When do you recognize revenues?

A

When revenue is measurable and available, namely collected during the year and shortly thereafter (60 days after year end).

44
Q

How do you record expenditures that go over one period (insurance)?

A

Must be allocated or accounting for as expenditures of the period of acquisition?

45
Q

What methods can be used to account for the purchase of supplies, prepaid expenses, and inventory of governmental funds?

A
  1. Purchase Method.

2. Consumption Method.

46
Q

What is the purchase method?

A 
Expenditure 
            Vouchers Payable
@EOY
Inventory 
            Nonspendable Fund Balance - Inventory
47
Q

What is the consumption method?

A 
Inventory 
            Vouchers Payable
@ time of consumption
Expenditure 
            Inventory
48
Q

What is the fact pattern to record tax levied revenue in government?

A

First you do the budget entry where the estimated revenues are debited.
Then, as taxes are levied, you credit the revenues.

49
Q

What is a key word to know they’re referring to Modified Accrual Basis of Accounting?

A

Statement of revenues, expenditures, and changes in fund balances.

50
Q

What is classified as expenditures on the Modified Accrual Basis of Accounting?

A

Include all expenses!

  • PP&E.
  • LT Debt Principal + Interest.
  • Operating expenses.
51
Q

What is the JE to record a property tax levy?

A

Property Tax Receivable
Property Tax Revenue
Allowance for uncollectible Prop tax - Current

52
Q

What are the types of leases that the government has?

A
  1. ST Leases = < 1yr
  2. Contracts that transfer ownership = accounted for as financed purchase for the lessee, and a sale by the lessor.
  3. Other leases not 1, not 2.
53
Q

What are the JEs for Lessees?

A

@ Beg of Lease
Expenditure - Capital Outlay
Other Financing Sources

@Payment of Lease
Expenditure - Principal
Expenditure - Interest
Cash

54
Q

What are the JEs for Lessors?

A

@ Beg of Lease: Record Interest and Lease Receivable
Interest Receivable (Lease * Int %)
Interest Revenue

Lease Receivable
Revenue
Deferred Inflows of Resources

@Payment of Lease
Cash
Lease Receivable
Interest Receivable

55
Q

What are non-exchange transactions?

A 
Main revenue for goverments. 
- Sales Tax (Derived).
- Income Tax (Derived).
- Prop Tax (Imposed).
- Fines (Imposed).
Ex: I pay taxes and receive nothing in return other than saying I don't owe.
56
Q

What are exchange transactions?

A

Transactions where I receive something back with the same value. Ex: When I buy tape at the PO.

57
Q

How do you record revenues from grants received?

A

Grant revenues are recognized as revenues in the year in which the money is used.

58
Q

What are unasigned fund balances?

A

Unassigned fund balances are what you carryforward to the next year as appropriations.

59
Q

What is the rule for unasigned fund balances?

A

If there are no encumbrances, and expenditures < appropriations, then amounts would be released to unassigned fund balance, making it increase.

60
Q

What are revenues on GRaSPP = GPSDC?

A
  • Taxes.

- Fines and penalties.

61
Q

What are Other Financing Sources on GRaSPP = GPSDC?

A
  • Debt proceeds.

- Interfund transfers.

62
Q

What are the classifications of Govt Expenditures?

A 
FOACO!
F = Function or Program 
O = Organizational Unit
A = Activity
C = Character
O = Object Classes
63
Q

What expenses are included in function or program?

A 
Function = Public safety, highways, education, health. welfare. 
Program = Programs for the elderly, drug addiction, and education.
64
Q

What expenses are included in Organizational Unit?

A

Police departments, fire departments.

65
Q

What expenses are included in Activities?

A

Events, task, or a unit of work.

66
Q

What expenses are included in Character?

A

Refers to fiscal period.

Ex: Capital Expenditures, Capital Outlay, Debt Service, Intergovernmental.

67
Q

What expenses are included in Object?

A

Personnel Services, supplies, and Principal & Interest for debt services.

68
Q

What is the nature of the budgetary control accounts?

A

They act like an equity account. Increases with a credit, decreases with a debit.

FAR (12 decks)

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