Governmental Accounting

Question 1

How should a city’s general fund report the acquisition of a new police car in its governmental fund statement of revenues, expenditures, and changes in fund balances?

Answer 1

Acquisition of a new police car in a city’s general fund would be displayed as a capital outlay expenditure in its governmental fund statement of revenues, expenditures and changes in fund balances.

Question 2

What are the encumbrance accounts used for?

Answer 2

Encumbrances are used to record purchase orders
DR: Encumbrance
CR: Budgetary control

Question 3

How is payroll treated for governmental funds?

Answer 3

Payroll is one area that is treated like commercial accounting and is accrued for (current liabilities)
DR: Payroll expenditures
CR: Accrued payroll liability

Question 4

When initially recording the budget, the journal entry would be:

Answer 4

DR: Estimated revenue control
CR: Appropriations
CR: Budgetary control

Question 5

Financial Statement Expenditure Classification for a Governmental Financial Statement

1) Character
2) Function
3) Other Financing Sources (Uses)
4) Object

Answer 5

1) Character tells us “when.” It is based on timing. This is going to be an add-back.
2) Function: Looking at the major purpose.
3) Other Financing Sources (Uses): Ex. Transferred Funds
4) Object: Normal G/L Classification (Used in Full Accrual SE Funds)

Question 6

A municipality that appropriately classified a derivative as a hedge will account for an increase in the value of the derivative, which is reported as an asset, as:

Answer 6

Changes in the value of derivatives classified as assets result in increases in deferred inflows of resources, a classification of transactions displayed between liabilities and fund equity, not deferred outflows of resources, a classification of transactions appearing between assets and liabilities.