Governmental Accounting 1 Flashcards
Primary user groups of external financial reports of a state government
- The citizenry: to which government is accountable to
- Legislative & Oversight bodies: who represent the citizenry
- Investors & Creditors: those who participate in the lending process
What is included in general-purpose external financial reporting
- financial statements
- notes to the financial statements
- required supplemental information
- other supplemental information
Involuntary Resource Provider
Cannot choose whether or not to pay; like taxes
Purpose of Financial Reporting
- Accountability: taxpayer has right to know by providing information to help in determining whether government was operated within legal constraint
Interperiod Equity: shows whether current-year revenues are sufficient to pay for current-year services or whether future taxpayers will be required to assume burdens for services previously provided
Financial Reporting Implications
- Expression of public policy
- Expression of financial intent
- Form of control
- May provide basis of evaluating performance
Outcome Measures
indicate the results that occur because of services provided including accomplishments as a result of the services provided like clearance rate of crime
6 Characteristics of Effective Financial Reporting
- Understandability
- Reliability
- Relevance
- Timeliness
- Consistency
- Comparability
Output Measures
Quantity of service provided like miles or road repaired
Accounting Equation for a Fund
Assets + Deferred Outflows of Resources = Liabilities + Deferred Inflows of Resources + Fund Balance
3 Types of Funds
- Governmental
- Proprietary
- Fiduciary
Governmental Funds
Nonexchange revenues like taxes, intergovernment revenues, and grants provide resources or most of the general government’s expenditures
Proprietary Funds
Use exchange transactions from examples like public utilities, convention centers, motor pools, and airports. They charge users for goods
Fiduciary Funds
Used to manage resources on behalf of entities or individuals
Basis of Accounting for Funds
Government: modified accrual
Proprietary: accrual
Fiduciary: accrual
Types of Government Funds
Government Fund Special Revenue Fund Debt Service Fund Capital Project Fund Permanent Fund
Types of Proprietary Funds
Enterprise Funds
Internal Service Funds
Types of Fiduciary Funds
Custodial Funds
Pension Trust Funds
Investment Trust Funds
Private Purpose Trust Funds
Fund Balance Equation
Current Assets + Deferred Outflows of Resources − Current Liabilities − Deferred Inflows of Resources = Fund Balance
General Fund
- Revenues usually come from taxes, licensing, fines, and other fees
- Expenditures can be made for any general government services not specifically accounted for in another fund
- The only required fund & there can only be one general fund
Special Revenue Fund
Accounts for specific revenues for purposes other than debt service or major capital projects like a gasoline tax that is for road maintenance
Capital Projects Fund
- Account for monies designated for acquisition or construction of significant capital items like land, buildings, and equipment
- Any remaining money is usually transferred to debt service funds unless there was debt then it goes to general fund
Debt Service Fund
Account for monies set aside to pay interest and principal on the governmental unit’s long-term general obligation debt.
Permanent Fund
ccount for resources received by the governmental entity with the stipulation that the principal amount remain “intact” but that earnings must be spent, for purposes that benefit the governmental entity
Proprietary Fund Equation
(Current Assets + Capital Assets + Deferred Outflows of Resources) − (Current Liabilities + Long-Term Liabilities + Deferred Inflows of Resources) = Net Position
Enterprise Funds
Account for activities that provide goods and services to the general public as well as to the governmental entity itself
Internal Service Fund
Account for activities that provide goods and services only to other government agencies and departments (i.e. motor pools, printing services, data processing services, central supplies, etc.)
Custodial Fund
Just holds it and distributes it
Private Purpose Trust Fund
Hold and distribute other entities besides the government and are often held longer than custodial
Investment Trust Fund
Account for monies received into an investment pool created through a formal legal trust or similar arrangement from other governmental agencies to be included in the governmental entity’s investment pool
Measurement Focus Basis of Accounting
Modified Accrual > Flow of Financial Resources > Net Current Financial Position
Full Accrual > Flow of Economic Resources > Financial Position
Modified Accrual Revenue recognition
Recognized when -
Measurable: amount is known and can be reasonably estimated
Available: amount is both legally due and cash is received whether it is by the end of the fiscal period or in time to pay obligations in current fiscal period (60 day rule)
Modified Accrual Revenue Recognition 60 day rule
A governmental entity may recognize monies received during the first 60 days of a new fiscal period as revenue of the old fiscal period.
