GASB Comcept Stmt Flashcards
Purpose of financial stmt for government entity
Accountability - users bad the right to know if the government has operated within the legal constraints imposed by its citizenry.
Inter-period equity - significant part of accountability by showing if the current year resource is sufficient for current year service that does not require future burden from taxpayers.
Characteristics of info in financial reporting
TRUCCR
Relevance
Comparability
Consistency
This is also for SEA performance measure
GASB believed in what performance measurement?
What are the elements of SEA performance?
Performance Measurement: service effort and accomplishment (SEA)
Elements: measures service effort (inputs)
And accomplishment: output and outcome
Measure From effort to accomplishment is efficiency, the resource used to achieve the level of output
What should be included in the financial reports?
Basis of financial stmt
Disclosure of notes about the financial stmt
Required supplemental info
Other supplemental info
Elements of the stmt of the financial position
Assets
Liabilities
Deferred outflow of resource (deferred consumption of net assets), i.e. Decrease in FV of hedging derivative)
Deferred inflow of resource ( deferred acquisition of net assets, i.e. Increase FV of hedging derivative)
Net position
Basic BS formula: assets + deferred outflow =
Liabilities + deferred inflow + net position ( for gov’t wide stmt)
Measurement attributes
Historical cost = entry value
FV = exit value
Replacement cost = entry value and acquisition value
Settlement cost = acquisition value
What are the three major type of fund for gov’tal entity?
Gov’tal funds - modified accrual (SPG DC)
- General funds
- Debt service fund
- Capital project funds
- Special revenue fund
- Permanent fund
Proprietary funds - full accrual (I.E.)
1. Internal derive funds 5. Enterprise fund
Fiduciary funds - full accrual (PIPA)
- Pension trust fund
- Investment trust fund
- Private purpose fund
- Agency trust fund
Number of funds principle: the principle state that use he minimum number of funds possible that consistent with laws and contract and follow sound financial mgmt
Purpose of budgetary Accounting
What is encumbrance accounting?
Demonstrate compliance with legislatively prescribed spending limits and purpose
Encumbrance accounting is used to ensure entity does not order goods than authorized amt
What two types of financial reporting is needed?
Fund stmt - the three major types of accounting reports
Gov’t -wide - presented the organization as a whole, including gov’tal funds and proprietary funds ( EXCLUDE fiduciary fund)
Use full accrual basis
Objectives for gov’tal accounting
Assess current availability of resources to cover the expenditures
Assess the service effort and accomplishment
Demonstrate compliance with the legal authorization
Gov’tal fund
What is a fund?
All gov’tal funds are current funds (only uses current assets and liability account), all expendable funds
A fund is both a fiscal and accounting entity with a self balance set of accounts that record cash and other financial resources.
CPA exam question on every exam!!
What are the measurement focus for modified accrual and full accrual?
Modified accrual: during the period is flow of financial resource
Focus on resource that is “measurable (known amt) and available ( legally due and receive cash at the end or in time to pay for obligation of the current period = 60 days rule)
Full accrual ha focus on economic resource, income determination or capital maintenance.
“Earned” concept is always used for Full accrual. **
At end of the period is all financial position for both focuses
What is the 60 day rule?
Gov’t entity recognize monies received during the first 60 days of a new fiscal year as revenue from the old fiscal period ( rational: in time to pay for obligation of the current fiscal year)
When revenue is measurable and legally due but before receipt of cash, how to recognize this?
This type of revenue is subject to accrual accounting
Revenues type include:
Peppery tax
Interest and penalties in delinquent taxes
Investment revenue
Regular billed for service
Taxes collected by other gov’tal unit but not yet remitted
Even though these revenue are recognized up front, but adjustment is needed for any amt exceed 60 days of recognition
Expenditure recognition rules
Short term and specific LT debt
Expenditure is using accrual basis when the liability is measurable and has been incurred.
Except: interest on general LT debt is not recorded until it is on the actual due date.
Specific LT debt and ST debt are recorded as accrued in proprietary fund and general fund
Inventoriable materials and supplies, how to recognize them?
Either record as expenditure when purchased (purchase method) or when consumed ( consumption method)
If use purchase method, the expenditure might be the whole amt paid
If use consumption method, the cost might be spread over a period of usage
What are the other financing source and usage? (OFS AND OFU)
Source: increased fund balance without increase net position
Usage: decrease fund balance without decrease net position for entity as a whole
CPA** distinguish OFS/ U from revenue and expenditures on exam
What account will be closed at end of fiscal year?
Examples of expenditure accounts?
Expenditure account because it is a temp account, close by credit it.
Ie: payable to vendor, purchase computer,
Payments of principle on LT debt
What type of funds uses budgetary account? (ALWAYS TESTED ON CPA EXAM)
- make of budgetary accounts
- budgetary account balance is the opposite of their actual account
- when budgetary entries are made
What is the characteristics of budgetary accounting entires?
Only modified accrual basis accounting use budgetary Accounts.
Entires: usually the opposite of accrual accounting entires
That is revenues will have a DR balance, and expenditure have CR balance
Budgetary entries **
- Budget is made at beg of fiscal year when budget has adopted
Dr. Estimated revenue
CR. Appropriation
Dr or CR budgetary fund balance to balance the entry
- Mid year entries if additional budget is adopted, same as set up the first entry
- Close entry at year end
Dr Appropriation
CR. Estimated revenue
What are examples of estimated revenues?
Property taxes,license & penalties and inter-gov’tal revenues
What is encumbrance for? What is the JE?
Encumbrance (dr balance) is for control the expenditures
Appropriation - encumbrance - expenditure = unencumbered ( unexpected appropriation)
Entries
When purchase order is prepared
Dr. Encumbrance CR budgetary FB
When goods is received
1. Dr budgetary FB
CR Encumbrance
- Dr Expenditure CR voucher payable / cash
If actual expenditure is less than encumbrance, the unencumbered amt is increased
At closing date
If not receive the goods still close the budgetary account
Reverse entry first p
1. Dr. Budgetary FB CR. Encumbrance
Put in assigned for encumbrance
2. Dr Unassigned FB CR FB - assigned for encumbrance (committed)
After closed, the fund is in FB- assigned
Next year: re-encumber
1. Dr. Encumbrance - prior year
CR. Budgetary FB
Reverse last year closing entry
2. Dr. FB assigned for encumbrance
CR. Unassigned FB
