Governmental Accounting

Question 1

Discrete

Answer 1

Discrete presentation is reporting component-unit financial data separately from that of the primary government. But some component units are, in substance, the same as the primary government and should be reported as a part of it, that is, blended

Question 2

Blended

Answer 2

The entity is not legally separate.
If the 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.

Question 3

Governmental Fund types that use modified accrual basis

Answer 3

General, Special Revenue, Capital Projects, Debt Service, and Permanent Funds

Question 4

Encumbrances

Answer 4

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

Question 5

Appropriations

Answer 5

Amounts set aside for certain purposes. an ‘encumbrance’ is
like an appropriation inside an appropriation. Appropriations is a budgetary account that includes all individual appropriations. It is an anticipatory liability account

Question 6

Proprietary fund

Answer 6

Accrual basis of accounting

Question 7

The Modified approach for reporting eligible infrastructure assets

Answer 7

Required supplementary information (RSI) in a separate section of the comprehensive annual financial report. RSI includes (1) schedules, (2) statistical data, (3) budgetary comparison schedules, and (4) other information that is an essential part of financial reporting. It should be presented with, but not as a part of, the basic financial statements of a governmental entity. Es

Question 8

Assigned fund

Answer 8

balance includes amounts not nonspendable, restricted, or committed. Expenditure is limited only by the entity’s intent to use such amounts for specific purposes. An example of an assignment is an appropriation of fund balance to offset a budget deficit expected in the next year. The amount should equal no more than the excess of expected expenditures over expected revenues. But, an assignment should not create a deficit in fund balance. Consequently, the $70 million appropriation is reported in assigned fund balance.

Question 9

Characteristic in determining the classification of an enterprise fund?

Answer 9

Enterprise funds account for activities that benefit outside parties who are willing to pay for them. They serve defined customer groups and are generally financed through fees. The pricing policies of the activity establish fees and charges designed to recover its cost.

Question 10

Accrual basis of accounting

Answer 10

(1) government-wide, (2) proprietary fund, and (3) fiduciary fund statements. The measurement focus is on economic resources. The emphasis is on (1) a longer-term measure of operating results and (2) the cost of services. Thus, revenues and expenses are measured in the same way as in for-profit accounting.

Question 11

Management’s discussion and analysis

Answer 11

MD&A is required supplementary information (RSI) that precedes the basic financial statements and provides an overview of financial activities. It is based on currently known facts, decisions, or conditions and includes comparisons of the current and prior years, with an emphasis on the current year, based on government-wide information. Currently known facts are those of which management is aware at the audit report date.

Question 12

Three standard sections of a governmental comprehensive annual financial report?

Answer 12

The three standard sections of a state or local government’s comprehensive annual financial report are the introductory section, the financial section, and the statistical section. The statistical section reports (1) financial trends, (2) revenue capacity, (3) debt capacity, (4) demographic and economic information, and (5) operating information.

Question 13

Gasoline taxes to finance road repairs.

Answer 13

A special revenue fund is used to account for the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Gasoline taxes levied to finance road repair are revenues restricted to expenditure for specified purposes that are accounted for in special revenue funds.

Question 14

Comprehensive annual financial report

Answer 14

A comprehensive annual financial report covers all funds and activities of the primary government and provides an overview of the discretely presented component units of the reporting entity. It includes the introductory, financial, and statistical sections. The statistical section provides additional information to the basic financial statements in five categories: financial trends, revenue capacity, debt capacity, demographics and economic information, and operating information. Moreover, while the basic financial statements may cover only 1 fiscal year, 10 years of selected financial, economic, and other data are required to be presented in the statistical section.

Question 15

general fund should Spring Township credit when it issues a purchase order for supplies

Answer 15

When a commitment is made to expend general fund resources, the entry is to debit encumbrances for the amount of the purchase order. The credit is to encumbrances outstanding. When the related liability is incurred, (1) the encumbrance entry is reversed, (2) expenditures is debited, and (3) vouchers payable is credited.

Question 16

The significant characteristics of the state and local governmental environment to be considered when establishing financial reporting objectives include all of the following except

Answer 16

The dissimilarity of functions of similarly designated entities (e.g., city, county, or state) at the same level of government is a characteristic of the governmental environment. For example, within a state, a function (e.g., financing construction) may be performed by (1) a self-sufficient special district or (2) a similar entity that is financially dependent on the government that created it.

Question 17

Governmental funds statement of revenues, expenditures, and changes in fund balances?

Answer 17

recognition in the financial records of economic events or transactions. The basis of accounting of a fund depends on its measurement focus. The modified accrual basis of accounting is used to report the governmental fund financial statements. The measurement focus is on current financial resources, that is, on determining financial position and changes in it. The reporting elements are sources, uses, and balances of current financial resources.

Question 18

Special-purpose governments

Answer 18

Legally separate entity that is a component unit or other stand-alone government. If it has governmental and business-type activities or engages in two or more governmental programs, it should be reported as a general-purpose government. If it engages in one governmental program, it is reported as a special-purpose government. It may combine the government-wide and fund statements in a format that reconciles individual items of fund data to government-wide data in a separate column.