60 day example
In Fiscal Year X, Bishop County levied property taxes totaling $5,000,000. The County received payments of $4,000,000 by the end of Fiscal Year X, received $300,000 during the first 60 days of the Fiscal Year Y, received an additional $500,000 by the end of Fiscal Year Y, and received the remaining $200,000 during the first 60 days of Fiscal Year Z.
Bishop County recognizes $4,300,000 (4,000,000 + 300,000) of property tax revenue in Fiscal Year X and $700,000 (500,000 + 200,000) of property tax revenue in Fiscal Year Y.
Modified Accrual Revenues Subject to Accrual Accounting
Revenues that are measurable and legally due prior to the receipt of cash are normally recognized on the accrual basis. These revenues typically result from charges that are billed to the customer/constituent by the governmental entity
- Property taxes
- Interest and penalties on delinquent taxes
- Investment revenue
- Regularly billed charges for services
- Taxes collected by other government units but not yet remitted
Journal Entries for amounts billed and received in current period and first 60 days of next period
Receivables
—–Revenues
Revenue
—–Deferred Inflows of resources
Modified Accrual Ependitures
Generally on the accrual basis that is expenditure is recognized when liability in incurred and measurable expect for 4 things
4 things expenditures under modified accrual accounting not accounted for under accrual method
Interest on general long term debt: not recorded until actually due
No distinction between capital expenditures like land or buildings and period expenditures like wages or rent, they are all just expenditures
Prepaids are recognized as expenditures either when purchased or when used
Increases & Decreases in fund balance other than revenues & expenditures
- other financing sources
- other financing uses
Entry to record a budget and close it
Estimated Revenues
———-Appropriations
Appropriations
———-Estimated Revenues
Surplus Budget Journal Entry
Estimated Revenues $110
- ———Appropriations $100
- ———Fund Balance $10
Fund Balance is an example of transfers from other funds or proceeds from Bonds
Deficit Budget
Estimated Revenues $90
Fund Balance $10
———-Appropriations $100
Fund balance is an example of transfer out of other funds
What Funds need budgetary comparison
General Fund and all major special revenue funds for which a budget is legally adopted.
Other Financing Sources
Increases in the fund balance of a fund that do not result in an increase in the net position of the organization as a whole.
Proceeds from long term debt & transfers of assets from other funds; either reported with revenue or netted against other financing uses
Other Financing Uses
Decreases in the fund balance of a fund that do not result in a decrease in the net position of the organization as a whole.
Transfers of assets to other funds(transfers out) is the most common example & are either reported with expenditures or netted against other financing sources
Unassigned Fund Balance Shit
Closing Appropriations increases fund balance
Closing Expenditures account decreases fund balance
So if closing entries for appropriations is greater than actual expenditures then you have an increase in unassigned fund balance
Encumbrance Order Issued J/E
Encumbrances
—-Budgetary Fund Balance
Encumbrance Order Filled J/E and year end closing
Budgetary Fund Balance
———-Encumbrances
To record invoice for goods received
Expenditures
—–Vouchers Payable
Things that are rarely encumbered and not encumbered
Payroll and interfund transactions are rarely encumbered
Petty cash is never encumbered
Amount of available appropriations
Authorized appropriation minus encumbrances and expenditures
But remember that encumbrances reverse and give way to the actual expenditure so appropriations may either decrease or increase depending if the expended amount is greater or less than the encumbrance
Note about interfund transfers
If in governmental you transfer to other government funds it is considered a transfer but if you transfer to proprietary or fiduciary then is an expenditure
