FAR Exam - Governmental Accounting

Question 1

What is a budget appropriation?

Answer 1

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

Question 2

What is an encumbrance?

Answer 2

Records purchase and reserves it for the encumbrance.

Question 3

What is the opening budgetary entry?

Answer 3

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

Question 4

What is a General Fund?

Answer 4

The operating fund of the governmental unit

Records Significant Revenues: Taxes; Tickets; Fines; Licenses

Records Significant Expenditures: Police; Education; Fire Dept

Question 5

What is a Special Revenue Fund?

Answer 5

Restricted for a specific purpose such as street repair.

Question 6

What is a Permanent Fund?

Answer 6

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

Principal remains intact.

Question 7

What is a Capital Projects Fund?

Answer 7

Used to acquire and build facilities.

Question 8

Which fund statements are issued in Governmental Accounting?

Answer 8

Balance Sheet

Statement of Revenues; Expenditures; and Changes in Fund Balance

Question 9

When is Revenue recorded in Governmental Accounting?

Answer 9

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

Question 10

What is Derived Tax Revenue?

Answer 10

Money collected from people doing things:

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

Question 11

What is Imposed Tax Revenue?

Answer 11

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 12

What are the Fund Balance Types?

Answer 12

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 13

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

Answer 13

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

Question 14

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

Answer 14

They are shown net of debt

Asset Cost - Accumulated Depreciation - Asset Liabilities : Net Assets

Question 15

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

Answer 15

Modified approach:

Reported at cost; no accumulated depreciation

Question 16

How is a Statement of Net Assets divided?

Answer 16

Into Governmental Activities and Business Activities

Question 17

How are activities presented in a Statement of Activities?

Answer 17

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 18

What is the primary objective of governmental accounting?

Answer 18

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 19

What Financial Statements are required for Defined Benefit Pension plans?

Answer 19

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

Question 20

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

Answer 20

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

Question 21

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

Answer 21

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

Question 22

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

Answer 22

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