Governmental Accounting

Question 1

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

Answer 1

Governmental, Proprietary, Fiduciary

Question 2

Which two accounting bases are used in governmental accounting? (What are the bases’ focused on reporting?)

Answer 2

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

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

Question 3

What is a budget appropriation?

Answer 3

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

Question 4

What is an encumbrance and when is it recorded?

Answer 4

Records purchase and reserves it for the encumbrance.

Recorded when a purchase order is made

Question 5

What is the opening budgetary entry?

Answer 5

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

Question 6

What is the closing budgetary entry?

Answer 6

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

Question 7

What are the types of governmental funds?

Answer 7

General Fund
Special Revenue Fund
Permanent Fund
Capital Projects Fund
Debt Service Fund

Question 8

What is a General Fund?

Answer 8

The operating fund of the governmental unit

Records Significant Revenues: Taxes; Tickets; Fines; Licenses

Records Significant Expenditures: Police; Education; Fire Dept

Question 9

What is a Special Revenue Fund?

Answer 9

Restricted for a specific purpose such as street repair.

Question 10

What is a Permanent Fund?

Answer 10

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

Principal remains intact.

Question 11

What is a Capital Projects Fund?

Answer 11

Used to acquire and build facilities.

Question 12

What is a Debt Service Fund?

Answer 12

Handles repayment of long-term debt and related interest.

Question 13

Which fund statements are issued in Governmental Accounting?

Answer 13

Balance Sheet

Statement of Revenues; Expenditures; and Changes in Fund Balance

Question 14

When is Revenue recorded in Governmental Accounting?

Answer 14

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

Question 15

What is Derived Tax Revenue?

Answer 15

Money collected from people doing things:

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

Question 16

What is Imposed Tax Revenue?

Answer 16

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.

Question 17

What are the types of Proprietary Funds?

Answer 17

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)

Question 18

What are the Fund Balance Types?

Answer 18

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

Question 19

What are the types of Fiduciary Funds?

Answer 19

Agency Fund - government acts as an agent or custodian (Custodial assets could be held for other governments, such as taxes collected for another entity or could be held for individuals and private organizations.)

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

Question 20

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

Answer 20

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

Question 21

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

Answer 21

They are shown net of debt

Asset Cost - Accumulated Depreciation - O/S Mortgage or Bonds (reduced by unspent proceeds) : Net Assets

Question 22

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

Answer 22

Modified approach:

Reported at cost; no accumulated depreciation

Question 23

How are activities presented in a Statement of Activities?

Answer 23

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.

Question 24

What is the primary objective of governmental accounting?

Answer 24

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

Question 25

What Financial Statements are required for Defined Benefit Pension plans?

Answer 25

Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position

Question 26

What are the components of the Statement of Fiduciary Net Position for Defined Benefit Pension Plans?

Answer 26

Assets; Deferred Outfows; Liabilities; Deferred Outflows; Fiduciary Net Position

Question 27

What are the components of the Statement of Changes in Fiduciary Net Position for Defined Benefit Pension plans?

Answer 27

Additions (Contributions and Net Investment Income) - Deductions (Benefits Payments and Admin Expense) : Net Change in Fiduciary Net Position

Question 28

What should be included in the Financial Statement notes for Defined Benefit Pension Plans?

Answer 28

Types of Benefits; Plan Member Classes; Board Information; Investment Policies and FV Determination

Question 29

The Proprietary Fund Cash Flow Statement should be reported using what method?

Answer 29

Direct Method Only

Question 30

Proprietary Funds report unrestricted grants and restricted operating grants as what?

Answer 30

Nonoperating Revenues

Question 31

If an entiry has government risk pools and the government's own agencies are not the predominant participants, what type of fund is used to report this?

Answer 31

Enterprise Fund

Question 32

What are the 2 required financial statements for fiduciary funds?

Answer 32

A statement of fiduciary net position and a statement of changes in fiduciary net position

Question 33

What are examples of what is included in the Required Supplementary Information section?

Answer 33

- Budgetary comparison schedules - Information about the modified approach for reporting infrastructure assets - Employee benefit information - MD&A

Question 34

How should a change from depreciation to the modified approach with regards to infrastructure be reported? (Change in estimate or principal?)

Answer 34

Change in estimate - not restating prior periods

Question 35

The government-wide statement of activities explains changes in____?

Answer 35

Total Net Position

Question 36

When should net position should be reported as restricted?

