Governmental Accounting Flashcards
Basis of Accounting
When transactions and events are recognized
Measurement Focus
What is being reported on – which assets and liabilities will be given recognition and reported on the balance sheet
Nonspendable Fund Balance
Fund balance that includes amounts that are not in spendable form or are legally or contractually required to be maintained intact.
Restricted Fund Balance
Fund balance that includes amounts constrained for specific purposes by external parties, through constitutional provisions or by enabling legislation.
Committed Fund Balance
Fund balance that includes amounts constrained for specific purposes determined and adopted by a formal action by the highest decision-making authority of the government itself.
Assigned Fund Balance
Fund balance that includes amounts a government explicitly intends to use for specific purposes.
Unassigned Fund Balance
Fund balance that is the residual classification for the general fund and comprises all amounts not included in the other classifications.
General Fund
This fund accounts for all resources that are not required to be accounted for in other funds; in essence, it accounts for all unassigned resources.
Special Revenue Funds
Funds that are used to account for revenues that are restricted or committed to expenditure for specific purposes other than debt service or capital projects.
Debt Service Funds
Funds that are used to account for resources that are restricted, committed, or assigned for the payment of interest and principal on long-term debt.
Capital Projects Funds
Funds that are used to account for resources that are restricted, committed, or assigned for capital outlays.
What are Permanent Funds?
Who benefits from this type of fund?
Funds that are used to report resources that are legally restricted so that only earnings, not principal, may be used to support the government’s programs.
This type of fund benefits the citizens at large or the government itself.
Governmental-Type Funds
Funds that are maintained to account for governments’ operating and financing activities.
Proprietary-Type Funds
Funds that are used to account for the ongoing business-type activities of a government
Enterprise Funds
Funds that are used to account for business-type activities in which the government sells goods or services to the general public at large (users external to the governmental unit).
Internal Service Funds
Funds that are used to account for business-type activities in which the customers are other funds, departments, or agencies within the same governmental unit, or occasionally to other governmental units.
What are the Two Types of Proprietary Funds?
Enterprise Funds;
Internal Service Funds
What are Trust Funds?
Who do they benefit?
Funds that are used to account for assets that the government holds as a trustee (a party that administers property for a beneficiary) for the benefit of parties other than the government itself.
Unlike the other types of funds, _________ are neither consolidated with, nor even incorporated into, government-wide statements.
Fiduciary Funds
Government-Wide Statements are comprised of?
Statement of net position;
Statement of activities
On government-wide statements, the difference between the government’s assets and liabilities is known as?
Net position
What are the basic statements for governmental funds?
Balance Sheet;
Statement of Revenues, Expenditures, and Changes in Fund Balance
What are the basic statements for proprietary funds?
Statement of Net Position;
Statement of Revenues, Expenses, and Changes in Net Position;
Statement of Cash Flows
Major Fund
Funds whose:
- Revenues, expenditures/expenses, assets, or liabilities (excluding extraordinary items) are at least 10 percent of corresponding totals for all governmental or enterprise funds, AND,
- At least 5 percent of the aggregate amount for all governmental and enterprise funds.
Any other fund may be reported as a major fund if the government’s officials believe that fund is particularly important to financial statement users.
What is a nonmajor fund? What column do they fall under?
Funds that are not major. They are combined into the column “other governmental funds.”
What is the measurement focus and basis of accounting for governmental funds?
Current Financial Resources;
Modified Accrual
What is the measurement focus and basis of accounting for proprietary funds?
Economic Resources;
Full Accrual
What is the measurement focus and basis of accounting for fiduciary funds?
Economic Resources;
Full Accrual
Encumbrance
A commitment to purchase goods or services.
Current Financial Resources
Expendable financial resources; cash and other items that can be converted into cash in the normal course of operations (less current liabilities). “Other items” include investments and receivables but NOT capital assets.
Under the modified accrual basis, when should revenues be recognized?
Under this basis, revenues should be recognized when they are both measurable and available to finance expenditures of the current period.
Available Revenue
Revenue that is collected within the current period or expected to be collected soon enough thereafter to be used to pay liabilities of the current period.
With respect to _______ taxes, and only ______ taxes, existing standards provide that, revenues should be recognized only if cash if collected within ___ days of year end. How many days for other types of revenues?
Property Taxes; Property Taxes; 60 days.
Other revenues don’t have specific guidance for a number of days.
What are nonexchange transactions?
What are the four types of nonexchange transactions?
Nonexchange transactions are those in which the government receives value without directly giving equal value in return. The four types are:
Imposed nonexchange revenues
Derived tax revenues
Government-mandated nonexchange transactions
Voluntary nonexchange transactions
What is mils?
1.2% is how many mils?
Mils are dollars per thousand.
1.2% is 12 mils (dollars per thousand).
Lien
The right to seize and sell property.
