Governmental Accounting

Question 1

Restricted net position in the government-wide statement of net profit

Answer 1

Restricted net position in the government-wide statement of net position is presented on the accrual basis. Restricted fund balances in the governmental funds balance sheet is presented on the modified accrual basis.

Question 2

In the government-wide statement of net position, restricted capital assets should be included in the

Answer 2

Net investment in capital assets includes unrestricted and restricted capital assets. However, debt related to significant unspent proceeds is classified in the same net position component as those proceeds.

Question 3

Balances not eliminated by the government

Answer 3

internal service funds that are not eliminated are usually reported in the government activities column because these funds’ activities are ordinarily more governmental than business-type.

Question 4

Unrestricted net position in the government-wide statement of net position

Answer 4

Unrestricted net position includes items that may be internally committed or assigned. However, the designation is not reported on the financial statements.

Question 5

Enterprise fund

Answer 5

Enterprise funds use the accrual method of accounting.

Question 6

General revenues reported in the government-wide statement of activities

Answer 6

General revenues are revenues not required to be reported as program revenues. They are reported separately after total net (expense) revenue for all functions in the government-wide statement of activities. All taxes, including those levied for a special purpose, are general revenues.

Question 7

Custodial.

Answer 7

When capital improvements are financed by special assessment debt, the debt service transactions of a special assessment issue for which the government is not obligated should be reported in a custodial fund in the statement of fiduciary net position, not a debt service fund.

Question 8

Total governmental fund balances should be reconciled to the net position of governmental activities in the government-wide statements of net position.

Answer 8

The first step in preparing government-wide financial statements is to convert the data in the governmental fund financial statements. Because those data are presented using the modified accrual basis, adjustments are necessary to convert the data to the full accrual basis. The conversion is performed at the total governmental fund summary level, not at the individual fund level. Liabilities due in the current period are reported in the governmental fund financial statements. Thus, bonds payable in the current period is not a reconciling item.

Question 9

The government wide statement of activities should report which of the following categories of programs revenues.

Answer 9

Program revenues include (1) charges for services, (2) program-specific operating grants and contributions, and (3) program-specific capital grants and contributions. They may also include earnings on (1) endowments, (2) permanent fund investments, or (3) other investments restricted to a given program. Earnings of endowments or permanent funds that finance general fund programs or general operating expenses are not program revenues. However, when earnings on a program’s invested accumulated resources are legally restricted for use by the program, those earnings are program revenues.

Question 10

When preparing worksheets to convert governmental fund financial statements to government-wide financial statements, conversion entries

Answer 10

The first step in preparing government-wide financial statements is to convert the modified accrual data in the governmental fund financial statements. Thus, reconciliation adjustments are necessary to convert the data to the full accrual basis. The conversion is performed at the total governmental fund summary level, not at the individual fund level.

Question 11

A summary reconciliation of the government-wide and fund financial statements

Answer 11

A government must provide a summary reconciliation to the government-wide statements at the bottom of the fund statements or in a schedule. Brief explanations on the face of the statements may suffice, but a more detailed explanation in the notes may be necessary.

Question 12

A state or local government’s change in fiduciary net position

Answer 12

Government-wide statements display information about the government as a whole, including the primary government and its component units. But they exclude fiduciary activities. Fiduciary funds, including fiduciary component units, are reported only in the statements of fiduciary net position and changes in fiduciary net position. Thus, information about fiduciary activities is not reported in the government-wide financial statements. For this reason, no reconciliation is possible.

Question 13

government-wide financial statement

Answer 13

Two major distinctions are made in the government-wide financial statements: (1) between the primary government and its discretely presented component units and (2), within the primary government, between governmental activities and business-type activities.

Question 14

With regard to the statement of cash flows for a governmental unit’s proprietary funds, items generally presented as cash equivalents are

Answer 14

Cash equivalents are highly liquid investments, readily convertible to known amounts of cash with an original time to maturity at acquisition of 3 months or less. The T-bills and CDs both meet these criteria and are presented as cash equivalents.