Question 19

Letter of transmittal

Answer 19

A state or local government must prepare a comprehensive annual financial report. It (1) covers all funds and activities of the primary government and (2) provides an overview of the discretely presented component units of the reporting entity. The comprehensive annual financial report includes introductory, financial, and statistical sections. The introductory section contains (1) a letter of transmittal from the appropriate government officials, (2) an organization chart, and (3) names of principal officers.

Question 20

Basic financial statements of a Government Entity

Answer 20

comprehensive annual financial report should be prepared. It covers all funds and activities of the primary government and provides an overview of the discretely presented component units of the reporting entity. The comprehensive annual financial report includes introductory, financial, and statistical sections. The financial section includes, among other things, the basic financial statements: (1) government-wide financial statements, (2) fund financial statements, and (3) notes. The fund financial statements are governmental, proprietary, and fiduciary.

Question 21

Governmental unit

Answer 21

The three categories of fund types that can be used by a state or local government are (1) governmental (general, special revenue, debt service, capital projects, and permanent funds), (2) proprietary (internal service and enterprise funds), and (3) fiduciary (pension and other employee benefit trust, investment trust, private-purpose trust, and custodial funds).

Question 22

statistical section

Answer 22

The statistical section presents information about financial trends, revenue capacity, debt capacity, demographic and economic factors, and operations. Revenue capacity relates to an entity’s ability to produce own-source revenues (e.g., taxes but not shared revenues). Subcategories are (1) the revenue base (including the total direct rate applied), (2) revenue rates, (3) principal revenue payers for a 10-year period, and (4) property tax levies and collections.

Question 23

City legally adopts its annual general fund budget on the modified accrual basis of accounting, its estimated revenues should be

Answer 23

Certain information must be presented as required supplementary information (RSI) in addition to management’s discussion and analysis (MD&A). Reported on the modified accrual basis of accounting in a budgetary comparison schedule or statement

Question 24

Depreciation

Answer 24

Of Capital Assets should be included in the summary of accounting policies in the notes to the financial statements of a state or governmental entity

Question 25

Encumbrances outstanding at year end in a state’s general fund should be reported in a

Answer 25

An encumbrance is recorded by debiting encumbrances and crediting encumbrances outstanding when a purchase order has been approved. Thus, funds are committed to be paid when the goods arrive and the invoice is received. When the liability is incurred, the encumbrance entry is reversed, expenditures is debited, and vouchers payable is credited. But if an encumbrance is outstanding at year end, it is not reported in the financial statements (but should be disclosed in the notes if significant). Instead, if encumbered amounts have not been restricted, committed, or assigned, fund balance is reclassified [debit unassigned fund balance, and credit fund balance – committed (or assigned)].

Question 26

Budgetary comparison schedules (BCSs)

Answer 26

They are reported for (1) the general fund and (2) each major special revenue fund with a legally adopted annual budget. A BCS includes (1) the original budgets, that is, the first complete appropriated budgets; (2) the final appropriated budgets; and (3) the actual inflows, outflows, and balances stated on the budgetary basis of accounting. A reconciliation of budgetary and GAAP information also should be provided.

Question 27

Fiduciary Funds

Answer 27

Pension (and other employee benefit) trust fund, Investment trust fund, Custodial fund, Private-purpose trust fund. They have an economic resources measurement focus and use accrual accounting.

Question 28

Governmental Funds

Answer 28

Special revenue fund, Permanent fund, Debt service fund, and Capital Projects fund

Question 29

Proprietary

Answer 29

Enterprise and Internal service

Question 30

Notes in the Financial Statement

Answer 30

Notes to the financial statements are an integral part of the basic financial statements. The focus is on the primary government’s (1) Governmental activities, (2) Business-type activities, (3) Major funds, and (4) Nonmajor funds in the aggregate.

Question 31

Encumbrances

Answer 31

Encumbrances are used for budgetary control purposes to record commitments to purchase goods or services. The entry is to debit encumbrances and credit encumbrances outstanding.

Question 32

Financial section

Answer 32

The financial section contains (a) the independent auditor’s report, (b) MD&A, (c) the basic financial statements, (d) RSI, and (e) other statements and schedules.

Question 33

Basis of the analysis- Currently known facts

Answer 33

MD&A is required supplementary information. It is an analysis of financial activities based on currently known facts, decisions, or conditions expected to significantly affect financial position or results of operations.

Question 34

Emphasis of the comparisons made.-Current year

Answer 34

D&A compares the current and prior years, with an emphasis on the current year, based on government-wide information.

Question 35

Financial statements discussed-Basic financial statements

Answer 35

MD&A discusses (a) the relationships of the basic statements to each other, (b) differences in the information provided, and (c) the relationships of the fund statements and the government-wide statements.

Question 36

Capital Assets and Long Term Liabilities

Answer 36

Pension Trust Fund, Investment Trust, Private-purpose and Custodial