F9 Flashcards
Interperiod equity
Gov accounting
Balancing the budget
Characteristics of financial reporting for gov
Understandability Reliability Relevant Timeliness Consistency Comparability
Fund categories for gov
Government
Proprietary
Fiduciary funds
Financial and legal control lead to what for gov accounting
Fund accounting
Gov Financial reporting objectives may not fully address…
Budgets and other special purpose reports
Gov financial reporting objectives pertain to
General purpose external financial reporting
Gov summary results of the city’s performance relative to budget for previous fiscal year can be found where?
Required supplementary information
Gov city’s compliance with laws, rules, and regulations can be found where in the financials?
Budgets and other special purpose reports
Fund financial statements are displayed why?
To report additional and detailed information about the primary gov in compliance with GASB #34
What is the paramount objective of gov accounting?
Accountability
What is the most difficult to report characteristic of information for a gov entity?
Relevance - just a lot of info and a wide variety of users
Fund balance on b/s for gov =
Current assets - current liabilities
What is the biggest difference between government fund accounting and fiduciary / proprietary fund accounting? (BS)
Government fund accounting has NO fixed assets and NO non-current liabilities
No non-current at all
Modified Accrual basis balance sheet difference
Current financial resources
No non-current (no fixed assets / no long term debt)
Government funds
GRaSPP
General Fund special Revenue funds debt Service funds capital Project funds Permanent funds
Proprietary funds
SE
Internal Service Funds Enterprise funds (external service)
Fiduciary funds
PAPI
Pension trust funds
Agency trust funds
Private purpose trust funds
Investment trust funds
Measurement focus of gov funds
Current financial resources (primary focus) and financial position
Primary emphasis in accounting and reporting for governmental funds is
Source, use, and balance of current financial resources
Gift of a library endowment fund (gov) would be what kind of fund?
Permanent fund
Modified accrual basis (gov) - revenues are recognized when?
They become available and measurable
Permanent Fund
Endowment where principle can’t be touched
General fund
Ordinary ops
Special revenue fund
Special tax project
Debt service fund
Debt payments
Capital projects funds
Construction of major capital assets
Private purpose fund
Benefit of specific, private individuals vs the public at large, or other governments
BAE
Budget
Activity
Encumbrance
BAE - BAE accounting
BAE are temporary accounts (like IS accounts), closed at the end of the year to the BS
What is the measurement focus of modified Accrual method?
Current financial resources measurement focus
What is the measurement focus of full Accrual method?
Economic resources measurement focus
Is the matching principle used in modified accrual?
No, - because there is no profit motive, so there is no income statement to measure profit, and therefore no matching principle
Encumbrance
Record purchase orders (like AP outstanding except you also restrict cash to pay off the invoice)
Appropriations
Appropriate things to spend revenues on
Revenue sources of government resources
Taxes - income and sales Taxes - property and real estate Fines and penalties Licenses and permits Intergovernmental revenue
Other financing sources of government resources
Debt proceeds
Interfund transfers
Gov budget entry @ year beg.
Estimated Revenue Control
Appropriations control
Plug:
Budgetary control (if deficit)
Budgetary control (if surplus)
Deficit = don't forecast enough revenues to cover expenses Surplus = forecast more revenues than needed to cover expenses
Appropriations control
What is it and what balance (DR / CR)?
Approved spending budget for the year
Credit balance
How are control (budget) account different from activity accounts?
Their natural balances are on the opposite side
Revenue control (budgeted revenue) has a debit balance and appropriations control (approved spending) has a credit balance
What does the account “budget control” measure in governmental accounting?
Whether the government has enough revenues to cover approved spending (surplus if more, deficit if not enough)
What is non-exchange revenue?
Entity receives the money without directly receiving / giving equal value in return (police / fire / etc. you pay for it but enjoy the benefits indirectly for the most part)
Types of non-exchange revenue
Derived tax revenues
Imposed non-exchange revenues
Derived tax revenues
Sales tax / income tax
Recognize revenue when received
Imposed non/exchange revenues
Real estate taxes
Fines and penalties
Recognize revenue when BILLED
Measurable and available criteria for recognizing revenue for gov accounting
Collection period won’t exceed 60 days after fiscal YE
Time requirement for gov accounting
Gov must spend the money in a reasonable time period
When to recognize expenditures for governmental funds
Same rules as accrual accounting
Expenses in gov accounting are called
Expenditures
Payables in gov accounting are called
Voucher payable
When are restricted grants earned revenue?
