Governmental Accounting +Rogers Flashcards
1
Q
What are the three major types of funds in governmental accounting?
A
Governmental, Proprietary, Fiduciary
2
Q
Which two accounting bases are used in governmental accounting?
A
Accrual basis - current economic resources focus (revenues recognized when earned)
Modified accrual basis - current financial resources focus (revenues recognized when available and measurable)
3
Q
What is a budget appropriation?
A
The highest amount allowed for a particular expenditure under a budget.
4
Q
What is an encumbrance?
A
Records purchase and reserves it for the encumbrance.
5
Q
What is the opening budgetary entry?
A
Dr Estimated Revenues Control
Cr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
6
Q
What is the closing budgetary entry?
A
Dr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
Cr Estimated Revenues Control
7
Q
What are the types of governmental funds?
A
General Fund Special Revenue Fund Permanent Fund Capital Projects Fund Debt Service Fund
8
Q
What is a General Fund?
A
The operating fund of the governmental unit
Records Significant Revenues: Taxes; Tickets; Fines; Licenses
Records Significant Expenditures: Police; Education; Fire Dept
9
Q
What is a Special Revenue Fund?
A
Restricted for a specific purpose such as street repair.
10
Q
What is a Permanent Fund?
A
Legally restricted fund; where only earnings can be used to fund programs.
Principal remains intact.
11
Q
What is a Capital Projects Fund?
A
Used to acquire and build facilities.
12
Q
What is a Debt Service Fund?
A
Handles repayment of long-term debt and related interest.
13
Q
Which fund statements are issued in Governmental Accounting?
A
Balance Sheet
Statement of Revenues; Expenditures; and Changes in Fund Balance
14
Q
When is Revenue recorded in Governmental Accounting?
A
When it is BOTH available and measurable; regardless of when it is spent.
15
Q
What is Derived Tax Revenue?
A
Money collected from people doing things:
Sales tax (buying cars) or income tax (people working)
16
Q
What is Imposed Tax Revenue?
A
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.
17
Q
What are the types of Proprietary Funds?
A
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)
18
Q
What are the Fund Balance Types?
A
Restricted - Restricted by Contributor Committed - Restricted by Government Assigned - Intended for a purpose Unassigned - Available to be spent Non-spendable - Not in a spendable state
19
Q
What are the types of Fiduciary Funds?
A
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
20
Q
How are Assets & Liabilities presented on the Statement of Net Position?
A
Assets (Current & Non-Current)
Deferred Outflows of Resources
Liabilities (Current & Non-Current)
Deferred Inflows of Resources
21
Q
How are Capital Assets shown on a governmental Statement of Net Assets?
A
They are shown net of debt
Asset Cost - Accumulated Depreciation - Asset Liabilities : Net Assets
22
Q
How is infrastructure reported on a governmental Statement of Net Assets?
A
Modified approach:
Reported at cost; no accumulated depreciation
23
Q
How is a Statement of Net Assets divided?
A
Into Governmental Activities and Business Activities
24
Q
How are activities presented in a Statement of Activities?
A
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.
25
What is the primary objective of governmental accounting?
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
26
What Financial Statements are required for Defined Benefit Pension plans?
Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position
27
What are the components of the Statement of Fiduciary Net Position for Defined Benefit Pension Plans?
Assets; Deferred Outfows; Liabilities; Deferred Outflows; Fiduciary Net Position
28
What are the components of the Statement of Changes in Fiduciary Net Position for Defined Benefit Pension plans?
Additions (Contributions and Net Investment Income) - Deductions (Benefits Payments and Admin Expense) : Net Change in Fiduciary Net Position
29
What should be included in the Financial Statement notes for Defined Benefit Pension Plans?
Types of Benefits; Plan Member Classes; Board Information; Investment Policies and FV Determination
30
what is interperiod equity?
based on a single period, with the revenues of that period intended to cover the spending of that period. ; used in accrual accounting; future periods are ignored. no depreciation or accounting for long term debt or assets
31
what are revenues under modified accrual?
recognized in the period they are available to spend and collectible in the current period to pay liabilities or within 60 days. Revenues billed or collected in advance are deferred until the appropriate future period
32
what are costs under modified accrual?
expenditures; recorded when incurred expcept as it related to unmatured interest on L/T debt
33
what is reporting under modified accrual
balance sheet, statement of revenues, expenditures, and changes in fund balance, no cash flow statement under modified accrual
34
what is accountability under modified accrual?
focus on compliance with budgets and accountability for resources. actual vs budgeted comparison provided as supplementary information.
