NINJA MCQs - Gov't Acctg

Question 1

What is included in Estimated Revenues and Other Financing Sources?

Answer 1

Estimated Revs include property taxes, licenses, permits, and inter-governmental revenues

Other Financing Sources include transfers in from other funds

Question 2

Which of the following would decrease in a general fund when it accounts for debt? Interest expenditures, interest expense, interest payable, or fund balance?

Answer 2

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.

Answer: fund balance, which would be decreased when expenditures, a temporary account, is closed at the end of the period

Question 3

How would a municipality that uses modified accrual and encumbrance accounting record the transaction of property taxes collected in advance?

Answer 3

In order to prevent property taxes collected in advance from increasing the fund balance in a period before the related assets can legally be expended,

Cash (Debit)
                     Deferred Revenue (Credit, liability like Unearned Rev)

Question 4

In which of the following funds should the debt service transactions of a special assessment issue for which the government is not obligated in any manner be reported?

Answer 4

Agency Fund (to reflect that working as an agent for the bondholders, assessed property owners etc)

Question 5

Revenues in Capital Projects fund are…

Answer 5

defined as inflows of financial resources from other than issuance of debt, interfund reimbursement and interfund transfers.

Grants would be recorded as revenues or deferred revenue (if liability hasn’t been spent according to grant guidelines)

Proceeds from bond issue and interfund transfer are “other financing sources”

Question 6

Which of the following accounts of a governmental unit is credited when taxpayers are billed for property taxes?

Answer 6

Taxes Receivable (Debit)
                             Revenues (Credit)

Property taxes of a governmental unit can be accrued and recorded as a receivable and revenue when the property taxes are measurable and available. These revenues are considered measurable at the time the levy is approved by the legislative body. (The billing may occur immediately upon approval of the levy.)

Question 7

Does a fiduciary funds have income determination or what focus?

Answer 7

Measurement focus of trust funds, including fiduciary funds, is economic resources

The purpose of measurement is change in trust net position reported as additions and deductions

Question 8

Measurement focus of Governmental type funds (What 2 focuses) & Proprietary funds

Answer 8

The measurement focus of governmental type funds is on both:

The changes in financial position and
financial position.
The flow of financial resources refers to the changes in financial position from the sources and uses of financial resources

By contrast, the measurement focus of a proprietary fund is on determining “operating income, changes in net position (or cost recovery), financial position, and cash flows”—similar to a commercial entity.

Question 9

Purchase order approved (J/E Entries)

Purchase order is paid (J/E Entries)

Answer 9

For purchase order approved, estimated entry:

Encumbrance (Debit)
Fund balance - reserved for encumbrances (Credit)
When purchase order is paid, reverse the entry,

Fund balance - reserved for encumbrances (Debit)
Encumbrance (Credit

The actual amount of expenditures may be more or less than the estimated amount, but that does not affect the amount by which the encumbrance or the Budgetary Fund Balance—Reserved for Encumbrances are reversed

Question 10

What are appropriations, expenditures, encumbrances, and vouchers payable?

Answer 10

Appropriations - Adopted budget of general fund represent maximum authorized expenditure during the period

Expenditures - amount expended

Encumbrances or Committed - amount committed

Vouchers payable - past expenditures waiting only for cash payment

Question 11

Gov’t Wide F/S - Programs, Program Revenue, General Revenue

Answer 11

Programs are financed with program revenues and general revenues.

Program revenues are derived directly from the program itself or from parties outside the reporting government’s taxpayers or citizenry, as a whole; they reduce the net cost of the function to be financed from the government’s general revenues. Financing from outside parties that is restricted to a specific program or programs is considered program revenue.

Taxes are always general revenues, even if restricted to a particular program

All revenues are general revenues unless specified for a specific program.

Question 12

Which funds will show in gov’t wide statement of cash flows?

Answer 12

The fund financial statements include statements of cash flows for proprietary funds but not for governmental funds. The proprietary funds, except for the internal service funds, make up the business-type operations of a government. A city-owned utility is a prototypical example of a business-type activity that would be recorded in a proprietary fund. In contrast, construction of a city hall building is a general government operation that would be recorded in a governmental fund.

Question 13

Basic government-wide financial statements include

Answer 13

Statement of net position and the statement of activities, but not a cash flow statement

Question 14

In 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?

Answer 14

Purchase of fixed assets is an example of an expenditure and reduces the excess of revenues over expenditures.

Transfers between funds are recorded as “other financing sources and uses.”

Proceeds from the sale of capital assets is an example of a special item. Special items are shown on the statement after the excess of revenue over expenditures.

Question 15

Private-purpose trust funds represent

Answer 15

resources held in trust for the benefit of parties that are not a part of the government, rather than for the benefit of government programs

Question 16

Government Wide Statements, which funds are included in governmental activities section?

How are enterprise funds reported?

How are fiduciary funds reported?

Answer 16

Net position of internal service funds are reported with governmental activities in government-wide statements because the activities accounted for in them are usually more governmental than business-type in nature

If enterprise funds are the predominant or only participants in an internal service fund, then the internal service fund would be reported along with the enterprise funds. Enterprise funds are reported as business-type activities in government-wide statements.

Fiduciary funds (the pension fund) are not reported in the government-wide statements.

Question 17

Fines and forfeitures are included

Answer 17

in charges for services. They result from direct charges to those who are directly affected by a program or service, even though they receive no benefit.