Property taxes, which are imposed revenues, should be recognized as revenues in what period?
Property taxes should be recognized in the period for which they are levied.
The government-wide statement of activities reports program-specific revenues in (how many) separate columns and in (how many) rows?
What are the names of each of the program revenue columns?
The government-wide statement of activities reports program-specific revenues in three separate columns and in as many rows as there are functions.
The columns are for:
- Charges for services
- Program-specific operating grants and contributions
- Program-specific capital grants
When are a government’s liabilities considered current?
A government’s liabilities are considered current only when they must be liquidated with expendable available financial resources.
Under the modified accrual basis, when should a government accrue a liability?
Under the modified accrual basis, a government should, as a general rule, accrue a liability in the period in which incurs (i.e. becomes obligated for) the liability.
Assets
Resources with present service capacity that the government presently controls.
Deferred Outflows
Consumption of net assets by the government that is applicable to a future reporting period.
Deferred Inflows
The acquisition of net position by the government that is applicable to a future reporting period.
True or False: Prepayments, such as prepaid insurance and prepaid rent, should be presented as deferred outflows.
False. Prepayments, such as prepaid insurance and prepaid rent, should be presented as assets because they have present service capacity that a government presently controls.
What is the definition for other financing sources/uses?
An operating statement classification presenting financial inflows and outflows other than revenues and expenditures.
What are some examples of other financing sources?
- Proceeds from long-term debt
- Proceeds from sale of capital assets
- PV of liabilities created by capital leases
- Nonreciprocal transfers-in
What are some examples of other financing uses?
- Payments to bond “escrow” agents who maintain accounts for eventual repayment of long-term obligations
- Nonreciprocal transfers out
What is the difference between extraordinary items and special items?
Extraordinary items are transactions or events that are both unusual and infrequent. They are clearly incidental or unrelated to the ordinary activities of the entity.
Special items are also unusual and infrequent, but they are WITHIN THE CONTROL OF MANAGEMENT. Further, special items include transactions that meet one of the two criteria but not the other–that is, transactions which are either unusual or infrequent, but not both.
True or False: Vacations, sick leave, and other compensated absences are accrued on the fund financial statements, regardless of when they are paid.
False. Vacations, sick leave, and other compensated absences are not accrued on the fund financial statements unless they will be liquidated with current financial resources.
According to the Statement on Tax Abatement Disclosures issued by the GASB, governments are required to disclose in the notes to their financial statements all of the following except:
A. information about the taxes abated
B. the number of tax abatement agreements entered into in the reporting period
C. the dollar amount of taxes abated in the reporting period
D. the names of the organizations in which the taxes have been abated
D. the names of the organizations in which the taxes have been abated
The Statement of Tax Abatement Disclosures does not require a listing of such organizations.
True or False: The accounting for sick leave is treated differently than for vacation leave.
True. They are treated differently since vacation leave is within the control of the employee and the employer, but sick leave is beyond the control of both the employer and the employee.
When can interest and principal be accrued on the fund financial statements?
In general, neither interest nor principal should be accrued on the fund financial statements.
If resources to service the debt are transferred to a debt service fund from another governmental fund in a current year for payment of principal and interest due early the next year (within one month), then both the expenditure and related liability may, but is not required to, be recognized in the recipient debt service fund.
Which of the following is a reciprocal interfund activity:
A. payments for the purchase of goods and services at a price that approximates their external fair value
B. interfund reimbursements
C. both A and B above
D. none of the above
A. CORRECT. These transfers should be reported as revenues in the seller fund and expenditures (or expenses) in the purchasing fund.
B. Incorrect. Interfund reimbursements should not be reported at all in the financial statements.
C. Incorrect. Only one of the responses is correct.
D. Incorrect. One of the responses is correct.
True or False: Interfund reimbursements should not be reported at all in the financial statements.
True. Interfund reimbursements should not be reported at all in the financial statements.
For example, if the general fund paid a bill for a cost that was the responsibility of a capital projects fund, the expenditure and the corresponding reduction in cash should be reported only in the capital projects fund—as if the capital projects fund had paid the bill itself. The capital projects fund should not report a transfer-out to the general fund; the general fund should report neither a payment to the vendor nor a transfer-in from the capital projects fund.
Are underwriting and other issue costs capitalized, or are they treated as expenditures?
What should the government do if the issue costs are not set out separately from premiums and discounts?
Underwriting and other issue costs are treated as expenditures.
If the issue costs are not set out separately from premiums and discounts, then the government should estimate them.
Per GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, resources transferred as grants before the recipient has satisfied eligibility requirements should be reported as…?
Per GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, resources transferred as grants before the recipient has satisfied eligibility requirements should be reported as an asset by the provider and a liability by the recipient. The rationale is that the recipient does not control the prepayment because in the event it does not meet the eligibility requirements it must return the advance payment to the provider.
