Governmetal Accounting Flashcards
Lys City reports a compensated absences liability in its government-wide financial statements. The salary rate used to calculate the liability should normally be the rate in effect:
Compensated absence liability should be calculated based upon the pay or salary rates in effect at the balance sheet date. The valuation of the noncurrent liability on the goverment-wide statement of net position will be equal to the number of hours employees are entitled to receive upon termination times the rate of pay earned at the balance sheet date, a point in time
The County Road & Bridge fund is funded by gas taxes whose use is restricted by law to road construction and is properly classified as a special revenue fund. The fund maintains inventories of road signage and road construction materials. Resources associated with those inventories would be classified within fund balance as:
Inventories are considered non-spendable. Non-spendable fund balances 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).
The Baker County Headstart fund, which is properly accounted for as a special revenue fund, overspent its available resources. The deficit in this fund would likely be displayed as:
If expenditures incurred for specific purposes exceed the amounts restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance
The most restrictive classification of governmental fund balances listed below is titled:
The most restrictive classification of governmental funds listed in the answer selection is the “committed” classification. Committed funds are internally limited by formal action of the government’s highest level of decision-making authority.
Roy City received a gift, the principal of which is to be invested in perpetuity with the income to be used to support the local library. In which fund should this gift be recorded?
The gift will be accounted for in a permanent fund. Permanent funds are used to report resources that are legally restricted to the extent income, and not principal, may be used for purposes supporting the reporting government’s programs for the benefit of the public. The library is to be supported by a gift endowment and the library is intended to support the needs of the general community, not a specifically identified individual.
Which of the following is the paramount objective of financial reporting by state and local governments?
Governmental (and not-for-profit) organization reporting is designed to demonstrate the accountability of each organization for the stewardship of the resources in their care. Governments do not measure net income or increase in wealth as businesses do, but are focused on providing efficient and effective delivery of services with public resources. Both operational and fiscal accountability are important to the financial reporting.
Which of the following is the measurement focus and basis of accounting for the government-wide financial statement
The government-wide financial statements are presented using the economic resources measurement focus using the accrual basis of accounting, similar to commercial enterprises.
Chase City imposes a 2% tax on hotel charges. Revenues from this tax will be used to promote tourism in the city. Chase should record this tax as what type of non-exchange transaction?
Derived (non-exchange) tax revenues represent taxes imposed on or derived from exchange transactions such as commercial sales (sales taxes).
Choice “a” is correct. A 2% tax on hotel charges represents a derived non-exchange tax revenue based on commercial sales per rule above.
Governmental funds use modified accrual accounting. Under modified accrual accounting, the issuing of a purchase order (commitment to purchase) is recorded for internal bookkeeping as:
Debit (Dr) Credit (Cr)
Encumbrance $ XX
Budgetary Control $ XX
On what accounting basis does GASB recommend that governmental fund budgets be prepared?
Governmental funds use a budget for control and comparison purposes. Since comparisons of budgeted and actual amounts are made, the basis for preparing the budget should be the same as the fund’s basis of accounting. The modified accrual basis is used in accounting for governmental funds and should, therefore, be used in preparing governmental fund budgets.
Expenditures of a governmental unit for insurance extending over more than one accounting period
Expenditures extending over more than one period may be allocated between or among accounting periods. Non spendable current resources such as inventory or prepaid may be recorded using either the consumption or the purchases method. Current assets of this character serve as the basis for classification of fund balance as non spendable.
or the budgetary year ending December 31, Year 1, Maple City’s general fund expects the following inflows of resources:
Property taxes, licenses, and fines $ 9,000,000
Proceeds of debt issue 5,000,000
Interfund transfers for debt service 1,000,000
In the budgetary entry, what amount should Maple record for estimated revenues?
Only the $9,000,000 property taxes, licenses and fines are classified as Estimated Revenues. The $5,000,000 proceeds of debt issue and the $1,000,000 interfund transfer would be classified as Estimated Other Financing Sources in the budgetary entry.
A county’s balances in the general fund included the following:
Appropriations $ 435,000
Encumbrances 18,000
Expenditures 164,000
Vouchers payable 23,000
What is the remaining amount available for use by the county?
Appropriations is a budgetary account. This account represents the governmental unit’s approved spending (in this case $435,000). Expenditures represent the actual incurring of bills, whether paid in cash or recorded as vouchers payable. Encumbrances are committed or assigned amounts within budgetary control for open purchase orders. Vouchers payable represent expenditures not yet paid and are included as a component of the expenditure amount. The amount of appropriations remaining is the difference between the appropriations and the funds encumbered or expended computed as follows:
In Soan County’s general fund statement of revenues, expenditures, and changes in fund balances, which of the following has an effect on the excess of revenues over expenditures?
Fixed assets are not expected to contribute to the generation of revenue and are therefore treated as an expenditure (capital outlay). This will serve to reduce the excess of revenue over expenditures.
How should state appropriations to a state university choosing to report as engaged only in business-type activities be reported in its statement of revenues, expenses, and changes in net position?
Receiving state appropriations represents a non-exchange transaction and will be treated as nonoperating revenues. Operating grants and subsidies represent non-exchange transactions that are not derived from operations. They are treated as nonoperating revenues.