Question 15

A state or local government’s statement of changes in fiduciary net position most likely

Answer 15

A statement of changes in fiduciary net position reports additions to and deductions from the fiduciary net position for (1) pension (and other employee benefit) funds, (2) investment trust funds, (3) private-purpose trust funds, and (4) custodial funds.

Question 16

A government entity is required to include a statement of cash flows

Answer 16

The proprietary funds financial statements are the statements of (1) net position; (2) revenues, expenses, and changes in fund net position; and (3) cash flows. A statement of cash flows also is required for entities engaged in business-type activities, e.g., public colleges and universities.

Question 17

An enterprise fund must be used when

Answer 17

Enterprise funds need not be used to report insignificant activities. They may be used for activities for which fees are charged to external users, but they must be used if one of three criteria (applied in the context of the activity’s principal revenue sources) is satisfied. The activity should be reported as an enterprise fund if it is financed with debt, and the only security is a pledge of the activity’s net revenues from fees and charges. If the debt is also secured by the full faith and credit of a related governmental entity, the debt is not payable solely from the activity’s net revenues.

Question 18

Custodial.

Answer 18

Custodial funds account for grants and other financial assistance to be transferred to, or spent on behalf of, a secondary recipient if the recipient government acts purely as a conduit, that is, if it receives the monies and transmits them without having any administrative or direct involvement in the program. If the recipient government has such involvement, the pass-through grant is accounted for in an appropriate governmental, proprietary, or trust fund.

Question 19

Statement of Financial Positions

Answer 19

Assets Liabilities Deferred inflow of resources deferred outflow of resources and net position

Question 20

Government Fund Accounting

Answer 20

Accrual Accounting revenue are recorded when measurable and earned

Question 21

Three Different types of funds

Answer 21

Government, Proprietary and Fiduciary

Question 22

What are the Five Governmental Funds

Answer 22

General Fund, Special Revenue, Capital Project Funds Debt Service Funds and Permanent Funds

Question 23

General Funds

Answer 23

Everything that is not required in another type of fund

Question 24

Special Revenue Fund

Answer 24

Revenue Sources that are restricted or committed to be spent for specific purposed purposes

Question 25

Capital Projects Funds

Answer 25

Restricted Funds for Construction or Acquisition of Capital Facilities in sure for buildings land or improvements

Question 26

Debt Service Funds

Answer 26

Restricted or Committed for Debt Service Principal and Interest Expenditures. Which are used to pay interest and principal on long term debt

Question 27

Permanent Funds

Answer 27

for Endowments which the earning are restricted to support governments programs dedicated for public use

Question 28

Proprietary Funds

Answer 28

Business Type Funds

Question 29

Enterprise Funds

Answer 29

Accounts for Business-type activities that the public is the primary user of

Question 30

Internal Service Funds

Answer 30

Other Governments agencies are the primary user

Question 31

Fiduciary Funds

Answer 31

Money held for others

Question 32

Custodial Funds

Answer 32

Assets held briefly then distributed such as special assessments, tax collections or payroll deductions

Question 33

Pension trust funds

Answer 33

Assets held in trust to provide employee retirement benefits

Question 34

Private purpose trust funds

Answer 34

Assets held in trust to benefit individuals

Question 35

Investment trust funds

Answer 35

accounts for assets held in trust for other governments

Question 36

Government-Wide Financial Statements

Answer 36

Statement of Net Position and Statement of Activities

Question 37

Statement of Net Position

Answer 37

Accrual basis, and it has 2 separate columns: Governmental activities and business activities (does NOT include fiduciary funds)

Question 38

Statement of Activities

Answer 38

Include the following sections Program expenses Program revenues Net program (expense) or revenue General revenues

