Indtroduction Flashcards
Why does the question ‘Does non-profit mean money doesn’t matter?’ matter in the context of governmental accounting?
Because while non-profits or government entities don’t operate with profit as the main objective, financial resources and accountability still play a critical role in ensuring sustainability and transparency.
What is the purpose of governmental accounting?
To provide a framework for recording, reporting, and interpreting financial information about governments to ensure accountability and transparency in the management of public funds.
How does governmental accounting differ from commercial accounting?
Governmental accounting focuses on accountability to citizens and stakeholders, rather than generating profits, and adheres to standards set by the GASB.
Who are the primary users of governmental financial statements?
Citizens, elected officials, and other stakeholders who require financial information to make informed decisions regarding public services and governance.
What are some examples of entities that governmental accounting covers?
- Local governments (e.g., cities, counties)
- State governments
- Federal agencies
What is the cornerstone of governmental financial reporting according to GASB?
Accountability.
What are the primary objectives of governmental accounting?
- To provide financial information that enables transparency and accountability.
- To demonstrate compliance with laws, regulations, and budgetary constraints.
- To assess the financial health and performance of the government entity.
How does GASB define accountability in governmental accounting?
Being able to demonstrate that government entities have used public resources efficiently, effectively, and legally to meet the needs of citizens.
What is the government-wide financial report?
A consolidated financial report for the U.S. government that includes a Citizen’s Guide, MD&A, performance information, financial statements, and supplemental information.
What does the Citizen’s Guide provide in a government-wide financial report?
A plain language explanation of the government’s finances, designed to make the financial information accessible to the general public.
What are the main components of a Performance and Accountability Report (PAR) for federal agencies?
- Annual Performance Report (APR)
- Annual Financial Statements
- Management Reports on internal controls and accountability issues.
What does MD&A (Management’s Discussion and Analysis) include in governmental financial reporting?
A narrative that provides an overview of the government’s financial activities, including its financial position, results of operations, and other significant factors influencing its performance.
Why do governments need to comply with GASB reporting standards?
GASB standards ensure consistency, transparency, and comparability in financial reporting.
What is the purpose of governmental fund accounting?
To ensure that governments manage and account for public funds in a way that meets budgetary and legal requirements.
What are the fund types used in governmental accounting?
- General Fund
- Special Revenue Funds
- Capital Projects Funds
- Debt Service Funds
- Enterprise Funds
- Fiduciary Funds
How do special purpose governments differ from general-purpose governments?
Special purpose governments focus on delivering specific services and typically use specific revenue sources, while general purpose governments provide a broad range of services.
What is the importance of understanding the funding sources for governmental entities in financial reporting?
It helps clarify how governments allocate and manage resources.
What is the primary focus of accountability in governmental accounting?
Demonstrating how effectively and efficiently public resources are used to serve the needs of citizens.
What role does budgetary accounting play in governmental accounting?
It ensures that governments track and report expenditures in accordance with legal limits.
What does GASB stand for?
Governmental Accounting Standards Board.
Define accrual accounting in the context of governmental accounting.
Accrual accounting recognizes revenues when earned and expenses when incurred.
What is the modified accrual accounting method?
Recognizes revenues when they are available and measurable, and expenditures when the liability is incurred.
What is the public sector’s primary reporting goal?
To ensure transparency, accountability, and proper stewardship of public resources.
What is a General Fund?
The primary operating fund of the government.
What is a Special Revenue Fund?
Used to account for revenue restricted to specific purposes.
What is a Capital Projects Fund?
Used for funding major capital projects like infrastructure.
What is a Debt Service Fund?
Used to account for the repayment of long-term debt.
What is an Enterprise Fund?
Used for government operations that charge fees (e.g., water utilities).
What is a Fiduciary Fund?
Used to account for resources held in trust for others (e.g., pension funds).
Which of the following is NOT part of the minimum general purpose external financial reporting (GPEFR) under GAAP for state and local governments?
A. Basic Financial Statements
B. Required Supplementary Information (RSI)
C. Statistical Section
D. Management’s Discussion and Analysis (MD&A)
Answer: C
Explanation: The statistical section is part of the ACFR and not a GAAP requirement for GPEFR.
