Governmental Accounting

Question 2

What is the primary objective of governmental accounting?

Answer 2

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 3

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

Answer 3

Governmental Proprietary Fiduciary

Question 4

Which two accounting bases are used in governmental accounting?

Answer 4

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

Question 5

What is a budget appropriation?

Answer 5

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

Question 6

What is an encumbrance?

Answer 6

Records purchase and reserves it for the encumbrance.

Question 7

What is the opening budgetary entry?

Answer 7

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

Question 8

What is the closing budgetary entry?

Answer 8

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

Question 9

What are the types of governmental funds?

Answer 9

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

Question 10

What is a general fund?

Answer 10

The ‘operating’ fund of the governmental unit Records Significant Revenues: Taxes, Tickets, Fines, Licenses Records Significant Expenditures: Police, Education, Fire Dept

Question 11

What is a special revenue fund?

Answer 11

Restricted for a specific purpose such as street repair.

Question 12

What is a permanent fund?

Answer 12

Legally restricted fund, where only earnings can be used to fund programs. Principal remains intact.

Question 13

What is a capital projects fund?

Answer 13

Used to acquire and build facilities.

Question 14

What is a debt service fund?

Answer 14

Handles repayment of long-term debt and related interest.

Question 15

Which fund statements are issued in governmental accounting?

Answer 15

Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balance

Question 16

When is revenue recorded in governmental accounting?

Answer 16

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

Question 17

What is derived tax revenue?

Answer 17

Money collected from people ‘doing’ things: Sales tax (buying cars) or income tax (people working)

Question 18

What is imposed tax revenue?

Answer 18

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 19

What are the types of proprietary funds?

Answer 19

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 20

What are the proprietary fund financial statements in governmental accounting?

Answer 20

Statement of Net Assets Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows

Question 21

What are the types of fiduciary funds?

Answer 21

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 22

How are assets and liabilities ordered in a governmental Statement of Net Assets?

Answer 22

Ordered by liquidity Current and non-current

Question 23

How are capital assets shown on a governmental Statement of Net Assets?

Answer 23

They are shown net of debt Asset Cost - Accumulated Depreciation - Asset liabilities = Net assets

Question 24

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

Answer 24

Modified approach: Reported at cost, no accumulated depreciation

Question 25

How is a Statement of Net Assets divided?

Answer 25

Into Governmental Activities and Business Activities

Question 26

How are activities presented in a Statement of Activities?

Answer 26

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.