When spent
Supplies / inventory accounting for gov fund accounting
Purchase method and consumption method
For supplies / inventory
Purchase method (gov fund accounting)
Record all as expenditures and at YE reverse for amount left in inventory
Consumption method (gov fund accounting)
Like commercial inventory accounting, expenditure as used
Year end JE for purchase method inventory to record inventory left over (gov fund accounting)
Supplies inventory
Nonspendable fund balance (inventory)
Classification hierarchy of gov fund expenditures
- Function or program (public safety)
- Org unit (police / fire)
- Activity (drug enforcement / highway patrol)
- Character
- Object
Character of expenditures (gov fund accounting)
- Current expenditures (period expense)
- Capital outlays (FA)
- Debt transfers (pay off LTD debt)
- Other transfers (intergovernmental / interfund transfers)
JE to record police car purchase for gov fund accounting
Expenditure - capital outlay
Vouchers payable
Object classes (gov fund accounting)
Chart of accounts for gov
JE for payment of principle and interest for gov fund accounting s
Expenditures - principle
Expenditures - interest
Cash
(Pretty much cash basis it seems?)
JE for recording encumbrance
DR: Encumbrance
CR: Budgetary Control*
- same budgetary control as difference between forecasted revenues and budgeted appropriations?
JE to record unreceived POs @ YE (gov fund accounting)
Unused fund balance
Committed fund balance
What kind of revenue for the gov are taxes on hotel rooms?
Derived tax revenue
When would a city recognize taxes that have yet to be remitted from the merchants to the state?
If measurable and available? (Collectible within 60 days of year end), recognize similar to Accrual basis (taxes earned in that month even though they weren’t ‘collected’)
Revenues control account vs estimated revenues control
Be careful with this distinction. The estimated revenue control is a budget account. The revenue control is an activity account that increased when property taxes are levied or sales / income tax as are received
Expenditure - salaries and wages is an example of which classification?
Object
Are estimated other financing sources for gov funds revenue?
No
Expenditure extending over life of more than one period - how recorded? For example - prepaid insurance over 2 years
Purchased or consumption method
Expense vs expenditure gov
Expenditure = gov fund Expense = proprietary fund
Are sales of capital assets fall under revenues on the general fund statement of revenues, asset expenditures, and changes in fund balances?
No, they are considered other financing sources. Not revenues.
Are special items reported as revenues or expenditures on the statement of revenues, expenditures, and changes in fund balances?
No - separate
Are payments to a debt service fund expenditures for gov funds?
No - they are transfers out
Are purchase of capital assets expenditures?
Yes - they are considered an expenditure of character “capital outlay”
How is the receipt of state appropriations reported on a proprietary fund’s statement of revenues, expense, changes in net position?
Non-operating
What is the major difference between an exchange transaction and a non-exchange transaction for governmental units?
The relationship between the amount given and received
JE for recording taxes levied Receivable net of 5% uncollectible
AR
Revenues
Allowance for Doubtful
Do governmental funds record depreciation expense?
No b/c no fixed assets. Depreciation expense does not reflect the flow of current financial resources
Is estimated transfer to debt service fund an appropriation?
No, it’s its own separate budget
Is revenue from a property garage owned by the city accounted for in a governmental fund?
No, proprietary fund
What does unassigned fund balance represent?
Appropriations (estimated) exceed actual expenditures
Amount of current resources carried forward into following year
Unexpended appropriation
BAE
Appropriations credit balance netted against debit balances of encumbrances and activities
= cash free to use
Credit account used when recording encumbrances
Budgetary control
Unassigned fund balance
Degree of spendable available resources that can be carried forward into next spending cycle
Reciprocal synonym
Exchange type transactions
Nonreciprocal synonym
Non-exchange transactions
Special vs extraordinary items (GASB)
Special - unusual or infrequent
Extraordinary - unusual AND infrequent
Which funds can have a positive unassigned fund balance?
Only the general fund
NU CAR
Categories of fund balances for gov funds
Nonspendible Restricted Committed Assigned Unassigned
Nonspendable fund balance
Inventories, prepaid expenditures, supplies
Equity of a governmental fund that is represented by the above
Only for general and special revenue funds
JE for unreceived POs (encumbrances) @ YE
Budgetary Control
Encumbrance
Unassigned fund balance (year end surplus)
Fund balance, commuted
What kind of transactions are deferred inflows and outflows
Commercial equivalent? OCI type transactions
Also for special gov accounting transactions
Restricted fund balance
Restricted by external authorities (legislation, grantors, creditors)
Committed fund balance
POs (encumbrances) not received
Are encumbered appropriations specially identified on the face of a gov’s financials?