Answer 36

If use is constrained either by externally imposed conditions such as from creditors or grantors, or by legislation. (restricted debt proceeds and amounts raised from restricted taxes or other revenue sources)

Question 37

A payment from the General Fund to a Pension Trust Fund is shown as what on the Statement of Revenues, Expenditures and Changes in Fund Balance?

Answer 37

Expenditure

Question 38

What is included in a Proprietary Fund Cash Flow - Investing section?

Answer 38

- Interest and Dividend Income - Loans Distributed *No Capital Asset Activity here!

Question 39

What is included in a Proprietary Fund Cash Flow - Noncapital Financing section?

Answer 39

- Interest expense on unsecured loans | - Transfers, grants, subsidies and property taxes received

Question 40

What is included in a Proprietary Fund Cash Flow - Capital& Related Financing section?

Answer 40

- Interest expense on secured loans for capital assets | - Financed purchases and sales of capital assets

Question 41

The letter of transmittal and the statistical section are considered what?

Answer 41

"Other" set of information included in a CAFR. They are not considered part of the basic financials or RSI

Question 42

How are compensated absences reported on the gov't wide statement (gov't activities and business type activities) , gov't fund statements, and proprietary fund statements?

Answer 42

Gov't Wide Statement (Gov't and Business Type) - fully accrued --> entire portion shown as a LT liability Gov't Funds- modified accrual - only report the amt expected to be claimed within 60 days Proprietary Funds - fully accrued

Question 43

Interest expense on note payables that clearly benefit a specific gov't function should be reported how?

Answer 43

As a direct expense from those functions Report any additional interest expense as an indirect expense on a separate line

Question 44

Tuition and fee revenues should be recorded how?

Answer 44

Net of scholarship allowances and net of uncollectible amounts

Question 45

When a bond is refinanced for a new bond how do you record the difference between the reacquisiton of the old bond and the net carrying value of the new bond under GASB?

Answer 45

Amortize the difference over the shorter of the remaining life of the old debt or the life of the new debt

Question 46

How do you record Debt Issuance costs on the Gov't Wide Statement?

Answer 46

Deferred and amortized

Question 47

What are the objectives of governmental external reporting? What statements meet those objectives?

Answer 47

``` Operational accountability (Gov't Wide Stmts) Fiscal accountability (Fund Stmts) ```

Question 48

What is the journal entry to record an annual budget?

Answer 48

Dr. Estimated Revenues Cr. Appropriations Dr./Cr. Budgetary Control

Question 49

What is the journal entry to record an encumbrance?

Answer 49

Dr. Encumbrance | Cr. Budgetary Control

Question 50

What is the journal entry to record an expenditure of a previously encumbered fund?

Answer 50

Dr. Expenditure Cr. Accounts Payable Dr. Budgetary Control Cr. Encumbrance

Question 51

What are typical operating and non-operating revenues for an internal service fund?

Answer 51

Operating - Charges for services provided to other funds (Not transfers or other financing sources) Non-Operating - Investment Income, Grant Revenues

Question 52

What is the basic structure of the statement of revenues, expenses and changes in net position for the proprietary funds?

Answer 52

``` Operating Revenues Operating Expenses ------------------------------ Operating Income Nonoperating Rev (Exp) ----------------------------- Income or Loss Before Contrib & Transfers Capital Contributions Transfers Out ------------------------------- Change in Net Position ```

Question 53

What are the unique note disclosures and required supplemental info reporting associated with pension funds?

Answer 53

Note Disclosures: - Plan Description - Contributions and Reserves - Risk Concentrations Required Supplementary Info: - Schedule of funding progress (last 6 years) - Schedule of employer contributions (last 6 years) - Notes to support the schedules

Question 54

How are interfund transfers reported in governmental funds vs proprietary funds?

Answer 54

Governmental Funds - Other Financing Source | Proprietary Funds - Transfers

Question 55

The portion of Fund Balance related to Prepaid Insurance and Supplies Inventory should be reported as what type of fund balance?

Answer 55

Non-Spendable

Question 56

What focus and basis do governmental fund financial statements use?

Answer 56

The current financial resources measurement and the modified accrual basis

Question 57

What focus and basis do proprietary fund financial statements use?

Answer 57

The flow of economic resources measurement focus and the accrual basis

Question 58

Are taxes considered program revenues or general revenues?

Answer 58

General Revenues even if the tax is for a specific program

Question 59

What 3 types of net position are displayed on a gov't wide statement?

Answer 59

Invested in Capital Assets, Net Restricted (by category) Unrestricted

Question 60

What is included in "program revenues" in the statement of activities?

Answer 60

Service Charges Operating Grants and Contributions Capital Grants and Contributions