Governmental Accounting II

Question 1

WHEN is an enterprise fund used?

Answer 1

TO account for activities involving providing goods or services in exchange for voluntary payments

NOTE: An enterprise fund uses accrual accounting and is accounted for similarly to a nongovernmental business enterprise

Question 2

WHAT is the debt service fund used for?

Answer 2

TO make Principal and Interest payments on the tax supported debts of the government and to collect funds for that purpose

Question 3

WHAT are the three standard sections of a governmental comprehensive annual financial (CAFR) report?

Answer 3

(1) Introductory
(2) Financial
(3) Statistical

Question 4

True or False.

Fiduciary funds are included in the government-wide financial statements.

Answer 4

FALSE.

Fiduciary funds are NOT include in the government-wide financial statements.

These Funds include: (1) Pension Trust Funds, (2) Investment Trust Funds, (3) Pivate Purpose Trust Funds, and (4) Agency Funds

Question 5

WHAT is the paramount objective of financial reporting by state and local governments?

Answer 5

ACCOUNTABILITY

Question 6

WHAT is an example of an “Other Financing Sources (Uses)” transaction?

Answer 6

Transfer to a Debt Service Fund

WHY? - Because it is considered a movement of resources from one fund to another in order to finance the current period activities of the recipient fund

NOTE: That these transactions are internal NOT external in nature

Question 7

WHAT is considered the “acceptable method” for a city government to present component units in its combined financial statements?

Answer 7

USING “Discrete Presentation”

Question 8

True or False.

Special revenue funds receive revenue from fees, grants and specific taxes, not charges to customers.

Answer 8

TRUE!!!!!!!!

Special revenue funds usually receive revenue from fees, grants and specific taxes, not charges to customers.

Question 9

True or False.

Revenue sources for a permanent fund are generally investment earnings of the principle.

Answer 9

TRUE!!!!!!

Revenue sources for a permanent fund are generally investment earnings of the principle.

i.e. They are NOT charges to customers.

Question 10

WHAT category of governmental fund would a Municipal Landfill fall under?

Answer 10

AN Enterprise Fund

WHY? - Because these funds account for government entities which are partially or wholly supported by voluntary payments (which often take the form of customer fees) or business activities

Question 11

True or False.

An employee pension fund is accounted for as a business-type activity.

Answer 11

FALSE.

An employee pension fund is accounted for in a fiduciary fund and is NOT a business-type activity

Question 12

True or False.

The use of encumbrances is a feature unique to modified accrual accounting.

Answer 12

TRUE!!!!!

The use of encumbrances is a feature unique to modified accrual accounting.

E.g. the use of encumbrances in a special revenue fund - which is a governmental fund with a modified accrual accounting basis

Question 13

HOW many sections is the Statement of Net Assets divided into?

Answer 13

THREE sections: Assets, Liabilities, and Net Assets

The calculation for your “net” net capital assets is: capital assets, net of (meaning minus) accumulated depreciation, minus related debt

Question 14

HOW are proprietary funds such as an enterprise fund prepared and reported on the Statement of Cash Flow for government accounting?

Answer 14

USING the “direct method”

Question 15

HOW should a governmental entity account for a grant received for construction of capital assets? When there is NO administrative or direct financial involvement?

Answer 15

IN the “Agency Fund”

Question 16

WHAT (2) criteria lead to the use of fund accounting by a governmental organization?

Answer 16

BOTH financial control and legal restrictions

Question 17

True or False.

A governmental entity that provides loans to another entity is considered an Investing Activity.

Answer 17

FALSE.

A governmental entity that provides loans to another entity is considered an Operating Activity NOT a Investing activity.

Question 18

WHAT does a budgetary fund balance Reserved for Encumbrances in excess of a balance of encumbrances represent?

Answer 18

A “Recording Error”

WHY? - Because both accounts are affected by the same amounts, the only reason they would NOT have equal balances would be a recording error

Question 19

HOW does the government prepare their change in net assets on the Statement of Activities?

Answer 19

Using the “Accrual Basis” of Accounting

Question 20

WHAT is the terminology used for a fund balance classification for the intent of the governing board to use for a specific purpose?

Answer 20

Assigned

i.e. A fund balance that the governing board intends to use for a specific purpose is classified as being “assigned”