Governmental Accounting

Question 1

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

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

Answer 2

Governmental

Proprietary

Fiduciary

Question 3

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

What is a budget appropriation?

Answer 4

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

Question 5

What is an encumbrance?

Answer 5

Records purchase and reserves it for the encumbrance.

Question 6

What is the opening budgetary entry?

Answer 6

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

Question 7

What is the closing budgetary entry?

Answer 7

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

Question 8

What are the types of governmental funds?

Answer 8

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

Question 9

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

What is a special revenue fund?

Answer 10

Restricted for a specific purpose such as street repair.

Question 11

What is a permanent fund?

Answer 11

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

Principal remains intact.

Question 12

What is a capital projects fund?

Answer 12

Used to acquire and build facilities.

Question 13

What is a debt service fund?

Answer 13

Handles repayment of long-term debt and related interest.

Question 14

Which fund statements are issued in governmental accounting?

Answer 14

Balance Sheet

Statement of Revenues, Expenditures, and Changes in Fund Balance

Question 15

When is revenue recorded in governmental accounting?

Answer 15

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

Question 16

What is derived tax revenue?

Answer 16

Money collected from people ‘doing’ things:

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

Question 17

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

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

What are the proprietary fund financial statements in governmental accounting?

Answer 19

Statement of Net Assets

Statement of Revenues, Expenses, and Changes in Net Assets

Statement of Cash Flows

Question 20

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

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

Answer 21

Ordered by liquidity

Current and non-current

Question 22

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

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

Answer 23

Modified approach:

Reported at cost, no accumulated depreciation

Question 24

How is a Statement of Net Assets divided?

Answer 24

Into Governmental Activities and Business Activities

Question 25

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.

Question 26

Committed funds

Answer 26

The most restrictive classification of governmental fund balances

Committed funds are internally limited by formal action of the government’s highest level of decision-making authority.

Question 27

Restricted fund

Answer 27

Represent resources whose use has been limited by external sources such as creditors (e.g., debt covenants), contributors, other governments, laws, constitutional provisions or enabling legislation.

Question 28

Non-spendable fund

Answer 28

Represent resources in a form that cannot be spent (e.g., inventories or prepaid expenditures) or are legally or contractually required to remain whole (e.g., permanent fund principal).

Question 29

Assigned fund

Answer 29

Constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed.

Question 30

Government Fund

Answer 30

Financial Resource Measurement Focus

Modified Accrual Basis of Accounting

Question 31

Propriety Fund

Fiduciary Fund

Answer 31

Economic Resource Measurement Focus

Accrual Basis of Accounting

Question 32

Restricted Fund

Answer 32

resource limited by external source, such as creditor( bond indentuure) , contributor, government, laws, constitutional provision