FAR Module 9 Part 2 Flashcards
Under the modified accrual basis of accounting for a governmental unit, revenues should be recognized in the accounting period in which they:
Become available and measurable.
Which of the following items is recognized for governmental activities in the government-wide statement of activities and not the statement of revenues, expenditures, and changes in fund balance for governmental funds?
A state grant awarded and received for road repairs that were completed this fiscal year
Property tax revenue for an amount deferred because it was not available
Salaries payable at the end of the current year that will be paid at the beginning of the subsequent year
Transfers between governmental funds
Property tax revenues that are measurable but not available at year end are recorded as deferred inflows of resources in governmental fund presentations and not recognized as revenues consistent with the modified accrual basis of accounting.
Financial statements for which fund type generally report net position in their individual fund financial statements?
Permanent fund
Enterprise
Capital Projects
Special Revenue
The term used to identify the equity section in proprietary funds is “net position”. An enterprise fund is a proprietary fund and it will report net position as fund equity.
Which of the following items is an example of imposed non-exchange revenue for a governmental entity?
Property taxes
Personal income taxes
Federal grant money
Retail Sales tax
Imposed non-exchange transactions include taxes imposed on non-exchange transactions (such as fines) or wealth (such as property taxes).
Financing for the renovation of Fir City’s municipal park, begun and completed during Year 1, came from the following sources:
Grant from state government $400,000
Proceeds from general obligation bond issue $500,000
Transfer from Fir’s general fund $100,000
In its Year 1 capital projects fund operating statement, Fir should report these amounts as:
Revenues?
Other Financing sources?
the $400,000 state government grant would be considered revenue of the capital projects fund. The $500,000 proceeds from the general obligation bonds and the $100,000 transfer from general fund (total $600,000) would be other financing sources of the capital project.
Chase City imposes a 2% tax on hotel charges. Revenues from this tax will be used to promote tourism in the city. Chase should record this tax as what type of non-exchange transaction?
Derived tax revenue
Imposed non-exchange revenue
Voluntary non-exchange transaction
Government-mandated transaction
Rule: Derived (non-exchange) tax revenues represent taxes imposed on or derived from exchange transactions such as commercial sales (sales tax).
A 2% tax on hotel charges represents a derived non-exchange tax revenue based on commercial sales per rule above.
Ridge Township’s governing body adopted its general fund budget for the year ended July 31, Year 1, composed of estimated revenues of $100,000 and appropriations of $80,000, Ridge formally integrates its budget into the accounting records. To record the appropriations of $80,000, Ridge should:
Credit appropriations control
Debit estimated expenditures control
Debit appropriations control.
Credit estimated expenditures control.
To record the budget, the journal entry would be:
Estimated Revenues $100,000
Appropriations $80,000
Budgetary Control 20,000
Which of the following journal entries should a city use to record $250,000 for fire department salaries and wages incurred during the month of May?
Salaries and wages exp $250,000
Encumbrances $250,000
Expenditures - salaries and wages $250,000
Salaries Payable $250,000
Salaries and wages exp $250,000
Appropriations $250,000
Encumbrances $250,000
Salaries Payable $250,000
The fire department salaries would be paid out of the general fund, as this is a service of the city. The general fund records salaries as expenditures with a credit to salaries payable.
Expenditures - salaries and wages $250,000
Salaries Payable $250,000
The revenues control account of a governmental unit is increased when:
Property taxes are recorded
Appropriations are recorded
The budget is recorded
The encumbrance account is decreased
When property taxes are levied, the following journal entry is made:
Property taxes receivable XXX
Allowance (Uncollectible Property taxes) XXX
Revenues XXX
Thus, revenue control account is increased when property taxes are levied.
The expenditure element “salaries and wages” is an example of which type of classification?
Function
Activity
Object
Program
Wages and salaries is an example of an object classification. This is most specific classification in the hierarchy and represents the chart of accounts title. Expenditures of governmental resources should be classified by object classes, according to the type of items purchased or services obtained.
Expenditures of a governmental unit for insurance extending over more than one accounting period:
Must be allocated between or among accounting periods.
Must be accounted for as expenditures of the periods subsequent to acquisition.
May be allocated between or among accounting periods or may be accounted for as expenditures of the period of acquisition.
Must be accounted for as expenditures of the period of acquisition.
Expenditures extending over more than on period may be allocated between or among accounting periods. Non spendable current resources such as inventory or prepaid may be recorded using either the consumption or purchases method. Current assets of this character serve as the basis for classification of fund balance as non spendable.
For the budgetary year ending December 31, Year 1, Maple City’s general fund expects the following inflows of resources:
Property taxes, licenses, and fines $9,000,000
Proceeds of debt issue $5,000,000
Interfund transfers for debt service $1,000,000
In the budgetary entry, what amount should Maple record for estimated revenues?
Only the $9,000,000 property taxes, licenses, and fines are classified as Estimated Revenues. The $5,000,000 proceeds of debt issue and the $1,000,000 interfund transfer would be classified as Estimate Other Financing Sources in the budgetary entry.
In Soan County’s general fund statement of revenues, expenditures, and changes in fund balances, which of the following has an effect on the excess of revenues over expenditures?
Payment to a debt-service fund
Proceeds from the sale of capital assets
Purchase of fixed assets
Special items
Fixed assets are not expected to contribute to the generation of revenue and are therefore treated as an expenditure (capital outlay). This will serve to reduce the excess of revenue over expenditures.
How should state appropriations to a state university choosing to report as engaged only in business-type activities be reported in its statement of revenues, expenses, and changes in net position?
Other financing sources
Capital contributions
Operating revenues
Nonoperating revenues
Receiving state appropriations represents a non-exchange transaction and will be treated as nonoperating revenues. Operating grants and subsidies represent non-exchange transactions that are not derived from operations. They are treated as nonoperating revenues.
What is the major difference between an exchange transaction and a non-exchange transaction for governmental units?
Whether resources acquired can be further exchanged
Time requirements and whether the transaction is required by law
Purpose restrictions placed upon fund balances
The relationship between the amount of value given and received
An exchange transaction is a reciprocal transfer in which each party receives and sacrifices something of approximately equal value. A non-exchange transaction involves giving/receiving value without receiving/giving equal value in return. With an exchange transaction, there is a bargained value in the transaction, with non exchange transaction there is no bargained value or arms length transaction.
