F8: Proprietary Funds

Question 1

What are the 6 funds that have full accrual basis of accounting ?

Answer 1

SE (proprietary) PAPI (fiduciary)

1) Internal service
2) Enterprise
3) Pension Trust
4) Agency trust
5) Private purpose trust
6) investment trust

Question 2

what is the purpose of internal service fund?

Answer 2

internal service fund to finance and account for services and supplies provided exclusively to other departments within a government unit or to other governmental units, typically on a cost -reimbursement basis

(i.e. the other fund/department is customer, not citizen)

Question 3

what are revenue sources for internal service fund?

Answer 3

1) restricted grant revenues - recognized as revenues in the year monies are spent
2) operating revenues - recognized when earned
3) nonoperating revenues - interest earnings

Question 4

what are unique accounting issues with internal service fund?

Answer 4

1) accrual accounting - records LT liab. and FA; depreciation is also recorded
2) BAE - BAE not used by SE PAPI
3) net position - classifies equity in three categories (RUN) - restricted, unrestricted, net investment in capital assets

Question 5

the assets and liabilities account balances for internal service fund are not eliminated should be reported in the government wide statement of net position as?

Answer 5

governmental activities.

internal service funds are frequently combined with governmental funds for purposes of displaying governmental activities in the government-wide F/S since they are often set up primarily to serve the govt funds.

Question 6

what is purpose of enterprise fund?

Answer 6

used to account for operations that are financed and operated in a manner similar to private business enterprise. activities are required to be reported as enterprise funds if:

1) activity financed with debt that is secured solely by a pledge of net revenue from fees and charges
2) laws and reg require that cost of providing services be recovered through fees
3) pricing policies of activity establish fees and charges designed to recover its costs

ex: PUBLIC utilities, public hospitals, transportation

Question 7

what are revenue sources of enterprise funds?

Answer 7

1) operating revenues (water and sewer billings, greens fees)
2) nonoperating revenues - shared revenues (ex: gasoline, sales taxes) and shared on a predetermined basis with another government, interest and investment income

Question 8

what are the unique accounting issues with enterprise funds?

Answer 8

municipal landfills
> total cost:
- cost of equipment expected to be installed near or after date that MSWLF stops accepting solid waste and during post closure period
- cost of gas monitoring
- cost of final cover (capping)
- this estimate should be adjusted annually

Question 9

what financial statements are required for proprietary funds?

Answer 9

1) statement of net position (all assets, all liabilities, net position (RUN))
2) statement of revenues, expenses, and changes in fund net position
3) statement of cash flows (operating, investing, non-capital financing)

Question 10

what is the order of cash flow statement for proprietary funds?

Answer 10

1) cash flow from operating activities
2) cash flows from noncapital financing activities
3) cash flows from capital and related financing activities
4) cash flows from investing activities

5) reconcile of operating income (loss) to net cash provided (used) by operating activities
* note how CF from financing and investing activities order is switched from the norm

Question 11

what items are included in CF from operating activities?

Answer 11

1) receipts from customers
2) payments to suppliers
3) payments to employees
4) internal activity - net payments to (from) other funds

Question 12

what items included in CF from non-capital financing activities?

Answer 12

1) operating subsidies and transfers to other funds

Question 13

what items included in CF from capital and related financing activities?

Answer 13

1) proceeds from capital debt
2) capital contributions
3) purchases of capital assets
4) principal paid on capital debt
5) interest paid on capital debt

Question 14

what items included in CF from investing activities?

Answer 14

1) purchase of investments

2) interest and divided

Question 15

how are inter fund transfers recorded in fund F/S for proprietary funds?

Answer 15

recorded as inter fund transfers. although these transfers are not recorded as revenues or expenditures, they DO affect the funds’ expendable resources, and therefore, affect results of operations of the fund