No
Assigned fund balance
Intentions to obligate but without formal commitment
Unassigned fund balance - which funds carry a positive unassigned fund balance?
Only the general fund
Three categories of net position for proprietary funds (SE) government wide financials
Net investment in capital assets
Restricted - externally imposed
Unrestricted - all other
What assets are excluded from calculation of net investment in capital assets?
Unspent resources accumulated for capital purposes
Equity interest in capital assets of joint ventures (financial instruments)
If funds are restricted and outstanding POs related to the restricted funds at x at year end, is x committed or not?
No. Restricted funds are restricted until expensed (when received)
County commission designates $50K for public parks, which how to categorize the fund balance?
Unassigned. Unassigned is also the plug, so may be negative to plug to the total
If expenditures incurred for specific purposes overspend on available resources, the deficit in the fund is displayed as
Unassigned
Examples of extraordinary items
Terrorist attack
Environmental disaster
Transfer of $$$ from general fund to establish a new enterprise fund is what kind of interfund activity?
Non-reciprocal
Multiyear grant max revenue that can be recognized in one year?
Due to time requirements only 1/x of the grant can be recognized in one year, although more may be earned. The excess earned (those that cannot be recognized due to time requirements) is classified as deferred inflows of resources.
GRaSPP fund accounting - Prior service costs (earned and unearned) are…
Earned? Expenses
Unearned? Deferred outflow
Whereas for commercial it’s a choice to expense or fridge in OCI
Do deferred inflows of resources include property taxes Receivable recognized in advance of the year they are levied OR collected in advance of the year they are levied?
Both
Do interfund transfers in affect the results of operations in governmental funds? What about proprietary funds?
Yes to both. They are recorded as follows:
Governmental: Other financing sources
Proprietary: interfund transfers
Not recorded as revenues and expenditures
What fund would normally have a non-spendable inventory of supplies?
General fund
At year end encumbrances outstanding must be reported as
A component of committed or assigned fund balance
Do internal transfers give rise to operating expenditures and revenues?
Generally no.
Exception: internal services like electric, heating, etc.
$$$ due to and due from other funds are netted. If positive = asset. If negative = liability.
True or false?
False.
A liability and asset are recorded separately
Is inventory included in SE net investment in capital assets?
Is inventory a capital asset? No :)
When a grant is received, if the fund is monitoring, what kind of fund?
Special revenue fund
If the fund is non-monitoring; what kind of fund?
Agency trust fund
Monitoring
Right or responsibility to monitor what is being spent or who it’s being spent on and determining eligibility
Fund where encumbrances are not applicable
Debt service fund
True or false. The debt service fund pays off the debt of the GRaSPP and SE PAPI funds
False
GRaSPP funds only
How is payment to a pension trust fund classified on the general fund financials?
Expenditures
How would transfer to a debt service fund be classified on the general fund financials?
Other financing uses
Year end for GRaSPP funds - how is interest recorded?
Interest and principal payments are recorded when PAID - there is NO ACCRUAL
Tax anticipation notes
Notes issued by states or municipalities to finance current operations b4 taxes are received
How is a capital outlay categorized on the statement of revenues, expenditures, and changes in fund balance for the general fund?
Expenditures
How are proceeds from the sale of land categorized on the statement of revenues, expenditures, and changes in fund balance?
Special items
What is the last item on the statement of revenues, expenditures, and changes in fund balance before ending fund balance?
Beginning fund balance
Are tax anticipated notes long term debt (LTD) or current or both?
Always current debt on GRaSPP funds
Is payroll accrued for GRaSPP funds?
Yes
How is a capital lease recorded for GRaSPP funds? JE
Expenditures - Capital outlay
Other financing sources - Debt proceeds
Both will be in the EQUITY section
What revenue account is credited for due from other governments?
Intergovernmental revenue
Example: gas tax to fund special revenue fund
A special tax levy exclusively restricted for debt repayment would be accounted for in which fund?
Debt service fund
NOT special revenue
Which account DECREASES when interest on debt is paid in a GRaSPP fund for interest accumulated in the year prior?
JE
Interest Expense
Fund Balance
Fund balance is the GRaSPP equivalent of retained earnings
Levied on affected property owners for installation of new sidewalks - which fund?
