F9 & F10 Flashcards
Which GRSPP funds do encumbrances not apply?
Permanent funds & Debt Service Funds
What is the primary objective of governmental accounting?
Accountability.
Which funds are included in the government wide FS?
GRSPP SE
- General
- Special Revenue
- Debt Service
- Capital Projects
- Permanent
- Internal Service
- Enterprise
**PAPI not included (Pension, Agency, Private Purpose, Investment Trust)
Who provides the standards for governmental accounting?
GASB.
*Government Accountability Office (GAO) prescribes auditing standards
Which fiduciary fund does an income statement not apply?
Agency Trust Fund (no revenues or expenses)
Which fiduciary fund requires a statement of cash flows?
None of them require a S of CF.
When a pension fund is contributed money, what is it classified as?
Additions.
Which fund provides services & supplies to all other funds?
Internal Service Fund.
Which funds does BAE BAE accounting apply to?
General, Special Revenue, Debt Service, Capital Projects, Permanent.
What are the sections of the Statement of Fiduciary Net Position for an Agency Fund?
Assets & Liabilities only.
What are the characteristics in financial reporting?
U R MICE:
Understandability Reliability Make a difference - relevance In timeliness Consistency yr. to yr. Entity to entity comparability
How does fund accounting work?
Seperate funds (like separate check books) of self balancing accounts consolidate into gov. wide FS.
Each fund is it’s own legal accounting entity.
What are the different types of fund structures?
Governmental (treats you like citizen)
Proprietary (treats you like customer)
Fiduciary (special purpose)
What basis of accounting do the gov. wide FS get reported on?
Full accrual.
What basis of accounting do the governmental funds use? And can you name them all?
Modified accrual (current financial resources measurement focus)
- *GRSPP
- Governmental fund
- Special Revenue fund
- Debt Service fund
- Capital Projects fund
- Permanent fund
When is revenue recognized for the governmental funds who use modified accrual?
When measurable and available.
**Within 60 days of YE collectible
When a governmental entity spends money on something, what is the JE?
DR: EXPENDITURES
CR: VOUCHER PAYABLE
*EXPENDITURES USED, NOT EXPENSES
When do you record expenditures in a governmental fund entity?
When the related fund liability is incurred.
What basis of accounting do proprietary funds use?
Full accrual.
*Economic resource measurement (FA & LTD carried)
What are the types of proprietary funds?
SE
- Internal Service Fund
- Enterprise Fund
What basis of accounting do fidiciary funds use?
Full accrual.
*Economic resource measurement (FA & LTD carried)
What are the types of fiduciary funds?
PAPI
- Pension Fund
- Agency Trust Fund
- Private Purpose Fund
- Investment Trust Fund
When is revenue recognized for a private purpose fund?
When earned (accrual)
When booking the budget for a general fund, what would the JE look like to record revenues and appropriations?
DR: Revenue
CR: Appropriations
*Reverse for same amount @ YE
What is BAE BAE accounting and what funds does it apply to?
Budget, Activity, Encumbrances
Budget, Activity, Encumbranes (reverse for same $)
**Applies to funds that use modified accrual
GRSPP
- Governmental fund
- Special Revenue fund
- Internal Service fund
- Capital Projects fund
- Permanent fund
What is an encumbrance?
Amount reserved for a future expense.
What is unique about booking a budget for a governmental fund at the beginning of the year?
JE’s are reversed from their normal balances.
DR to revenue and CR to expenses.
DR: Revenue
CR: Appropriations
CR: Budgetary Control (plug - surplus)
*Reverse accounts at YE for exact same amount.
What should be included as revenue for a governmental fund?
- ) Revenue collected in CY
2. ) Revenue collectible in 60 days after YE
When would a receivable be recognized for a governmental fund?
*When there is an enforceable claim (revenue when billed for property tax for example)
DR: Real Property Tax Receivable
CR: Allowance
CR: Revenue
What is a non-exchange revenue?
Nothing being exchanges, just being imposed or derived from something (income tax, property tax)
What is derived tax revenue?
Derived from a source and depends on that source:
- ) Income taxes - derived from amount earned
- ) Sales tax - derived from amount sold
**cannot recognize before receiving since not predictable
What is imposed tax revenue?
Imposed upon you, and not derived from a certain amount.
- ) Real estate taxes
- ) Fines & penalties
**can recognize before receiving (when billed) bc of predictability.
If a governmental fund spends money on a fixed asset with a useful life of 20 years, what would the JE be?
DR: Expenditures
CR: Vouchers Payable
*FA not carried, expensed immediately.
**Current financial resources measurement
Cash basis accounting delays recognizing expenses until cash payment is made, is governmental fund accounting the same? How so?
DR: Expenditures
CR: Vouchers Payable
*Fund accounting doesn’t delay expenditure, records as soon as liability is incurred
Explain the difference between a:
- ) Functional Program
- ) Organizational Unit
- ) Activity
- ) Character
- ) Object Classes
- ) Functional Program = PUBLIC SAFETY
- ) Organizational Unit = POLICE, FIRE DEPTs
- ) Activity = Drug, Highway, Residential, Commercial
- ) Character = Basis & fiscal period
- ) Object Classes = Chart of accounts (salaries, etc)
What is the purchase method of recording the activity in governmental accounting and how is it booked?
A way of recording expenses on fund acct books.
When buying supplies inventory:
DR: Expenditure (full amount of purchase)
CR: Voucher Payable (full amount of purchase)
When using supplies inventory:
NO JE REQUIRED
End of year JE:
DR: Supplies Inventory (amount on hand)
CR: Nonspendable fund bal. (amount on hand)
**Book whatever you have at YE as inventory, and record the full expenditure when incurred (as if it was all used)
What is the consumption method of recording the activity in governmental accounting and how is it booked?
