FAR - F8: Governmental Accounting

Question 1

Question: In complying with GASB #34, a governmental will present separate fund financial statements for its governmental and proprietary funds. The purpose of this presentation is to:

Answer 1

Answer: “Report additional and detailed information about the primary government.”

Rule: Separate fund financial statements should be presented for governmental and proprietary funds to report additional and detailed information about the primary government.

Question 2

Question: Which fund would most appropriately use the current financial resources measurement focus and modified accrual basis of accounting in their fund financial statements?

Answer 2

Answer:
Governmental funds use the current financial resources measurement focus and modified accrual basis of accounting in their fund financial statements.

**Proprietary and fiduciary funds use the economic resources measurement focus and accrual basis of accounting.

Question 3

Question: Which of the following characteristics of service efforts and accomplishments is the most difficult to report for a governmental entity?

a. Timeliness
b. Comparability
c. Consistency
d. Relevance

Answer 3

Answer: Relevance

**Relevance - means the information must bear a logical relationship with the needs for its purpose. It must also be reliable

**Consistency - means government consistently uses the same accounting principles (application of GAAP) year over year.

**Comparability - means governments use the same principles of accounting as other governments.

**Timeliness - objective requires that reports be issued early enough to facilitate timely decisions.

Question 4

“Appropriations”

Answer 4

**Appropriations is a budgetary account. This account represents the governmental units approved spending.

**Expenditures represent the total amount incurred, whether paid in cash or accrued as vouchers payable and serve to reduce available appropriations.

Question 5

Question: Which event(s) is (are) supportive of interperiod equity as a financial reporting objective of a governmental unit?

Answer 5

Answer: A balanced budget is adopted demonstrates interperiod equity.

-Interperiod equity helps users assess whether current year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required t assume burdens for services previously provided.

Question 6

Question: Which internal account should Spring Township credit when it issues a purchase order for supplies?

Answer 6

Answer: Budgetary Control.

**A purchase order is a binding document and thus is recorded when issued.

**JE for internal accounting when a purchase order is issued is:

Dr. Encumbrances
Cr. Budgetary Control.

**When Goods are received

Dr. Budgetary Control
CR. Encumbrances

**JE to record actual expenditures:

Dr. Expenditures
Cr. Vouchers payable (or cash)

**Appropriations control is credited when the budget is setup, not when a purchase order is issued.

Question 7

1 **To record the estimated revenue of $100,000 and appropriations of $80,000…

Estimated revenue > Appropriations

#2 **To record the estimated revenue of $80,0000 and Appropriations of $100,000
Estimated revenue

Answer 7

#1 **To record the budget, the journal entry would be:
Beginning of the year:
Dr. Estimated revenue $100,000
       Cr. Appropriations  $80,000
       Cr. Budgetary Control $20,000

Ending of the year:
Dr. Appropriations $80,000
Dr. Budgetary Control 20,000
Cr. Estimated Revenue $100,000

#2
Beginning of the Year:
Dr. Estimated revenue 80,000
Dr. Budgetary Control $20,000
        Cr. Appropriations $100,000

End of the Year:
Dr. Appropriations $100,000
Cr. Estimated Revenue $80,000
Cr. Budgetary Control $20,000