Capital projects
Gas taxes to finance road repairs
Special projects - NOT capital projects - because general repairs and maintenance are expensed, not capitalized
How is cash in and cash out of a debt service fund accounted for?
Transfers in
Expenditures
A special tax assessed by local governments to pay for a capital project financed by county debt is accounted for in which fund on the county’s books?
Debt service for the county’s books
Should accrued interest be included in the fund balance of the debt service fund as an interest payable?
No
Which fund would revenues be recorded in for a trust?
Private purpose fund
Interfund transfer JE
Cash
Interfund transfer
Special Assessment
Taxes levied against property owners who will directly benefit from the project (sidewalk)
Are special tax assessment revenues displayed as tax revenue on financials?
No - program revenue because they specifically defray a particular cost
When the gov is NOT liable for the debt associated with a special assessment which fund handles special assessments?
Agency fund (fiduciary fund)
When gov IS liable for the debt of a special assessment, which fund?
Capital projects / debt service
Which financial statement contains other financing sources?
Income statement (GRaSPP funds equivalent)
Do GRaSPP funds amortize bond premiums or discounts?
No
JE for capital project $ earning interest
Cash
Interest Rev
Interfund Transfer (to debt service)
Cash
JE to record bond proceeds at a premium for GRaSPP funds
Cash
Other Financing Sources - bond issue proceeds
Other financing sources - premium on bonds
Interfund transfer (to debt service)
Cash (amount of premium)
Construction Progress Signed and Progress Billing (GRaSPP funds)
Budgetary Control xxx
Encumbrances xxx
When vvv of xxx is approved for payment:
Encumbrances vvv
Budgetary Control vvv
Expenditures vvv
Vouchers Payable vvv
Is the cumulative balance of the constructed capital asset displayed in the capital projects fund?
No, it was expenditured
If short term borrowings will be refinanced with long term debt, how recorded for GRaSPP funds?
Other financing sources. Do not record as Liability
Otherwise record as Liability
What type of fund balance (NU CAR) will outstanding encumbrances at YE be recorded as for capital projects funds?
Restricted
NOT committed
Which two funds are encumbrances not applicable?
Debt service and permanent funds
Permanent fund
Principle is permanently kept
Special Rev Fund vs Permanent Fund
Special Rev - principle and interest are available
Permanent - interest only
Are bond proceeds recorded in the debt service fund?
No - debt service funds are only used for the accumulated of resources for payment of gov fund debt
Proceeds are recorded in fund benefitting
Is the discount for a bond moved to the debt service fund like a premium would be?
No. A premium is moved because the extra money received will be used to service the debt
What is recorded as revenue in the capital projects fund?
Restricted grants revenue earned (through expenditure - similar to non-profits)
Land held as investments by endowments in a gov permanent fund should be measured at
Fair value
Construction in process is an account in which GRaSPP fund?
Trick question. None of them. All capital projects are expenditured. They are never recorded in CIP
The proceeds of a bond or grant should be reflected in which account?
The account relevant to the project records the proceeds. The debt service fund is for accumulation of resources to service the GRaSPP fund debts
When a state grant Receivable is recorded is the revenue considered earned or unearned?
Earned if a Receivable is being recorded, else cannot record the Receivable
When will capital projects record a liability related to debt?
Anticipation notes - current liability only that will not be refinanced into LTD
Revenues earned from a previously awarded grant for GRaSPP funds
Debit deferred inflows of resources
Deferred inflows of resources vs deferred revenue
If revenue will be deferred to a future reporting period, credit deferred inflows of resources instead
What statement do deferred inflows of revenues appear on?
Not IS, BS for GRaSPP funds
Will debt service fund record implied interest as an expenditure?
Yes. Split the payment between principle and (implied) interest.
PV of minimum lease payment * interest % = expenditure
Does a city’s budget address proposed longer term goals and capital expenditures?
Yes
Is one measurement focus on government type funds financial position?
Yes! That is the BS for gov type funds
What liabilities should be recorded for gov type funds?
Amount to be paid from current financial resources - modified Accrual method
NOT amount due within one year of the balance sheet date - that’s Accrual
Is bad debt expense recognized for proprietary funds?
No
What type of account is deferred inflows of resources?
Liability - NOT equity even though we may store OCI equivalent stuff in there
Shared Revenues should be reported on proprietary income statement as
Non-operating revenues
If a fund is primarily supported by user fees by receives a tax subsidy to keep rates low, what fund should be used?
If the fund is PRIMARILY supported by user fees: enterprise fund
