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CPA FAR > Governmental Accounting > Flashcards

Governmental Accounting Flashcards

1
Q

What are the three major types of funds in governmental accounting?

A

Governmental, Proprietary, Fiduciary

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2
Q

Which two accounting bases are used in governmental accounting?

A

Accrual basis - current economic resources focus (revenues recognized when earned)

Modified accrual basis - current financial resources focus (revenues recognized when available and measurable)

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3
Q

What is a budget appropriation?

A

The highest amount allowed for a particular expenditure under a budget.

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4
Q

What is an encumbrance?

A

Records purchase and reserves it for the encumbrance.

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5
Q

What is the opening budgetary entry?

A

Dr Estimated Revenues Control
Cr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)

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6
Q

What is the closing budgetary entry?

A

Dr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
Cr Estimated Revenues Control

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7
Q

What are the types of governmental funds?

A 
General Fund
Special Revenue Fund
Permanent Fund
Capital Projects Fund
Debt Service Fund
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8
Q

What is a General Fund?

A

The operating fund of the governmental unit

Records Significant Revenues: Taxes; Tickets; Fines; Licenses

Records Significant Expenditures: Police; Education; Fire Dept

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9
Q

What is a Special Revenue Fund?

A

Restricted for a specific purpose such as street repair.

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10
Q

What is a Permanent Fund?

A

Legally restricted fund; where only earnings can be used to fund programs.

Principal remains intact.

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11
Q

What is a Capital Projects Fund?

A

Used to acquire and build facilities.

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12
Q

What is a Debt Service Fund?

A

Handles repayment of long-term debt and related interest.

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13
Q

Which fund statements are issued in Governmental Accounting?

A

Balance Sheet

Statement of Revenues; Expenditures; and Changes in Fund Balance

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14
Q

When is Revenue recorded in Governmental Accounting?

A

When it is BOTH available and measurable; regardless of when it is spent.

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15
Q

What is Derived Tax Revenue?

A

Money collected from people doing things:

Sales tax (buying cars) or income tax (people working)

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16
Q

What is Imposed Tax Revenue?

A

Tax assessed just because things exist

Example: property tax on a car (even if it’s never driven); real estate tax

Recorded as a revenue when BUDGETED.

Estimated uncollectible property tax revenues don’t offset revenues; so don’t net them.

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17
Q

What are the types of Proprietary Funds?

A

Internal Service Funds - to serve the needs of other governmental units (i.e. motor pool)

Enterprise Funds - provide goods or services to external users (i.e. post office)

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18
Q

What are the Fund Balance Types?

A 
Restricted - Restricted by Contributor 
 Committed - Restricted by Government
 Assigned - Intended for a purpose
 Unassigned - Available to be spent
 Non-spendable - Not in a spendable state
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19
Q

What are the types of Fiduciary Funds?

A

Agency Fund - government acts as an agent or custodian

Pension Trust Fund - Government is a trustee for a pension plan

Investment Trust Fund - Government is a trustee over a series of investments

Private Purpose Trust - Trust that benefits various individuals and entities

20
Q

How are Assets & Liabilities presented on the Statement of Net Position?

A

Assets (Current & Non-Current)
Deferred Outflows of Resources
Liabilities (Current & Non-Current)
Deferred Inflows of Resources

21
Q

How are Capital Assets shown on a governmental Statement of Net Assets?

A

They are shown net of debt

Asset Cost - Accumulated Depreciation - Asset Liabilities : Net Assets

22
Q

How is infrastructure reported on a governmental Statement of Net Assets?

A

Modified approach:

Reported at cost; no accumulated depreciation

23
Q

How is a Statement of Net Assets divided?

A

Into Governmental Activities and Business Activities

24
Q

How are activities presented in a Statement of Activities?

A

They are divided by function

If the activities of a component are distinguishable from the rest of the governmental entity; then discreet presentation is required

If the activities of the component cannot be identified and separated from the rest of the governmental activities; then blended presentation is warranted.