* any fund using an annual budget must prepare a reconciliation of budget to actual amounts to be presented as supplementary information in the financial statements.
35
Estimated Revenues
revenues that are expected to be available to spend in the period
36
Estimated Other Financial Sources
expected proceeds from issuance of long term debt and operating transfers from other government departments
37
appropriations
expenditures that are expected to occur in the period
38
estimated other financial uses
expected operating transfers to other government departments
39
Budgetary Fund Balance-unreserved
modified accrual; unreserved because it represents anticipated activity but no actual legal commitments
40
What are the 2 types of Revenues in governmental accounting
exchange and non-exchange transactions
41
exchange transactions
goods/services/cash of equal value are exchanged
42
Non-exchange transactions
government gives or receives without directly receiving or giving equal value in exchange
43
what are the 4 types of non-exchange transactions?
Derived tax revenues, imposed non-exchange transactions, government-mandated non-exchange transactions and voluntary non-exchange transactions
44
derived tax revenues
taxes self-assessed on exchange transactions (sales tax, income tax, motor fuel tax)
45
imposed non-exchange transactions
taxes not derived from transactions (property taxs, fines, forefits, special assessments); a revenue when use of money is permitted and an asset when have a legal claim
46
government mandated non-exchange transactions
one level of govt provides funds to another level of govt to be used for a specific purpose (federal grant)
47
voluntary non-exchange transactions
transactions entered into willingly by parties (unrestricted grants & voluntary donations)
48
what is the entry to write off a property tax receivable account?
Dr. Allowance for Uncollectibles
| Cr. Property Taxes Receivable-current
49
what is the entry to assign a property tax receivable as a delinquent account?
Dr. Property Taxes Receivable-delinquent
Cr. Property Taxes Receivable-current
Dr. Allowance for uncollectibles
Cr. Allowance for uncollectibles-delinquent
50
what is the entry if the allowance account is reduced based on aging?
Dr. Allowance for uncollectibles
| Cr. Revenues
51
What is the entry if a state govt. receives an unrestricted grant (time of approval) vs when they collect?
Dr. Receivable from state grant
Cr. Revenues
When they collect- Dr. Cash Cr. Receivable from state grant
52
What is the entry is a state govt receives a restricted grant (not considered available until the local government has acted in accordance with the restriction)?
Dr. Cash
Cr. Deferred Revenues
to record the receipt of the money
Dr. Deferred Revenues
Cr. Revenues
money is spent/grant money is now available. Record the appropriate expenditure
53
how are the proceeds from the issuance of L/T debt recorded in the governmental fund?
other financing source NOT a revenue
54
encumberance
open order (form of estimated expenditure); requires an actual legal commitment and requires that a portion of the fund balance be reserved
55
when an order to purchase supplies is made
Dr. Encumberances
| Cr. Reserved for Encumberances
56
when an order for supplies has been filled
Dr. Reserved for Encumberances
| Cr. Encumberances
57
how do you record the actual invoice from the vendor?
Dr. Expenditures
| Cr. Vouchers Payable
58
how do you record the payment of a voucher?
Dr. Vouchers Payable
| Cr. Cash
59
what is the difference between purchases and consumption method?
governments use the purchases method- record as an expenditure even if the supplies have not been used yet
the consumption method- private businesses use this to record supplies as expenses only once they are used
60
when are purchases of fixed assets recorded as expenditures?
at the time of delivery of the assets to the government
61
funds available=
appropriations-encumbrances-expenditures
62
What are the categories of expenditures?
1. ) function or program (why-purpose)
2. ) Organizational unit (department)
3. ) Activity
4. ) Character (when)
5. ) Object (what-type)
63
what is the budgetary entry for recording the budget at the beginning of the year?
```
Dr. Estimated Revenues
Dr. Estimated Other Financial Sources
Dr./Cr. BFB
Cr. Appropriations
Cr. Estimated other financial uses
```
64
what is the closing entry for the budget?
