Governmental Accounting Flashcards
Restricted net position in the government-wide statement of net profit
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.
In the government-wide statement of net position, restricted capital assets should be included in the
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.
Balances not eliminated by the government
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.
Unrestricted net position in the government-wide statement of net position
Unrestricted net position includes items that may be internally committed or assigned. However, the designation is not reported on the financial statements.
Enterprise fund
Enterprise funds use the accrual method of accounting.
General revenues reported in the government-wide statement of activities
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.
Custodial.
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.
Total governmental fund balances should be reconciled to the net position of governmental activities in the government-wide statements of net position.
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.
The government wide statement of activities should report which of the following categories of programs revenues.
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.
When preparing worksheets to convert governmental fund financial statements to government-wide financial statements, conversion entries
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.
A summary reconciliation of the government-wide and fund financial statements
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.
A state or local government’s change in fiduciary net position
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.
government-wide financial statement
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.
With regard to the statement of cash flows for a governmental unit’s proprietary funds, items generally presented as cash equivalents are
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.
A state or local government’s statement of changes in fiduciary net position most likely
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.
A government entity is required to include a statement of cash flows
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.
An enterprise fund must be used when
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.
Custodial.
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.
Statement of Financial Positions
Assets Liabilities Deferred inflow of resources deferred outflow of resources and net position
Government Fund Accounting
Accrual Accounting revenue are recorded when measurable and earned
Three Different types of funds
Government, Proprietary and Fiduciary
What are the Five Governmental Funds
General Fund, Special Revenue, Capital Project Funds Debt Service Funds and Permanent Funds
General Funds
Everything that is not required in another type of fund
Special Revenue Fund
Revenue Sources that are restricted or committed to be spent for specific purposed purposes
Capital Projects Funds
Restricted Funds for Construction or Acquisition of Capital Facilities in sure for buildings land or improvements
Debt Service Funds
Restricted or Committed for Debt Service Principal and Interest Expenditures. Which are used to pay interest and principal on long term debt
Permanent Funds
for Endowments which the earning are restricted to support governments programs dedicated for public use
Proprietary Funds
Business Type Funds
Enterprise Funds
Accounts for Business-type activities that the public is the primary user of
Internal Service Funds
Other Governments agencies are the primary user
Fiduciary Funds
Money held for others
Custodial Funds
Assets held briefly then distributed such as special assessments, tax collections or payroll deductions
Pension trust funds
Assets held in trust to provide employee retirement benefits
Private purpose trust funds
Assets held in trust to benefit individuals
Investment trust funds
accounts for assets held in trust for other governments
Government-Wide Financial Statements
Statement of Net Position and Statement of Activities
Statement of Net Position
Accrual basis, and it has
2 separate columns:
Governmental activities and business activities (does NOT include fiduciary funds)
Statement of Activities
Include the following sections Program expenses
Program revenues
Net program (expense) or revenue
General revenues
Governmental activities and business-type activities
Are separated on the
statement. It does NOT include fiduciary funds either
Financial statements of a governmental fund
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
Statement of Revenues, Expenditures, and Changes in Fund Balance
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
Statement of Cash Flow
Not included in the Government Statements
Budget Comparison
Budget-to-actual comparison is required for the general fund, and any annually
budgeted major special revenue fund.
Proprietary Funds Statements are
Statement of net position
Statement of revenues, expenses, and changes in net position
Statement of cash flows
It is organized in order by:
● Operating revenues
● Operating expenses
● Operating income or loss
● Non-operating revenues & expenses
● Ends with “change in net position”
Fiduciary Funds Statements
Statement of fiduciary net positions
○ Assets
○ Add: Deferred outflows of resources
○ Less: Liabilities
○ Less: Deferred inflow of resources
○ Ends with: Net positio
Changes in Fiduciary Net Position
Additions
○ Less: Deductions
○ Ends with: Net increase or decrease in fiduciary net position
Managment’s Discussion and Analysis
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.
Other information required
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
Component Unit
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.
Blended Presentation
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”.
Discrete Presentation
For all other component units, a separate column is added to the right of the
primary government’s data. This is discrete presentation.
Net Positions Categories include
Unrestricted, Restricted and New Investment in Capital Assets
Unrestricted
Funds that aren’t “restricted” or “net investment in capital
assets
Restricted
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
Net investment in capital assets
Balance is equal to capital assets -
accumulated depreciation - any debt related to the capital assets
Non-spendable
not in a spendable form or legally required to remain
unspent, such as permanent endowments
Spendable
Restricted Committed Assigned and Unassigned
Committed
Constrained by the government’s highest level of authority.
Note the difference to “restricted
Assigned
Intended to be used for a specific purpose but doesn’t meet
restricted or committed criteria
Unassigned
Resources available for any purpose
Capital assets
reported in the proprietary or fiduciary funds
Capital assets are recorded
Historical cost and depreciated, except for land and
inexhaustible works of art or historical items.
Infrastructure Assets
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
General Liabilities for the Government- Wide Financial Statements
Unmatured long-term debt is reported in the government-wide statement of
net position.
Unmatured Long-Term Debt
bonds, capital leases, judgements, underfunded pension plans, notes, and other government debt
Interfund transactions
Inter-fund sales/purchases, Reimbursements, Loans, Transfers
Inter-fund sales/purchases
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
Reimbursements
One fund reimburses another fund.
Transfers
These are transfers between funds with no repayment required
Loans
Amounts between funds that are expected to be repaid
Derived Tax Revenues
Taxes imposed on exchange transactions such as taxing personal income or taxes on goods and services
Imposed Nonexchange Transactions
These are taxes on non-government entities (individuals or property) but not on exchange transactions. These include property taxes or fines.
Government Mandated Nonexchange Transactions
When one government entity provides resources to another government entity to be used for a certain purpose.
Voluntary Nonexchange Transactions
A contractual agreement entered by two parties willingly, such as a donor donating
funds to a local school, or endowments.
Nonexchange revenue under the modified accrual basis
: 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.
Encumbrance Accounting
● Appropriation
● LESS encumbrances
● LESS expenditures
● = Unencumbered, unexpended appropriation
Noncapital financing.
Cash interest paid to lenders other than to acquire, construct, or improve capital assets and Receipt of tax revenues.
Operating
Cash payments for interfund services,selling services and making student loans
A Fund that is always Major
General Fund
Combined with liabilities to determine whether major fund criteria are met.
Deferred inflows of resources.
funds that emphasize major fund reporting.
Governmental and proprietary financial statements emphasize major funds. But major fund reporting does not apply to internal service funds.
Deferred outflows of resources
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.
Internal Service Funds
In which Major fund reporting does not apply to internal service funds
The standard(s) required for major fund reporting of a qualifying fund
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.
The standard for discretionary major fund reporting of a qualifying fund
Any governmental or enterprise fund believed to be particularly important to users also may be reported in the same way as a major fund.
Example of Resources most likely accounted for by a special revenue fund
Gasoline Taxes
Example of Resources most likely accounted for by a capital projects fund
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)
Enterprise Funds
Enterprise funds may be used for any activities for which fees are charged to external users. T
