Fund Financial Statements

Question 1

Fund financial statements

Answer 1

financial statements are required for the governmental, proprietary, and fiduciary funds; fund financial statements are presented by major fund rather than by fund type; reporting by major fund provides more meaningful information

major funds are specifically defied as follows: a major fund must meet the 10% criteria within its category and also meet the 5% criteria associated with both categories; both rules must be met

to meet the 10% test, the GRaSPP funds are individually compared with the total of all governmental funds, and the enterprise funds are individually compared with the total of all enterprise funds

to meet the 5% test, the GRaSPP funds are individually compared with the total of all the governmental funds and enterprise funds and each enterprise fund is individually compared with the total of all enterprise funds and governmental funds to meet the 5% test

government officials may elect to report a fund as major if they believe that the pubic interest is served by the reporting, regardless of the quantitative criteria

the general fund is always considered a major fund

internal service funds are not considered in the evaluation of major and nonmajor funds; the only proprietary funds used in the determination of major and nonmajor funds are the enterprise funds

extraordinary items and transfers are not considered in major fund determinations

Question 2

Governmental funds

Answer 2

governmental funds should present financial position in a balance sheet format that displays assets plus deferred outflows of resources equal to liabilities plus deferred inflows of resources plus fund balance

Question 3

Proprietary funds

Answer 3

proprietary funds are encouraged to report net position as the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources (same thing applies to fiduciary funds)

Question 4

Fiduciary funds

Answer 4

proprietary funds are encouraged to report net position as the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources (same thing applies for proprietary funds)

the proprietary funds statement of cash flows is similar to the commercial statement of cash flows, however, it has the following 7 differences:

1) the direct method is required (indirect method is not permitted)

2) a reconciliation of operating income (not net income) to net cash provided by operations is required

3) there are four categories (instead of the three in commercial accounting): operating activities, capital and related financing activities, noncapital financing activities, and investing activities

4) the order of financing and investing activities categories are reversed; governmental entities present the financing categories before investing while commercial entities present the investing category before the financing category

5) interest income/cash receipts are reported as investing activities (not as operating activities)

6) interest expense/cash payments are either capital and related financing or noncapital financing

7) capital asset purchases are reported as financing activities (not as investing activities)

the reconciliation of operating income to net cash provided by operations includes depreciation and changes in current assets and liabilities, but does not include adjustments for gains and losses because gains and losses and nonoperating items are not included in operating income