Governmental Accounting Flashcards
Current Financial Resources Measurement Focus
CFRMF
for Governmental Funds Accounting on Government-wide presentations
(Major Fund Financial Statements are like Segment Reporting - and only major funds presented, non-major funds displayed in the aggregate)
“Statement of Revenues, Expenditures, and Changes in Fund Balance”
for Governmental Funds
Governmental Funds (1 of 3 categories of FUND STRUCTURE. No profit motive.)
GRSPP
G- General Fund is set up to account for ordinary ops from a gov’t unit, which is financed from taxes and other general revenues. All transactions NOT accounted for in other funds are here.
R- Special Revenue Funds - set up to account for revenues from specific taxes OR other earmarked sources that are restricted By Law or committed to finance particular activities
S- Service (Debt Service) Funds - set up to account for the accumulation of resources an the payment of interest/principal on all “General obligation debt,” other than that serviced by enterprise funds or by special assessments in another fund. Resources of the fund are restricted, committed to assigned debt or service expenditures.
P- (Capital) Projects Funds - set up to account for resources restricted, committed, or assigned for the acquisition of construction of major capital assets by a governmental unit, except those financed by an enterprise fund
P- Permanent fund are used to report resources that are legally restricted to the extent income/principal may be used for purposes supporting the reporting gov’ts programs (EG benefit of the public.
Dual objective?
1) Operational accountability
2) Fiscal accountability
GAO (Gov’t Accountability Office)
The GAO prescribes “Government Auditing standards” or Yellow Book standards,
for audits of gov’t orgs and federal assistance programs, activities, and functions.
Covered under the Single Audit Act.
Three themes of CPA governmental accounting?
1) Fund Structure
2) Fund Accounting
3) External Reporting
Fund Structure?
GASB 34 defines fund structure for governments. Eleven fund types are classified into 3 categories:
1) Governmental Funds
2) Proprietary Funds
3) Fiduciary Funds
Fund Types?
1) Enterprise fund - carried into “business-type activities” section of the gov’t wide financial statements, generally with no reconciling items
2) Internal service funds - often merged with “Gov’t Activities” in financials
3) Fiduciary Funds - presented individually as fund financial statements, but are excluded from gov’t-wide financial statement presentation.
Fund Structure 2 of 3 - Proprietary Funds
(SE)
(Service and Enterprise)
All proprietary is accrual-based, economic focus.
- Treat like customer not citizen
- Full accrual basis and Economic Resources Measurement focus (not Current resources like Governmental)
Proprietary Funds are for business-type activities and is SIMILAR to commercial accounting. Includes:
1) Internal service funds (set up to account for goods and services provided by designated departments at cost)
- on gov’t-wide financial statements, these are reported as gov’t activities.
-billings for transportation services: quasi-external; reported as operating revs.
-when you bill, JE:
[DR] due from other funds
[CR] operating revenues control
2) Enterprise Funds (set up to account for the acquisition and operation of gov’t facilities and services that are intended to be primarily self-supported by user charges ,EG in excess of 50% funded by customer fees). Customers on the enterprise funds are primarily external.
- for-profit type of operation, EG municipal utilities
- int. expense associated with debt in an enterprise fund: int paid in that period, plus int. accrued (annual level)
- is a proprietary fund, “net position”, equity
- funded largely by “user charges”
Fiduciary Funds - ERMF and what do they include?
hint - PAPI
Fiduciary or Trust Funds act like trust accounts, for assets received where the government acts in the capacity of a trust or agency fund. Financial statements of fiduciary funds should be reported using the economic resources measurement focus and full accrual basis of accounting. Fiduciary funds include:
P- Pensions (and other employee benefit) Trust Funds
-deferred compensation plans other than to proprietary fund employees
A- Agency Trust Funds
(special assessments debt for which the government is not obligated in any manner; just acting as Custodian eg state acting as custodian for county)
P- Private-Purpose Trust Funds
- for Escheat property held for individuals, private organizations, or funds held for another government .
- trusts for specific individuals, private organizations, other governments
I- Investment Trust Funds
-FS needed includes only: Stmnt. of changes in fiduciary net position
PASS KEY:
- Governmental Funds are “MAC-GRaSPP”
- Proprietary and Fiduciary funds have “SPACE”
MAC-GRaSPP: MODIFIED Accrual Accounting Current financial resources measurement focus \+ GRSPP
SPACE: SE PAPI Accrual Accounting Carry fixed assets and LT debt Economic Resources Measurement Focus
For gov’t accounting fund balances:
Restricted
Non-Spendable
Assigned
Committed
restricted = limited by certain constraints by law
non-spendable = EG inventory, or legal/contractually required to remain whole (EG a permanent fund principal)
assigned = constrained by gov’t intent to be used for specific purposes, but neither restricted nor committed
Committed = resources that can only be used for purposes pursuant to gov’t decision making (MOST restrictive classification of fund)
(if expenditures exceed this, it may be necessary to report a negative unassigned fund balance.)
Private Purpose Funds?
Fiduciary
How are gov’t-wide financial statements presented?
1) Economic Resources
2) Accrual
WHen is sales tax revenue recognized?
When it is measurable and available.
Governmental: Journal entry that records budgeted amounts for estimated revenue and approved expenditures
[DR] est. rev
[DR] Estimated other financing sources (trfs in from other funds)
[DR] Budgetary control (negative/ deficit)
[CR] appropriations control (approved spending)
[CR] estimated other financing uses (trfs out from other funds)
[CR] budgetary control (positive/surplus)
at year-end, budgetary accounts are approved and closed.
you use the SAME AMOUNTS as beginning of pd. plus or minus any amendments.
remember, this is not the same as actual activity in the accounts, it’s just for budget.
Voluntary non-exchange transactions - when the gov’t receives resources and does not provide equal value
[DR] real property taxes receivable
[CR] Revenues (property taxes)
[CR] Allowance for uncollectable taxes receivable - current
What are considered “Expenditures” in gov’t funds?
Operating and capital transactions
(timing of expenditure recognition is CONSISTENT with accrual accounting – goerned by when the voucher payable is recorded.
alternative method for current assets only - “purchase method” for supplies, prepaids, and inventory (with contras’ for items still on hand) means EXPENDITURE when purchased….
and “Consumption method” means expenditure as CONSUMED (periodic physical count)
rule about budgets, activities, and encumbrances?
DON’T NET BAE!
- Budget booked –> budget closed, for same amount
- activity booked –> activity closed for ACTUAL amount
- encumbrance booked –> encumbrance reversed for same amount
What kind of account is an appropriations account?
Budgetary
what is interperiod equity?
a government’s obligation to disclose whether current-year revenues were sufficient to pay for current-year benefits, or did current citizens defer payments to future taxpayers, i.e. it refers to whether current-year revenues are sufficient to pay for the services provided that year and whether current-year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided.
