NINJA MCQ - Gov't Subsection B Flashcards
Is amortization recorded in the debt service fund?
As a governmental fund, the modified accrual basis of accounting is used. (Amortization is an allocation system used in the accrual basis of accounting to determine interest expense. Amortization does not change the financial resources of a governmental-type fund or the amount paid out or “expended” for interest, and is thus not recorded in governmental-type funds.)
What accounts do not affect the Revenue Control Account?
Budgetary events and related accounts (appropriations, encumbrance, fund balance, etc.)
Interfund transfers are nonreciprocal are classified as in gov’t funds?
Interfund transfers are nonreciprocal in nature. Specifically, they are flows of assets (such as cash or goods) without equivalent flows of assets in return and without requirement for repayment.
Transfers are legally authorized movements of resources from the fund receiving the resources to the fund through which the resources will be expended. Commonly, transfers are made from the general fund, which receives general tax revenues, to capital projects or debt service funds, which, respectively, account for construction activities or the payment of debt principal and interest. Payments from proprietary funds in lieu of taxes and not in return for services received are considered interfund transfers.
An interfund transfer does not represent revenue (expenditure or expense) and should be reported as “Other Financing Sources (Uses)” in governmental funds.
Debt service funds are
governmental funds used to account for the accumulation of resources for and the payment of principal and interest associated with general long-term debt as they come due (mature). Unmatured amounts are not accrued. Debt service funds are accounted for on the modified accrual basis
“Salaries and Wages” is an example of what type of classification?
In governmental accounting, expenditures should be recorded in a multiple classification scheme—typically by (1) fund, (2) function or program, (3) organizational unit (e.g., department), (4) activity, (5) character, and (6) object (“object of expenditure”). Object refers to “the type[s] of items purchased or services obtained” (GASB 1800.137) which expenditures are for—that is, “what” is acquired. Governments pay salaries and wages in order to acquire “personal services.”
What is the intent of interperiod equity?
The intent of balanced budget laws is to achieve interperiod equity, such that current taxpayers neither pay disproportionately for future years’ services nor receive current-year services that must be paid for by future taxpayers. In contrast, transfers among funds should always be equal; however, equality of transfers in and out has no bearing on the extent to which interperiod equity is achieved in governmental external financial reporting.
When a capital lease entered into by a governmental unit represents the acquisition of a general capital asset, the acquisition should be reflected as:
Reported as an expenditure and an other financing source.
Under the current financial resources measurement focus used in governmental funds, neither capital assets nor long-term liabilities are recorded in those funds. However, the inception of a capital lease should be reported in the governmental fund from which the lease payments will be made. GASB 1800.128 states in this regard: “When a capital lease represents the acquisition or construction of a general fixed asset, the acquisition or construction of the general fixed asset should be reflected as an expenditure and (an) other financing source…” This is a “wash” entry that has no effect on fund balance
Which of the following accounts should Moon City close at the end of its fiscal year? Vouchers payable, expenditures, fund balance, fund balance - reserved for encumbrances
Expenditures is a nominal (operating statement) account used in periodically measuring outflows of financial resources, and as such is closed at the end of the fiscal year. Vouchers Payable, Fund Balance, and Fund Balance—Reserved for Encumbrances are all balance sheet (real) accounts. Balance sheet accounts are not closed at fiscal year-end.
Revenues are defined as:
Inflows of financial resources from other than issuance of debt, interfund reimbursement and interfund transfers.
Cost-reimbursement basis represents what type of fund?
Internal Service Fund
Not obligated in any manner represents what type of fund?
Agency Fund
A state had general obligation bonds outstanding that required payment of interest on July 1 and January 1 of each year. State law allowed for the general fund to make debt payments without the use of a fiscal agent. The fiscal year ended June 30. Which of the following accounts would have decreased when the state paid the interest due on July 1?
The use of a debt service fund to account for the payment of bond interest may be required by law. Otherwise, the general fund is used for transactions not required to be reported in another fund. In this case, state law allows the interest payment to be recorded in the general fund. Paying interest would increase, not decrease, expenditures, so interest expenditures is not correct. In a governmental fund, the interest would not have been accrued, so the payable would not be decreased, and interest payable would not be correct. In a governmental fund, expense (the expiration of resources matched to the earning of revenue) is not measured, so interest expense would not be correct.
The correct answer is fund balance, which would be decreased when expenditures, a temporary account, is closed at the end of the period.