```
Dr./Cr. BFB
Dr. Appropriations
Dr. Estimated other financial uses
Cr. Estimated Revenues
Cr. Estimated other financial sources
```
* reversal of opening entry
65
other than the budgetary accounts, what other accounts must be closed out at year end?
the nominal accounts such as Revenues, Other Financial Sources, Fund Balances, Expenditures, Encumberances, Other Financial Uses
66
the fund balance-unreserved account is equivalent to what in private business/accrual accounting?
retained earnings, the fund balance-unreserved account is the modified accrual version of retained earnings
67
what happens to open encumberances during closing entries?
the closing entry needed at year end would be:
Dr. Fund Balance-unreserved
Cr. Encumbrances
68
what is the closing entry for inventory ?
Dr. Inventory of supplies
| Cr. Reserved for inventories
69
fund
self balancing set of accounts
70
what are the 3 fund categories?
governmental, proprietary, and fiduciary
71
governmental funds
budgetary focus, current financial resources method, funded by taxation, modified accrual accounting
72
proprietary funds
operations orientation, economic resources approach, funded by voluntary payments for goods and services by users, resemble private businesses, full accrual accounting
73
fiduciary funds
main emphasis on reporting is net position and changes to net position, economic resources approach, NFP, trusts, agency activities, full accrual accounting
74
what are the 5 governmental funds?
General, Special Revenue, Capital Projects, Debt Service, Permanent
75
General Fund
modified accrual, accounts for and reports any activity or function by the government unit that is not being accounted for in another fund; unassigned fund balance; if you don't know where to put it then put it in general fund
76
Special Revenue Fund
used to account for and report specific revenues from earmarked sources that are restricted or committed to be used to finance designated activities other than capital projects and debt service; restricted or committed fund balance
77
Capital Projects Fund
account for major acquisition or construction activities of capital assets, other than those financed by proprietary or trust funds; restricted, committed, or assigned
78
Debt Service Fund
responsible for accumulating and making interest and principal payments on the tax supported debts of the governmental funds; restricted, committed, or assigned for L/T debt purpose
79
Permanent Fund
account and report assets whose principal is restricted and may not be spent (nonexpendable fund), but must be invested on a permanent basis (the income is spendable/expendable); Revenue sources are usually from the investment earnings of the trust
80
What are the 2 proprietary funds?
Internal Service Fund & Enterprise Fund ....both are on the accrual basis
81
Internal Service Fund
render services or provide goods to other funds within the government entity, charging the other funds directly for those services; Revenues are from billings for services, grants and interest earnings
82
Enterprise Fund
account for activities financed by voluntary payments for goods and services rendered to the payers; user fee is often paid; revenue sources include charges for services, interest and investment income, shared revenues (property or gas tax) and transfers in
83
what are the 4 fiduciary funds?
Pension trust, investment trust, private purpose trust, and agency
84
Pension Trust
account for government employee pensions and other post- retirement benefits for which the government is trustee. 2 RSI are required: Funding progress & Employer contributions
85
Investment Trust
account for pooled resources that are being invested on behalf of multiple government entities for which this specific government entity is trustee
86
Private Purpose Trust
account for resources that are being held for the benefit of private persons or organizations or other governments (escheat property); could be expendable or nonexpendable
87
Agency Fund
account for collected amounts that must be transferred to other funds or outsiders; all assets held belong to others; ASSETS=LIABILITIES; no equity section; no measurement focus; on accrual accounting
88
What are the 5 major sections to the general purpose financial statements of a government entity aka Comprehensive Annual Financial Report (CAFR) ?
1. ) Management discussion & analysis (MD&A)
2. ) Government-wide financial statements
3. ) Fund Financial Statements
4. ) Notes to the financial statements
5. ) Required supplementary information (RSI) other than MD&A
89
Management Discussion & Analysis (MD& A)
first section of the financial report; discussion by management of the significant activities of the government as a while during the reporting period and for the future; provides overview of the government's financial activities; considered RSI
Included in MD&A
1. ) comparison with prior year
2. ) overall financial statements
3. ) individual fund statements
4. ) variance analysis
5. ) long-term activities
6. ) expected events
90
Government-Wide Financial Statements
- accrual basis
- two financial statements: statement of net position and a statement of activities for the overall government entity
- government wide statements are prepared on the economic resources measurement focus and accrual basis of accounting
- fiduciary funds not included
- designed to provide information about operational accountability
91
Statement of Net Position:
- in the govt. wide financial statements
- balance sheet
- Assets + Deferred outflows of Resources - Liabilities - Deferred Inflows of Resources = Net Position
- Net Position consists of 3 components: Net Investment in capital assets, restricted net position, unrestricted net position
92
In the Statement of Net Position what makes up the 3 components of Net Position?
