M3 - Transactions and Events: Part 1

Question 1

Derived tax revenues represents:

Answer 1

taxes imposed on or derived from exchange transaction such as commercial sales (sales taxes).

(ex: A 2% tax on hotel charges represents a derived non-exchange tax revenue based on commercial sales per rule above.)

Derived tax revenues represent a non-exchange transaction that derives its revenue from exchange transactions such as sales taxes (on sales) and income taxes (on income).

Question 2

To record the budget and appropriations the journal entry would be:

Answer 2

DR: Estimated Revenues 100,000
CR: Appropriations 80,000
CR: Budgetary Control 20,000

(budgetary control is the budgeted excess of estimated revenues over appropriations)

Question 3

Imposed non-exchange revenues include:

Answer 3

Property taxes and fines

Imposed non-exchange revenues represent taxes imposed on non-exchange transactions (such as fines) or wealth (such as property taxes).

Question 4

Governmental-mandated non-exchange transactions represent:

Answer 4

non-exchange transactions that compel the collection of revenues for certain activities, such as environmental clean up, etc.

Government mandated non-exchange transactions represent instances in which a higher level of government (e.g., a state) provides funds and mandates certain activities by another level of government (e.g., a county) such as environmental clean up, etc.

Question 5

Voluntary non-exchange transactions are:

Answer 5

non-exchange transactions that effectively represent contributions, such as grants, etc.

Voluntary non-exchange transactions represent instance in which the government receives resources and does not provide equal value.

Question 6

How should a city record $250,000 for fire department salaries and wages incurred during the month of may on a journal entry?

Answer 6

DR: Expenditures-Salaries and Wages 250,000
CR: Salaries Payable 250,000

The fire department salaries would be paid out of the general fund, as this is a service of the city. The general fund records the salaries as expenditures with a credit to salaries payable.

Question 7

Appropriations is the term for authorized (estimated) resource outflows, including expenditures, used when recording a budget. It does not represent actual expenditures. (true or false)

Answer 7

True

Question 8

If they ask for what the right journal entry is for something and a choice includes “expense”, the word “expense” is associated with accrual accounting. The city in its general fund, recognizes “expenditures” not “expenses” (true or false)

Answer 8

True

Question 9

Encumbrances represent commitments or assignments, not actual amounts payable. (true or false)

Answer 9

True

Encumbrances are recorded when resources are committed for future expenditures, not when goods are received.

Question 10

The revenues control account of a governmental unit is increased when:

Answer 10

Property taxes are recorded (levied)

DR: Property Taxes Receivable
CR: Allowance for uncollecible property taxes
CR: Revenues

Not when the encumbrance account is decreased. That J/E would look like:
DR: Budgetary Control
CR: Encumbrances

Not when appropriations are recorded. That J/E would look like:
DR: Budgetary Control
CR: Appropriations

Question 11

Wages and salaries is an example of what type of classification?

Answer 11

Object Classification

This is the most specific classification in the hierarchy and represents the chart of accounts title. Expenditures of governmental resources should be classified by object classes, according to the type of items purchased or services obtained.

Question 12

Program classification groups what:

Answer 12

Activities, operations, or organizational units that are directed to the attainment of specific purposes or objectives.

Question 13

Function classification groups what:

Answer 13

Related activities that are aimed at accomplishing a major service or regulatory responsibility.

Question 14

Activity classification provides what:

Answer 14

Data for calculating expenditures per unit of activity. An activity is a specific and distinguishable line of work performed by an organizational unit.

Question 15

General fixed assets, such as land, buildings, and equipment, purchased with general fund resources should be recorded as:

Answer 15

expenditures in the general fund.

DR: expenditures
CR: vouchers payable

Question 16

Expenditures extending over more than one period may be allocated between or among accounting periods. (true or false)

Answer 16

True

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 calculation of fund balance as non spendable.

Question 17

Journal entries using the purchase method:

Answer 17

Buying item:
DR: Expenditure
CR: Vouchers Payable

Use of Item:
No entry

On hand at year end:
DR: Supplies Inventory
CR: Nonspendable fund balance- inventory

Question 18

Journal entries using the consumption method:

Answer 18

Buying Item:
DR: Supplies Inventory
CR: Vouchers Payable

Use of Item:
DR: Expenditure
CR: Supplies Inventory

On hand at year end:
No entry

Question 19

Proceeds of debt issue and interfund transfers would be classified as what?

Answer 19

Estimated other Financing Sources in the budgetary entry

Not estimated revenues

Question 20

Receiving state appropriations (such as grants and subsidies) represents a non-exchange transaction and will be treated as nonoperating revenues. (true or false)

Answer 20

True

Question 21

What is the major difference between an exchange transaction and non-exchange transaction for governmental units?

Answer 21

The relationship between the amount of value given and received.

An exchange transaction is a reciprocal transfer in which each party receives and sacrifices something of approximately equal value. A non-exchange transaction involves giving/receiving value without receiving/giving equal value in return. With an exchange transaction, there is a bargained value in the transaction, with a non exchange transaction there is no bargained value or arms length transaction.

Question 22

The measurement focus of governmental funds is the flow of financial resources. Because depreciation expense does not reflect the use of financial resources, it is not recorded in the governmental funds. (true or false)

Answer 22

True

GRaSPP

Question 23

The journal entry at period end to reverse the budget is always for the same dollar amounts as the original budgetary journal entry +/- any amendments. (true or false)

Answer 23

True