Question 39

Governmental activities and business-type activities

Answer 39

Are separated on the statement. It does NOT include fiduciary funds either

Question 40

Financial statements of a governmental fund

Answer 40

Balance Sheet Assets and Deferred Outflows of Resources section Liabilities, Deferred Inflows of Resources, and Fund Balances section Has a column from left to right of the general fund, special revenue fund, capital projects fund, debt service fund, a column that totals all non-major funds, and then a totals column

Question 41

Statement of Revenues, Expenditures, and Changes in Fund Balance

Answer 41

Revenues section Expenditures section Shows the changes in fund balances at the bottom Has separate columns for each major fund and a column showing combined non-major funds like the balance sheet

Question 42

Statement of Cash Flow

Answer 42

Not included in the Government Statements

Question 43

Budget Comparison

Answer 43

Budget-to-actual comparison is required for the general fund, and any annually budgeted major special revenue fund.

Question 44

Proprietary Funds Statements are

Answer 44

Statement of net position Statement of revenues, expenses, and changes in net position Statement of cash flows

Question 45

It is organized in order by:

Answer 45

● Operating revenues ● Operating expenses ● Operating income or loss ● Non-operating revenues & expenses ● Ends with “change in net position”

Question 46

Fiduciary Funds Statements

Answer 46

Statement of fiduciary net positions ○ Assets ○ Add: Deferred outflows of resources ○ Less: Liabilities ○ Less: Deferred inflow of resources ○ Ends with: Net positio

Question 47

Changes in Fiduciary Net Position

Answer 47

Additions ○ Less: Deductions ○ Ends with: Net increase or decrease in fiduciary net position

Question 48

Managment's Discussion and Analysis

Answer 48

R discusses the current year’s results compared to prior years. It provides an explanation of the included financial statements and how the different statements relate to each other. It will also discuss overall financial position, reasons for any major changes in fund balances, deviations from the budget, etc.

Question 49

Other information required

Answer 49

Disclosures about infrastructure assets using the modified approach, Budget comparison Other statistical data or schedules to provide additional info on significant elements of the government

Question 50

Component Unit

Answer 50

A component unit is a legally separate organization that the primary government officials are financially accountable for, OR, the relationship is such that leaving it out of the financial statements would be misleading or incomplete.

Question 51

Blended Presentation

Answer 51

component unit is part of the primary government in substance, then the balances for its funds are included with similar funds in the primary government, hence, “blended”.

Question 52

Discrete Presentation

Answer 52

For all other component units, a separate column is added to the right of the primary government’s data. This is discrete presentation.

Question 53

Net Positions Categories include

Answer 53

Unrestricted, Restricted and New Investment in Capital Assets

Question 54

Unrestricted

Answer 54

Funds that aren’t “restricted” or “net investment in capital assets

Question 55

Restricted

Answer 55

The restriction needs to be due to an external reason such as creditors or legislation. Not city council decision on how to use the funds

Question 56

Net investment in capital assets

Answer 56

Balance is equal to capital assets - accumulated depreciation - any debt related to the capital assets

Question 57

Non-spendable

Answer 57

not in a spendable form or legally required to remain unspent, such as permanent endowments

Question 58

Spendable

Answer 58

Restricted Committed Assigned and Unassigned

Question 59

Committed

Answer 59

Constrained by the government’s highest level of authority. Note the difference to “restricted

Question 60

Assigned

Answer 60

Intended to be used for a specific purpose but doesn’t meet restricted or committed criteria

Question 61

Unassigned

Answer 61

Resources available for any purpose

Question 62

Capital assets

Answer 62

reported in the proprietary or fiduciary funds

Question 63

Capital assets are recorded

Answer 63

Historical cost and depreciated, except for land and inexhaustible works of art or historical items.