1. ) Net Investment in Capital Assets- total of capital assets reduced by accumulated depreciation and obligations, including bonds, mortgages, notes, and other borrowings, that are associated with the acquisition, construction, or improvement of capital assets
2. ) Restricted Net Position- consists of restricted assets net of liabilities and deferred inflows of resources that are related to restricted assets
3. ) Unrestricted Net Position- consists of restricted assets net of liabilities and deferred inflows of resources that are related to restricted assets.
93
Deferred Outflows of Resources
consumption of net assets that are applicable to a future reporting period; no assets; have a positive effect on net position
94
Deferred Inflows of Resources
acquisitions of net assets that are applicable to a future reporting period; not liabilities; have a negative effect on net position
95
Are prepaid insurance and commitment fees received for a commitment to originate or purchase a loan deferred inflows or outflows?
neither; prepaid insurance is an asset; commitment fees are liabilities
96
what are the four columns in the statement of net position?
governmental activities, business-type activities, total, and component units
97
Governmental activities
activities financed by taxes and other nonexchange transactions; consolidated results of all governmental and internal service funds; accrual accounting presentation; interfund transactions eliminated
98
business type activities
activities normally financed by user charges; no internal service fund;
99
Total section of Statement of Net Position
adds together the amounts from the 2 primary government columns for governmental and business-type activities. No Fiduciary
100
Component Units
legally separate organization for which the elected officials of a primary government are financially accountable
101
What are the two types of accounting for component units?
separately stated (discreetly presented)- when management of the unit consists of separately elected officials with budgets developed separately from the primary government, and the services provided by the unit are not primarily to the government itself. separate accounting for the activities of the component unit in separate columns is usually appropriate
Blended- component unit serves other parts of the primary government or is dependent on the overall government legislative body for funding or budgeting - more appropriate to account for the activities of the component unit along with the remaining funds of the government (place in governmental activities)
102
What are the 3 criteria to be considered a component unit to present in separate columns on the Statement of Net Position?
1. ) Direct Benefit- funds are nearly totally all for the direct benefit of the primary government, its component units, or its constituents
2. ) Majority- the primary government or its component unit is entitled to a majority of the economic resources received or held by the separate entity
3. ) Significance- the resources are significant to that primary government
- a legally separate elected governing board, legally separate, fiscally independent (authority to determine its budget, levy taxes without approval, issue bonded debt without approval
103
accounting for infrastructure assets
preferred approach- historical cost and recognize depreciation
modified approach- may be used if 1.) the government uses an asset management system to manage the infrastructure and 2.) the government documents how the assets are being preserved at a minimum level established by the government; this approach allows depreciation to be omitted; infrastructure assets are recorded as expenditures; additions and improvements are still capitalized
104
Statement of Activities
reports revenues and expenses; full accrual basis; consolidated statement, expenses reported by function
1. ) Program Revenues- directly associated with the functional expense categories are deducted to arrive at the net expense or revenue. Program Revenues include: 1.) charges for services, 2.) operating grants and contributions, 3.) capital grants and contributions
2. ) General Revenues are deducted from the net expenses to obtain net revenues
- net position at beginning and end of the year are reconciled.
105
Fund Financial Statements
- use fiscal accountability
- fixed assets and l/t debt not reported (only in government wide statements)
- 4 financial statements (governmental, proprietary, fiduciary, and notes to the F/S)
106
Governmental Fund Financial Statements (GF, SRF, CPF, DSF, Permanent Fund)
balance sheet and statement of revenues, expenditures, ad changes in fund balance will be prepared with columns for each major fund and a total for all minor funds
-reporting on modified accrual reconciled to accrual for govt wide f/s (includes ISF)
Balance Sheet- Current Assets + Deferred Outflows=Current Liabilities + Deferred Inflows + Fund Balance
107
Reconciliation of the Governmental Fund balance to the government-wide statement of net position includes
adjustments for fixed assets, issurance of L/T debt, debt service payments, revenue recognition, accrual of revenue and expenses (modified vs. accrual) and must also include the ISF
108
what are the 5 fund balance classifications?
