FAR - Governmental Accounting Part 2

Question 1

What is the component test for a government entity?

Answer 1

To determine whether the governmental unit can be discrete (as opposed to blended), it must contain all the following characteristics:

1. Separately
2. Elected governing body
3. Legally separate entity
4. Financially independent status

think of the self acronym “SELF”

Question 2

What should be included in the intro section of a government’s comprehensive annual financial report

Answer 2

1. letter of transmittal
2. organization chart
3. list of principal officers

Question 3

What is the required presentation of government reporting standards for basic financial statements and required supplementary information?

Answer 3

1. Required Supplementary Information includes MD&A and support schedules (i.e. combining financial statements by fund type and budget vs actual presentations)
2. Basic financial statements are defined as government wide financial statements, fund financial statements, and notes to the financial statements.
   * MD&A comes before the financials

Question 4

What are the three standard sections of a governmental comprehensive annual financial report?

Answer 4

1. Introductory
   2 Financial (includes both basic financial statements an d required supplementary information
2. Statistical

Question 5

What approach is used to present the government wide and fund financial statements and reconciliation?

Answer 5

the integrated approach

Question 6

What is the basic criteria for determining the reporting entity of a governmental unit?

Answer 6

financial accountability

Question 7

What are the sections of the statement of cash flows? ?

Answer 7

1. Operating activities
2. capital and related financing activities
3. non capital financing activities
4. investing activities

**investing comes after financing

Question 8

Does government accounting require the indirect or direct method for statement of cash flows?

Answer 8

government accounting requires the direct. however, they require a reconciliation of operating income (not net income) to net cash provided by operations

Question 9

Fund financial statements are presented by major fund rather than fund type. What criteria does a major fund meet in order to be presented?

Answer 9

10 percent test -10% or more of the corresponding total revenues, expenditures/expenses, assets and deferred outflows of resources, or liabilities and deferred inflows of all government funds OR all enterprise funds

AND

5 percent test - 5% or more of the corresponding total revenues, expenditures/expenses, assets and deferred outflows of resources, or liabilities and deferred inflows of all government funds AND all enterprise funds

Question 10

What is the difference between Capital and Related Financing Activities and Noncapital Financing Activities?

Answer 10

Capital and Related Financing Activities: issuing debt associated with capital assets; inflows from capital grants; activity related to special assessments associated with capital assets

Noncapital Financing Activities: issuing debt for noncapital purposes (including interest expense); grants or subsidies; cash received from property taxes (not restricted for capital use); operating transfers

Question 11

How are the following reported in the cash flow statement:

1. Interest income
2. Interest Expense
3. Capital asset purchase

Answer 11

1. Interest income is an investing activity (not operating activities)
2. Interest expense is NOT operating. It is either Capital and related or noncapital financing
3. Capital Asset purchase is a financing activity (not investing)

Question 12

What is the journal entry to record a PO for supplies?

Answer 12

dr encumbrance and cr budgetary control

Question 13

What is considered the “equity section” of a governmental fund?

Answer 13

the “equity” section is called the FUND balance and is made up of the following:

1. Nonspendable fund balance - current assets that cannot be spent (inventory, prepaid expenditures)
2. Restricted fund balance - restricted to be spend by external authorities (legislation, grantors, creditors, other govt)
3. Committed fund balance - restricted to be spent by highest level of gov’t
4. Assigned fund balance - assets that the gov’t plans to obligate/designate (must have a positive fund balance)
5. Unassigned fund balance - resources that do not meet the above categories. only general fund has a positive unassigned fund balance (other gov’t type funds are negative)

use the acronym “NU CAR” to remember

Question 14

How should a transfer received by a gov’t type fund be reported in the Statement of Revenues, Expenditures, and Changes in Fund Balance?

Answer 14

Other Financing Source

Question 15

How to calculate amounts available for use?

Answer 15

Budget Appropriations - expenditures - encumbrances = funds available to use

Question 16

What is considered the “equity” section of gov’t wide, internal service, and enterprise funds?

Answer 16

1. Restricted - externally imposed by creditors, grantors, contributors, or laws and regulations (should never be negative)
2. Unrestricted - amounts not included in restricted and net investment on capital assets
3. Net investments on Capital Assets - this is the capital assets minus depreciation minus liabilities for those assets

Question 17

How should an interfund transfer received be reported in a proprietary fund’s Statement of Revenues, Expenses, and Changes in Fund net position?

Answer 17

it is reported after nonoperating revenues and expenses

Question 18

What fund category (i.e. governmental, proprietary, fiduciary) is concerned with the flow of funds?

Answer 18

governmental type funds.

Question 19

What is the journal entry for an internal service fund when recording revenue?

Answer 19

Dr Due from other funds

Cr Operating Revenues (control)

Question 20

What are the required financial statements for an investment trust fund?

Answer 20

the statement of fiduciary net position (balance sheet) and the statement of changes in fiduciary net position (income statement)