A way of recording expenses on fund acct. books.
When buying supplies inventory:
DR: Supplies Inventory (full amount of purchase)
CR: Voucher Payable (full amount of purchase)
When using supplies inventory:
DR: Expenditure (little by little as used)
CR: Supplies Inventory (amount used)
End of year JE:
NO JE REQUIRED
**Book inventory when acquired and expense out when used (as you CONSUME)
How would a gov. entity record a transfer of assets between funds when the entity is transferring out the asset?
DR: Other Financing Uses
CR: Asset
What is an encumbrance?
Amount reserved to spend money. (for submitted purchase orders)
How is an encumbrance initially set up and recorded?
DR: Encumbrances
CR: Vouchers Payable
If an invoice is received for something that was previously encumbered, how is it recorded?
DR: Budgetary Control
CR: Encumbrances (reverse for amount reserved)
DR:Expenditure (actual amount of invoice)
CR: Vouchers Payable
How are encumbrances treated at YE if they have yet to be reversed.
In other words, if book an encumbrance in the beginning of the year, and don’t receive the invoice until February of the next year, how is this treated at YE?
CLOSE OUT ENCUMBRANCE
DR: Budgetary Control
CR: Encumbrances (reverse for amount reserved)
BOOKED AT YE
DR: Unassigned Fund Balance
CR: Fund Balance, Committed
EXPENSE INCURRED NEXT YR.
DR: Expenditure
CR: Vouchers Payable
What is an example of nonreciprocal interfund activity?
A transfer or reimbursement. (nothing of value added back)
What is an example of reciprocal interfund activity?
Sales/purchases.
If a governmental entity expects to collect something more than 60 days after YE, how is this recorded?
As a deferred inflow of resources.
DR: Asset
CR: Deferred Inflow of Resources
What are the categories of the fund balance in a governmental entity?
And what is the fund balance?
Fund balance = equity for governmental entities.
Elements are: NU CAR Nonspendable = prepaid/inventory Unassigned = only general fund should have Committed = encumbered appropriations Assigned = gov. intends to obligate Restricted = by external authorities
What does a general fund do?
Can perform function of any other fund if it does not exist.
Which governmental fund purhcases FA for GRSPP funds (capital outlay expenditures)
Capital Projects Fund
What makes up the fund balance of proprietary funds?
NO FUND BALANCE IN PROPRIETARY FUNDS.
Only net position.
What are the components of the net position in proprietary funds?
NET POSITION = RUN
Restricted
Unrestricted
Net investment in capital assets
What is the statement of net position for proprietary funds?
“Balance sheet”
Which fund out of all the GRSPP SE PAPI funds does not have an income statement and why?
Agency Fund.
No revenues and expenses, just transfers money between funds (mailman)
Explain what a permanent fund is…
And what kind of fund is it?
Governmental Fund.
Cannot spend principal but can spend earnings. Used to report resources that are legally restricted to extent that income (principal) can be used to support reporting gov’s program
What is the focus of the gov. wide FS?
Operational Accountability = report if met objectives effectively and efficiently using all resources for that purpose
What is fiscal accountability?
Focus on fund FS to demonstrate complied with public decisions.
What makes up the “basic” FS in the governement wide FS?
- ) Gov. wide FS
- ) Fund FS
- ) Notes to the FS
What are the only funds that have a statement of cash flows?
Proprietary funds:
- Internal Service
- Enterprise
What makes up the full gov. wide FS?
- ) MD&A
- ) Gov. wide FS
- ) Fund FS
- ) Notes to the FS
- ) Required Supplementary info
- ) Other supp. info (optional)
Which funds are included in the government wide FS?
GRSPP SE
Governmental Special Revenue Capital Projects Permanent Internal Service Enterprise
*NOT PAPI FUNDS
Which funds capitalize interest during construction?
Enterprise funds are the only fund that have construction period interest capitalization.
What are the two types of approaches in accounting for infrastructure assets?
- ) Required Approach = record & depreciate
- ) Modified Approach = don’t have to depreciate as long as:
a. ) Asset mgmt system meets conditions
1. ) Up to date inventory
2. ) Condition assessment
3. ) Estimate to maintain & preserve asset
b. ) Documentation Includes Data of Asset Preservation
1. ) condition assessment
2. ) support assertions being disclosed
How should a governmental entity account for historical treasures/ works of art?
Need to record & depreciate unless:
- ) Public exhibition
- ) Protected
- ) Proceeds go to acquire new
**Same rules as NFP entities
What is the threshold for a fund to be considered a “major fund” within the gov. wide FS?
- ) 10% test in it’s own category (gov or proprietary)
- ) 5% test in gov wide FS (both gov/proprietary)
- *General fund is ALWAYS considered a major fund
- *Internal Service fund not eligible for consideration
There are 7 differences between proprietary fund Statement of Cash flows and GAAP Statement of Cash flows, what are they?
- ) Direct Method Required
- ) Reconciliation of operating income and not net income
- ) Four categories (op, cap financing, noncap. financing, investing)
- ) Financing section comes before investing section
- ) Interest income = investing not operating
- ) Interest expense = financing not operating
- ) Capital asset purchases = financing not investing
What are the componenets of the required supplementary information in the gov. wide FS?
- ) Budget Comparison Sch.
a. ) Budgeted Amounts (org. and final)
b. ) Actual Amounts (inflows & outflows)
c. ) Variance (optional)
**Funny bc within the “required supp. info”, there is an optional component to show a variance
Do any of the governmental funds allow/require capitalization of construction period interest?
Only enterprise funds require this.
All others do not allow the capitalization.