Component units are reported in the Entity-Wide Financial Statements and not the Fund Financial Statements.

25
Q

What is the primary objective of governmental accounting?

A

To provide information that is useful and benefits a wide range of users including:

Costs of services provided

Sufficiency of revenues to cover costs

Financial position of entity

26
Q

Which of the following characteristics of service efforts and accomplishments is the most difficult to report for a governmental entity

A

Relevance
means the information must bear a logical relationship with the needs for its purpose. It must also be reliable. The achievement of this reporting objective is more difficult to establish than it is to demonstrate consistency (adherence to the consistent application of GAAP from year to year) or comparability (the use of GAAP in a manner comparable to other governments). The timeliness objective requires that reports be issued early enough to facilitate timely decisions. The timeliness of reporting is relatively easy to demonstrate.

27
Q

The measurement focus of governmental-type funds is on the determination of:

A

Measurement focus for a governmental fund contemplates measurement of the flow of current financial resources and resulting financial position. A fund’s measurement focus identifies what transactions should be recorded and how they should be reported. For governmental funds, the statement of revenues and expenditures should report resources received and consumed during the current period (current financial resources focus). The balance sheet shows available resources and current obligations (financial position focus).

The governmental fund measurement focus is on current financial resources, the determination of financial position and changes in financial position (sources, uses, and balances of current financial resources), rather than on such proprietary objectives as net income determination, capitial maintenance or cash flows.

28
Q

Fund accounting is used by governmental units with resources that must be:

A

Segregated for the purpose of carrying on specific activities or attaining certain objectives.

A fund is a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein. Fund resources are segregated for the purpose of carrying out specific activities (e.g., water and sewer operations) or attaining certain objectives (e.g., providing drinking water and wastewater management services to customers).

29
Q

Lys City reports a compensated absences liability in its government-wide financial statements. The salary rate used to calculate the liability should normally be the rate in effect:

A

Compensated absence liability should be calculated based upon the pay or salary rates in effect at the balance sheet date. The valuation of the noncurrent liability on the goverment-wide statement of net position will be equal to the number of hours employees are entitled to receive upon termination times the rate of pay earned at the balance sheet date, a point in time.

30
Q

The revenues control account of a governmental unit is increased when

A

Property taxes are recorded.

Property taxes receivable $ XXX
Allowance for uncollectible property taxes $ X
Revenues XXX

31
Q

Which internal account should Spring Township credit when it issues a purchase order for supplies?

A

Budgetary control.

Encumbrances $ XXX
Budgetary control $ XXX

32
Q

When a snowplow purchased by a governmental unit is received, it should be recorded in the general fund as a(an):

A

Expenditure.

33
Q

How are the following classified:
Proceeds of debt issue 5,000,000
Interfund transfers for debt service 1,000,000

A

The $5,000,000 proceeds of debt issue and the $1,000,000 interfund transfer would be classified as Estimated Other Financing Sources in the budgetary entry.

34
Q

Journal Entries for Purchase Orders

A

When the purchase order was issued:
Encumbrances (estimated) $ 5,000
Budgetary control $ 5,000

When the supplies and invoice are received:

Budgetary control $ 5,000
Encumbrances $ 5,000
Expenditures (actual) 4,950
Vouchers payable 4,950

35
Q

Encumbrances outstanding at year-end in a state’s general fund would most likely be reported as a

A

Fund balance commitment in the general fund.

Encumbrances are commitments or assignments of fund balance representing the amount of unperformed contracts for goods or services. Encumbrances at year-end do not constitute expenditures or liabilities. Therefore, at year-end encumbrances are reclassified as a commitment of assignment of fund balance that is not appropriable for expenditure.

36
Q

The govt wide F/S must reconcile:

A

· The differences in the fund balances of governmental funds and net assets in the govt wide F/S
· The differences in net change in fund balances of governmental funds and the change in net assets (net position) for governmental activities (GOES BARE) (i.e. net increase in FB, what is change in net position of govnt actitivies?)