1. ) nonspendable fund balance- funds that cannot be spent for one of two reasons: 1.) no in spendable form (assets, prepaid expenses) 2.) legally or contractually required to be maintained, such as the principal balance of a permanent fund
2. ) Restricted Fund Balance- funds restricted for a specific purpose. Restrictions may be: 1.) imposed externally (creditors, grantors, contributors) 2.) Imposed by law
3. ) Committed Fund Balance- funds that are required to be used for a specific purpose as a result of constraints imposed by the highest level of decision making authority
4. ) Assigned Fund Balance- funds the government INTENDS to spend for a specific purpose but are not restricted or committed and do not require assignment by the highest level of decision-making authority
5. ) Unassigned Fund Balance- all GF that do not belong in another classification
109
Proprietary Funds
- statement of net position (balance sheet), and statement of revenues, expenses, and changes in fund net position, and statement of cashflows
- ISF included (ISF included in governmental in entity wide statements)
110
what are the section of the proprietary fund statement of cashflows?
1. ) Operating- (direct then reconciled to indirect), no interest or dividends
2. ) Noncapital Financing- unsecured loans, interest expense, cash received from property taxes or grants
3. ) Capital & related Financing- financed purchases and sales of capital assets, normally investing and also interest expense
4. ) Investing- interest and dividends received, inflows and outflows associated with loans to other; reconciliation of operating income (not net income) to net cash flow from operating activities is required
111
Fiduciary Funds
- statement of fiduciary net position and statement of changes in fiduciary net position
- AGENCY FUNDS no in statement of changes in fiduciary net position
- none of these funds included in government-wide financial statements
112
Major Fund
- general fund
- other fund representing both 10% or more of total category assets, liabilities, revenues or expenditures/expenses of either Governmental or Enterprise category & 5% or more of total entity (Gov & Enterprise) assets, liabilities, revenues or expenditures/expenses
- any other funds that management believes are useful to present separately
113
Notes to the Financial Statements
- 4th section of the general purpose financial statements
- summary of accounting policies disclosures, related party transactions, description of reporting entity, segment information for enterprise funds
114
RSI other than MD&A
- 5th section of governmental entity wide statements
- budgetary comparison schedule
- 4 types of RSI- 1.) BCS, 2.) Information about Infrastructure Assets (for entities reported using the modified approach), 3.) Claims Development Information when the government sponsors a public entity risk pool, 4.) 2 pension schedules- schedule of funding progress, schedule of employer contributions
115
what are the 4 interfund transactions?
operating transfers, quasi-external transactions, reimbursements, and loans
116
Operating Transfers
aka interfund transfers
- movement of cash from one fund to finance current period activities in another fund
- modified accrual- other financial sources,other financial uses
- accrual- other revenues, other expenses
- reported on statement of revenues, expenditures, and other changes or statement of revenues, expenses, and other changes (dependent on modified or full accrual)
117
Quasi-external transactions
- payment from one fund to another for services or gods that are being provided
- transfer made without any benefit received by the transferor
- reciprocal transactions
- transferee receiving money earned (revenue)
- transforor makes payment (expense- accrual; expenditure-modified)
118
Reimbursements
repayments from one fund to another for costs paid earlier on its behalf
trasnferee- settles of a receivable or a reduction of an earlier expenditure or expense
transferor- settlement of a payable or as an expenditure or expense
use Due from or Due to accounts if know it will be reimbursed.
119
Loans
temporary transfers between funds that are to be repaid at a later date.
-Use Due From and Due to Accounts (receivable and payable)
120
Where are transfers reported?
on the government wide statement of activities
-permanent transfers or recurring transfers from either governmental activities to business-type activities. Reimbursements not included
121
Enterprise Fund Financial Statements
statement of net position; statement of revenues, expenses, and changes in net position; statement of cash flows
122
who are the primary users of governmental financial reports?
the citizenry, legislative and oversight bodies, investors and creditors
123
what are the 3 components of net position?
net investment in capital assets, restricted net position, unrestricted net position