Question 64

Infrastructure Assets

Answer 64

Assets such as bridges roads and water systems that will have useful life longer than ordinary Because of this, “inexhaustible”. Infrastructure assets are not depreciated, and the rest are treated as capital assets

Question 65

General Liabilities for the Government- Wide Financial Statements

Answer 65

Unmatured long-term debt is reported in the government-wide statement of net position.

Question 66

Unmatured Long-Term Debt

Answer 66

bonds, capital leases, judgements, underfunded pension plans, notes, and other government debt

Question 67

Interfund transactions

Answer 67

Inter-fund sales/purchases, Reimbursements, Loans, Transfers

Question 68

Inter-fund sales/purchases

Answer 68

business-type transactions between funds. These are recorded as revenue and expenditures or expenses ○ The fund receiving the service records an expenditure and the providing fund records revenue

Question 69

Reimbursements

Answer 69

One fund reimburses another fund.

Question 70

Transfers

Answer 70

These are transfers between funds with no repayment required

Question 71

Loans

Answer 71

Amounts between funds that are expected to be repaid

Question 72

Derived Tax Revenues

Answer 72

Taxes imposed on exchange transactions such as taxing personal income or taxes on goods and services

Question 73

Imposed Nonexchange Transactions

Answer 73

These are taxes on non-government entities (individuals or property) but not on exchange transactions. These include property taxes or fines.

Question 74

Government Mandated Nonexchange Transactions

Answer 74

When one government entity provides resources to another government entity to be used for a certain purpose.

Question 75

Voluntary Nonexchange Transactions

Answer 75

A contractual agreement entered by two parties willingly, such as a donor donating funds to a local school, or endowments.

Question 76

Nonexchange revenue under the modified accrual basis

Answer 76

: Under the modified accrual basis, a government recognizes revenue as cash is received during the year, and up to 60 days after the end of the year when it is measurable and available.

Question 77

Encumbrance Accounting

Answer 77

● Appropriation ● LESS encumbrances ● LESS expenditures ● = Unencumbered, unexpended appropriation

Question 78

Noncapital financing.

Answer 78

Cash interest paid to lenders other than to acquire, construct, or improve capital assets and Receipt of tax revenues.

Question 79

Operating

Answer 79

Cash payments for interfund services,selling services and making student loans

Question 80

A Fund that is always Major

Answer 80

General Fund

Question 81

Combined with liabilities to determine whether major fund criteria are met.

Answer 81

Deferred inflows of resources.

Question 82

funds that emphasize major fund reporting.

Answer 82

Governmental and proprietary financial statements emphasize major funds. But major fund reporting does not apply to internal service funds.

Question 83

Deferred outflows of resources

Answer 83

To determine whether major fund criteria are met, deferred outflows of resources are combined with assets, and deferred inflows of resources are combined with liabilities.

Question 84

Internal Service Funds

Answer 84

In which Major fund reporting does not apply to internal service funds

Question 85

The standard(s) required for major fund reporting of a qualifying fund

Answer 85

Any governmental or enterprise fund must be reported as major if two requirements are met. First, total assets, liabilities, revenues, or expenditures or expenses (excluding extraordinary items) of the fund are at least 10% of the corresponding element total (assets, etc.). Second, an element that met the 10% test is at least 5% of the corresponding element total for all governmental and enterprise funds.

Question 86

The standard for discretionary major fund reporting of a qualifying fund

Answer 86

Any governmental or enterprise fund believed to be particularly important to users also may be reported in the same way as a major fund.

Question 87

Example of Resources most likely accounted for by a special revenue fund

Answer 87

Gasoline Taxes

Question 88

Example of Resources most likely accounted for by a capital projects fund

Answer 88

Capital projects funds account for financial resources restricted, committed, or assigned to be expended for capital purposes. These resources include general obligation bond proceeds to be used to acquire or construct major capital facilities for general government use (e.g., schools, bridges, or tunnels)

Question 89

Enterprise Funds

Answer 89

Enterprise funds may be used for any activities for which fees are charged to external users. T