Which of the following reports is required by GAAP for governments?
A. ACFR
B. GPEFR
C. GFOA Certificate of Achievement
D. Comprehensive Revenue Summary
Answer: B
Explanation: General Purpose External Financial Reporting (GPEFR) is the minimum required by GAAP.
Which of the following is optional and goes beyond the minimum GAAP reporting requirements?
A. Basic financial statements
B. ACFR
C. Fund financial statements
D. RSI
Answer: B
Explanation: The Annual Comprehensive Financial Report (ACFR) is not required by GAAP, but it expands on GPEFR with additional sections like the introductory and statistical sections.
Which section of the ACFR typically includes organizational charts and a letter of transmittal?
A. Financial Section
B. Management’s Discussion and Analysis
C. Introductory Section
D. Statistical Section
Answer: C
Explanation: The Introductory Section includes general background, organizational charts, and a transmittal letter.
The Statistical Section of the ACFR is used to:
A. Summarize fund-level activities only
B. Provide 10 years of trend data and non-financial metrics
C. Replace the MD&A
D. Provide audit opinions
Answer: B
Explanation: The Statistical Section includes ten-year historical data, social, economic, and operational statistics for context.
What is the primary purpose of the MD&A in governmental financial reporting?
A. Provide unaudited supplementary information
B. Offer forward-looking economic forecasts
C. Present a narrative overview and analysis of financial activities
D. Show a full list of government employees
Answer: C
Explanation: MD&A helps users interpret the financials by giving a narrative overview of performance and trends.
The ACFR’s Financial Section must include all of the following EXCEPT:
A. Independent Auditor’s Report
B. Basic Financial Statements
C. Budget Summary Section
D. Notes to the Financial Statements
Answer: C
Explanation: A Budget Summary Section is not a required part of the Financial Section in an ACFR.
Which financial basis is used in government-wide financial statements under GAAP?
A. Cash Basis
B. Modified Accrual Basis
C. Accrual Basis
D. Budgetary Basis
Answer: C
Explanation: Government-wide financials are reported using the accrual basis and economic resources measurement focus.
Fund-level financial statements for governmental funds are reported using which basis of accounting?
A. Accrual
B. Cash
C. Modified Accrual
D. Modified Cash
Answer: C
Explanation: Governmental fund statements (like General Fund) use Modified Accrual for GAAP compliance.
Which of the following is a requirement for governments to be eligible for the GFOA Certificate of Achievement for Excellence in Financial Reporting?
A. Submit quarterly financial statements
B. Prepare an ACFR
C. Include only fund financials
D. Exclude the auditor’s opinion
Answer: B
Explanation: To receive the GFOA Certificate, a government must prepare and submit a full ACFR.
Which of the following provides a high-level overview of the financial condition and performance of the entire government as a single economic entity?
A. Fund financial statements
B. Notes to the financial statements
C. Government-wide financial statements
D. Budget summary schedules
Answer: C
Explanation: Government-wide financial statements focus on the overall operational accountability of the government.
Which of the following items is considered Required Supplementary Information (RSI)?
A. Statistical schedules
B. Ten-year financial trends
C. Budgetary comparison schedules for major funds
D. Letter of transmittal
Answer: C
Explanation: Budgetary comparison schedules for major funds are RSI under GAAP.
What is the purpose of Notes to the Financial Statements?
A. To replace RSI
B. To provide non-financial data
C. To disclose detailed information on accounting policies, assumptions, and clarifications
D. To present management’s forward-looking statements
Answer: C
Explanation: Notes provide essential disclosures that support the understanding of the financial statements.
What distinguishes fiscal accountability from operational accountability in government reporting?
A. Fiscal accountability is about long-term efficiency
B. Operational accountability focuses on individual funds
C. Fiscal accountability relates to current-year budget compliance
D. Operational accountability focuses only on debt compliance
Answer: C
Explanation: Fiscal accountability addresses whether the government complied with current-year budgetary constraints.