To prepare the reconciliation use the following mnemonic
B/S – GALS BARE
G GRaSPP fund balance
\+A Assets (non-current)
- L Liabilities (non-current)
\+S Internal service fund net assets
Adjustments
B Basis of accounting
A Accrued
R Revenues
E Expenses
Statement of revenues, expenditures and changes in fund balance – GOES BARE
G GRaSPP net change in fund balance
-O Other financing sources
\+E Expenditure – capital outlay (net of depreciation)
\+S Internal service fund net income
Adjustments
B Basis of accounting
A Additional Accrued
37
Q

Statement of Cash Flows for Fund Statements

A

Similar to normal statement of cash flows except 6 differences:

  1. Direct method is required (indirect method not allowed)
  2. Reconcile operating income (not NI) to net cash provided by operations
  3. Financing section is split into 2 sections (so 4 in total)
    - Capital and related financing activities
    - Non-capital financial activities
  4. Interest income and cash receipts are reported are investing activities (not operating)
  5. Interest expense/cash payments are including in one of the financing sections
  6. Capital assets purchases are reporting in capital financing activities (not investing)
38
Q

The statement of activities of the government-wide financial statements is designed primarily to provide information to assess which of the following?

A

Operational accountability.

39
Q

According to GASB 34, Basic Financial Statements-and Management’s Discussion and Analysis-for State and Local Governments, certain budgetary schedules are required supplementary information. What is the minimum budgetary information required to be reported in those schedules?

A

Budgetary comparison schedules should be prepared for the general fund and each major special revenue fund which requires a budget. Budgetary comparison schedules should display the original budget, final appropriations budget, and actual inflows, outflows, and balances on a budgetary basis.

40
Q

The city of Accountability will report its net position in its government-wide financial statements classified in up to three categories, as follows

A

Government-wide financial statements should classify net assets as: RUN

  1. Net investment in capital assets
  2. Restricted and
  3. Unrestricted.
41
Q

Modified approach for Infrastructure and Government

A

Under the modified approach, infrastructure expenditures are reported as expenses except for outlays that result in additions or improvements, which would be capitalized.

42
Q

In applying the criteria used for determination of major funds required for reporting in a government’s fund financial statements, a government would consider which of the following statistics?

A

Rule: The criteria for determining major funds includes qualification as to revenues, expenditures/expenses, assets, or liabilities that are at least 10 percent of the associated total for ALL governmental OR enterprise (as appropriate) AND at least 5 percent of the total of the associated totals for ALL governmental AND enterprise funds.

43
Q

Budgetary Comparison Schedules as part of the required supplementary information. Which of the following is not a true statement regarding this schedule?

A

The following are true:

  1. The schedule may use either GAAP or budgetary presentation formats and basis of accounting
  2. The schedule must include the originally adopted budget, the final amended budget and the actual results for the year
  3. The schedule may include the computed difference between the original budget and the final amended budget.

This is the answer, and this is not true….this is OPTIONAL:
The schedule must include the variance of actual performance from the final amended budget.

GASB 34 and Budget:
Presentation of budget versus actual amounts for the General Fund and each major Special Revenue Fund with a legally adopted budget presented in either the Required Supplementary Information or within the Basic Financial Statements.

44
Q

Which of the following is a basic criterion used to determine the reporting entity for a governmental unit?

A

The reporting entity is the oversight unit and all related component units. The basic criteria include financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability of fiscal matters.

45
Q

Not for Profit

A

Cash flows from noncapital financing activities include:
•Proceeds or payments related to borrowing not attributable to the acquisition, construction or improvement of capital assets.

  • Cash receipts or payments related to grants or subsidies not attributable to capital purposes.
  • Property taxes not designated for capital purposes.
  • Cash paid to other funds (other than for interfund services).

CPA FAR (20 decks)

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