FAR 8 Flashcards
3 Generic Fund Categories in Governmental Accounting
- Governmental Funds
- Proprietary Funds
- Fiduciary Funds
* F/S should be separately presented for these
Government-wide Presentations
Consider to be consolidated financial statements with fund financial statements as their respective segments.
Funds are reconciled to government wide
Financial activity of primary government classified in these ways:
- Governmental activities
2. Business-type activities
What fund is excluded from government-wide financial statement presentation
Fiduciary funds
They are however presented individually as fund financial statements
Governmental Fund Types: G.R.S.P.P.
- Modified accrual accounting
- Current* financial resources measurement focus
- Carries current assets and liabilities only
G.- General fund R.- Revenue (special) funds S.- Service (debt) funds P.- Projects (capital) funds P.- Permanent fund
Proprietary Fund Types
- Full accrual accounting
- Economic resources measurement focus
- Carries everything- fixed assets & L/T Debt
- Internal Service Funds
- Enterprise Funds
Fiduciary (Trust) Fund Types: P.A.P.I.
Full accrual accounting
Economic resources measurement focus
*Carries everything - fixed assets & L/T Debt
P.- Pension & other employee benefit trust funds
A.- Agency trust funds
P.- Private purpose trust funds
I.- Investment trust funds
Economic Resources Measurement Focus- Balance Sheet Presentation - Proprietary & Fiduciary Funds
Net position reported in 3 components:
- Net investment in capital assets
- Restricted (distinguishing b/t major categories of restrictions)
- Unrestricted
Pass Key- Reconciling b/t Governmental Funds & Government-Wide Financial Statements
Adding fixed assets excluded from governmental fund financial statements and subtracting non-current liabilities (also excluded) are two of the most significant reconciling items between governmental funds and government-wide financial statements.
Budgetary Account J/E
Budgetary accounts are “estimate accounts” which are opposite debit credit balances from usual accounting.
Ex: Estimated rev is Dr.
Dr. Est revenue control Dr. Est financing sources Dr. Budgetary control (negative/deficit) Cr. Appropriations control Cr. Est. other financing uses Cr. Budgetary control (positive/surplus)
At EOY, close for exactly as budget. Budgetary & actual activity closed separately.
Budgetary Control Account
Beginning of year, difference between estimated revenues and appropriations goes to an account called budgetary control (budgetary “equity” account)
Expenditures under Modified Accrual Accounting
Purchase & Consumption Method
Purchase Method- expenditure current assets when purchased
Consumption Method - set up as current asset when purchased, expenditure items as consumed
*Expenditure is similar to expense under accrual method
Pass Key - Fixed Asset Acquisitions under current financial resources measurement focus and economic resources measurement focus
Current Financial Resources Measurement Focus - “Expenditure”
Economic - capitalize and depreciate
Encumbrances
Open purchase orders or commitment of the available appropriations of a government.
The use of encumbrances help monitor the degree to which appropriations have been used.
Should not be viewed as GAAP expediture.
Budgetary control entry acts as a limitation or constraint that reduces the available fund balance.
Encumbrances- J/E of appropriation and actual use of funds
To set up:
Dr. Encumbrances
Cr. Budgetary control
Need to reverse when takes place:
Dr. Budgetary control
Cr. Encumbrances
Then record actual expenditure:
Dr. Expenditures
Cr. Vouchers payable (or cash)
Outstanding Encumbrances - J/E to close at EOY
Close and reserve the fund balance:
Dr. Budgetary control
Cr. Encumbrances
Close budgetary accounts related to outstanding POs
Dr. Unassigned fund balance (year-end surplus)
Cr. Fund balance, committed
B.A.E.
B.- Budget - appropriations is example
A.- Activity - expenditures, actual bills incurred
E.- Encumbrances - restrictions of fund balance due to POs
Budget
-Activity
-Encumbrances
= Remaining available appropriations
Deferred Outflows & Inflows
Deferred outflow (like an asset)- positive effect on net position, reported after assets. Consumption of net assets applicable to future reporting period.
Deferred inflow (like a liability) - negative effect on net position, reported following liabilities. Acquisition of net assets applicable to future reporting period.
Special Revenue Fund
Accounts for revenues and expenditures that are legally restricted or committed for specific purposes other than debt service or capital projects.
Expendable Trust Activities
Special revenue fund - i.e. scholarship and endowment funds
Debt Service Fund
Accounts for accumulation of resources (cash & investments) and payment of currently due interest and principal on L/T general obligation debt.
Pays off debt of GRSPP funds
Does NOT pay off debt of SE-PAPI funds
Encumbrance accounts NOT used
Expenditures should be recorded when legally payable per bond agreement. No allocation b/t interest and principal. NO accrual of interest payable or amortization of discount/premium.
Capital Projects Funds
Can be considered “purchasing department”
Established for construction or purchase or leasing of significant fixed assets for GRSPP funds only.
Capital Projects Funds - Expenditures & Encumbrance Types
Expenditures usually classified as capital outlay.
During construction, encumbrances recorded as commitments are incurred.
Vouchers recorded when liability is incurred and expenditure known.
When vouchers recorded, encumbrance reversed.
Pass Key
Special revenue fund - has operating expenditures
Debt service fund - has debt service expenditures
Capital projects fund - has capital outlay expenditures
Permanent Funds
Used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for the purposes that support the reporting government’s programs.
L/T Debt Enterprise Funds Carry
- Revenue bonds backed only by proprietary fund
- Revenue bonds backed by proprietary fund with general obligation backing
- General obligation bonds paid with proprietary fund revenues
Fiduciary Funds - Pension Trust
Changes in net pension liability typically included in pension expense of government-wide financial statements and the appropriate funds responsible for funding the pension obligation.
Agency Trust Fund
Collects cash to be held temporarily for an authorized recipient to whom it will be later disbursed.
Record no fund balance because current assets must equal current liabilities.
Private Purpose Trust Fund
Designated fund for reporting all other trust arrangements under which principal and income are for the benefit of one of the following:
- Specific individuals
- Private organizations
- Other governments
