FAR 9: Governmental Accounting

Question 1

What are the three major types of funds in governmental accounting?

Answer 1

Governmental, Proprietary, Fiduciary

Question 2

Which two accounting bases are used in governmental accounting?

Answer 2

Accrual basis - current economic resources focus (revenues recognized when earned)

Modified accrual basis - current financial resources focus (revenues recognized when available and measurable)

Question 3

What is a budget appropriation?

Answer 3

The highest amount allowed for a particular expenditure under a budget.

Question 4

What is an encumbrance?

Answer 4

Records purchase and reserves it for the encumbrance.

Question 5

What is the opening budgetary entry?

Answer 5

Dr Estimated Revenues Control
Cr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)

Question 6

What is the closing budgetary entry?

Answer 6

Dr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
Cr Estimated Revenues Control

Question 7

What are the types of governmental funds?

Answer 7

General Fund
Special Revenue Fund
Permanent Fund
Capital Projects Fund
Debt Service Fund

Question 8

What is a General Fund?

Answer 8

The operating fund of the governmental unit

Records Significant Revenues: Taxes; Tickets; Fines; Licenses

Records Significant Expenditures: Police; Education; Fire Dept

Question 9

What is a Special Revenue Fund?

Answer 9

Restricted for a specific purpose such as street repair.

Question 10

What is a Permanent Fund?

Answer 10

Legally restricted fund; where only earnings can be used to fund programs.

Principal remains intact.

Question 11

What is a Capital Projects Fund?

Answer 11

Used to acquire and build facilities.

Question 12

What is a Debt Service Fund?

Answer 12

Handles repayment of long-term debt and related interest.

Question 13

Which fund statements are issued in Governmental Accounting?

Answer 13

Balance Sheet

Statement of Revenues; Expenditures; and Changes in Fund Balance

Question 14

When is Revenue recorded in Governmental Accounting?

Answer 14

When it is BOTH available and measurable; regardless of when it is spent.

Question 15

What is Derived Tax Revenue?

Answer 15

Money collected from people doing things:

Sales tax (buying cars) or income tax (people working)

Question 16

What is Imposed Tax Revenue?

Answer 16

Tax assessed just because things exist

Example: property tax on a car (even if it’s never driven); real estate tax

Recorded as a revenue when BUDGETED.

Estimated uncollectible property tax revenues don’t offset revenues; so don’t net them.

Question 17

What are the types of Proprietary Funds?

Answer 17

Internal Service Funds - to serve the needs of other governmental units (i.e. motor pool)

Enterprise Funds - provide goods or services to external users (i.e. post office)

Question 18

What are the Fund Balance Types?

Answer 18

Restricted - Restricted by Contributor 
 Committed - Restricted by Government
 Assigned - Intended for a purpose
 Unassigned - Available to be spent
 Non-spendable - Not in a spendable state

Question 19

What are the types of Fiduciary Funds?

Answer 19

Agency Fund - government acts as an agent or custodian

Pension Trust Fund - Government is a trustee for a pension plan

Investment Trust Fund - Government is a trustee over a series of investments

Private Purpose Trust - Trust that benefits various individuals and entities

Question 20

How are Assets & Liabilities presented on the Statement of Net Position?

Answer 20

Assets (Current & Non-Current)
Deferred Outflows of Resources
Liabilities (Current & Non-Current)
Deferred Inflows of Resources

Question 21

How are Capital Assets shown on a governmental Statement of Net Assets?

Answer 21

They are shown net of debt

Asset Cost - Accumulated Depreciation - Asset Liabilities : Net Assets

Question 22

How is infrastructure reported on a governmental Statement of Net Assets?

Answer 22

Modified approach:

Reported at cost; no accumulated depreciation

Question 23

How is a Statement of Net Assets divided?

Answer 23

Into Governmental Activities and Business Activities

Question 24

How are activities presented in a Statement of Activities?

Answer 24

They are divided by function

If the activities of a component are distinguishable from the rest of the governmental entity; then discreet presentation is required

If the activities of the component cannot be identified and separated from the rest of the governmental activities; then blended presentation is warranted.

Component units are reported in the Entity-Wide Financial Statements and not the Fund Financial Statements.

Question 25

What is the primary objective of governmental accounting?

Answer 25

To provide information that is useful and benefits a wide range of users including:

Costs of services provided

Sufficiency of revenues to cover costs

Financial position of entity

Question 26

What Financial Statements are required for Defined Benefit Pension plans?

Answer 26

Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position

Question 27

What are the components of the Statement of Fiduciary Net Position for Defined Benefit Pension Plans?

Answer 27

Assets; Deferred Outfows; Liabilities; Deferred Outflows; Fiduciary Net Position

Question 28

What are the components of the Statement of Changes in Fiduciary Net Position for Defined Benefit Pension plans?

Answer 28

Additions (Contributions and Net Investment Income) - Deductions (Benefits Payments and Admin Expense) : Net Change in Fiduciary Net Position

Question 29

What should be included in the Financial Statement notes for Defined Benefit Pension Plans?

Answer 29

Types of Benefits; Plan Member Classes; Board Information; Investment Policies and FV Determination