Governmental Accounting

Question 1

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What is the primary objective of governmental accounting?

Answer 1

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 2

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

Answer 2

Governmental

Proprietary

Fiduciary

Question 3

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Which two accounting bases are used in governmental accounting?

Answer 3

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

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

Question 4

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What is a budget appropriation?

Answer 4

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

Question 5

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What is an encumbrance?

Answer 5

Records purchase and reserves it for the encumbrance.

Question 6

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What is the opening budgetary entry?

Answer 6

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

Question 7

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What is the closing budgetary entry?

Answer 7

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

Question 8

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What are the types of governmental funds?

Answer 8

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

Question 9

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What is a General Fund?

Answer 9

The operating fund of the governmental unit

Records Significant Revenues: Taxes; Tickets; Fines; Licenses

Records Significant Expenditures: Police; Education; Fire Dept

Question 10

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What is a Special Revenue Fund?

Answer 10

Restricted for a specific purpose such as street repair.

Question 11

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What is a Permanent Fund?

Answer 11

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

Principal remains intact.

Question 12

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What is a Capital Projects Fund?

Answer 12

Used to acquire and build facilities.

Question 13

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What is a Debt Service Fund?

Answer 13

Handles repayment of long-term debt and related interest.

Question 14

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Which fund statements are issued in Governmental Accounting?

Answer 14

Balance Sheet

Statement of Revenues; Expenditures; and Changes in Fund Balance

Question 15

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When is Revenue recorded in Governmental Accounting?

Answer 15

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

Question 16

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What is Derived Tax Revenue?

Answer 16

Money collected from people doing things:

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

Question 17

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What is Imposed Tax Revenue?

Answer 17

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 18

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What are the types of Proprietary Funds?

Answer 18

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 19

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What are the Fund Balance Types?

Answer 19

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 20

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What are the types of Fiduciary Funds?

Answer 20

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

Question 21

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

Answer 21

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

Question 22

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

Answer 22

They are shown net of debt

Asset Cost - Accumulated Depreciation - Asset Liabilities = Net Assets

Question 23

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

Answer 23

Modified approach:

Reported at cost; no accumulated depreciation

Question 24

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How is a Statement of Net Assets divided?

Answer 24

Into Governmental Activities and Business Activities

Question 25

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How are activities presented in a Statement of Activities?

Answer 25

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.