Governmental Funds

Question 1

What is purpose of capital projects fund?

Answer 1

• Used for construction or purchase or leasing of significant fixed assets (used by governmental funds (GRaSPP) only, not by (SE-PAPI).

Question 2

What are capital grants in capital projects fund?

Answer 2

Capital grants are grants received in advance and are recorded as a liability.

• You can recognize capital grants as “revenues” when earned.

OR

• You can recognized capital grants immediately and it maybe unrestricted.

Question 3

How to record following journal entries for capital grants of capital projects fund?

1) Journal entry to record unrestricted government grant?
2) Journal entry to record restricted government grant (revenue when spent)
3) Journal entry to recognize revenue (when spent)

Answer 3

1) Journal entry to record unrestricted government grant?

Unrestricted = Revenue NOW

Dr: Cash
Cr: Revenue

2) Journal entry to record restricted government grant (revenue when spent)

Restricted = Deferred

Dr: Cash
Cr: Revenue collected in advance

3) Journal entry to recognize revenue (when spent)

Revenue collected in advance that is being spent and earned

Dr: Expenditure
Cr: Vouchers payable/cash

Dr: Revenue collected in advance
Cr: Revenue

Question 4

Does permanent fund record encumbrances?

Answer 4

Debt service fund and permanent funds don’t use encumbrances.

Question 5

What is the purpose of permanent fund?

Answer 5

• Legally restricted

- Only earnings and not principal are used for the benefit of public

Question 6

If principal and interest are being recorded what fund does it go to?

If interest is only being recorded what fund does it go to?

Answer 6

Principle AND Interest - Special Revenue Fund

Interest Only - Permanent Fund