Chargers for services - ALWAYS included in program revenues

Question 18

The lease meets the criteria for a capital lease. In which financial statement should the noncurrent portion of the lease be reported?

Answer 18

The noncurrent portion of general government capital leases are reported as a general long-term liability. General long-term liabilities should be reported in the governmental activities column of the government-wide statement of net position. They should not be reported as liabilities in governmental funds.

Question 19

Gov’t Wide - Notes to Financial Statements

Answer 19

With the exception of the general fund or its equivalent, the descriptions should be specific to the particular government, rather than general definitions that could describe any government

include a note that summarizes the accounting policies related to the specific statements presented. The notes are considered an integral part of the statements.

Although unnecessary and immaterial items should not be included, the extensive list of items a government should address in the notes of its financial statements covers material additional to “required supplementary information

Question 20

MD&A is…

Answer 20

Required Supplementary Info

Question 21

Two financial statements are required for fiduciary funds

Answer 21

—a statement of fiduciary net position and a statement of changes in fiduciary net position. (The statement of changes in fiduciary net position is not required for agency funds.)

Question 22

The annual required contribution (ARC) consisting:

Answer 22

of the present value of the benefits earned due to current service plus amortization of a portion of previously earned benefits is recognized as an expense

Question 23

Discretely presented component unit information is shown

Answer 23

separate from the governmental and business-like activities portions on the government-wide financial statements

Discrete presentation should be used unless the financial activities of the two entities are so intertwined as to make them substantially the same entity.

Question 24

A component unit should be included in the reporting entity or primary government’s financial statements using the blending method

Answer 24

If one of the following apply:

1) If the component unit’s governing body is the same as the primary government;
2) if the component unit provides services entirely or almost entirely to the primary government;
3) Or, if the component unit’s debt is expected to be repaid with resources provided by the primary government even if provided through a lease arrangement.

For the purposes of defining the governmental financial reporting entity, it is not required that the component unit of the primary government be a governmental or not-for-profit organization. A for-profit corporation could be a component unit if the elected officials of the primary government are financially accountable.

Question 25

Public institutions that report as special-purpose governments either engaged only in governmental activities or engaged in both governmental and business-type activities should report infrastructure using

Answer 25

Required using the full governmental model

These provisions include the reporting of capital assets that are defined in GASB 1400.103 to include infrastructure.

The term “capital assets” is used in governmental accounting for long-lived assets (generally longer than one year) rather than the terms “property, plant and equipment,” or “fixed assets.” Capital assets are not reported in governmental funds, but they are reported in proprietary and fiduciary funds as well as in the government-wide or entity-wide financial statements.

Infrastructure assets are “long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure assets include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems.

Question 26

Municipally owned and operated hospital and a component unit of X City should be reported where in government wide F/S?

Answer 26

Data of discretely presented component units should be displayed in the government-wide statement of activities and statement of net position in columns to the right or after the primary government information

The focus of the government-wide financial statements should be on the primary government. Separate columns distinguish the primary government and its discretely presented component units.

Discretely presented component units are not in substance part of the primary government. This contrasts with the presentation of blended component unit data, which is included within the primary government information because blended component units are, in substance, part of the primary government.

Question 27

Which entities fall under the umbrella of FASB?

Corporate, politic, not-for-profit, power to enact and enforce a tax levy

Answer 27

Bodies corporate and politic and entities with the power to enact and enforce a tax levy are governments (GASB)

Not-for-profit organizations that are not governmental are exempt from federal taxation (FASB)

Question 28

Contribution revenue in gov’t wide statement of activities should include

Answer 28

Scholarship collected

And Scholarship pledged

Question 29

Which funds do State-operated lottery or State-operated hospital belong to?

Answer 29

Enterprise funds should be employed when the pricing policies of the activity establish fees and charges to external users designed to cover its costs, including capital costs. Covering costs is an important objective of a lottery operation, so a lottery should be accounted for in an enterprise fund

Accounting for government-operated hospitals financed in whole or in part by fees charged are usually reported in an enterprise fund

Note: Governmental hospitals may also be component units

Question 30

Extraordinary Items vs. Special Items

Differences between 2 concepts

Answer 30

Both extraordinary and special items are defined as unusual and infrequent in nature.

However, special items are significant transactions under management’s control. The acquisition of the new equipment that suddenly caused the obsolescence of the existing building resulted from management action.

Both extraordinary items and special items are reported separately at the bottom of the statement of activities.

Question 31

When a state (provider) shares a portion of revenues resulting from its sales tax with local governments (recipients), both provider and recipient governments should account for the event as a voluntary or government-mandated nonexchange transaction, as indicated by the specific situation.

Answer 31

Thus, recipient governments would recognize an asset “when all eligibility requirements have been met or when resources are received, whichever is first.”

Question 32

Fund balances - what would have to occur for an increase in fund balance when closing the budget?

Answer 32

Appropriations Exceeded Actual Expenditures

Two general approaches to recording budgetary information are used. One approach uses a budgetary fund balance account, which does not impact the unassigned fund balance amount. The other approach debits or credits the budgeted decrease or budgeted increase for the year to unassigned fund balance. The question presumes use of the latter approach. Thus, appropriations recorded using this approach would decrease unassigned fund balance.

At the end of the year, the budgetary accounts are removed from the books, removing their impact on the fund balance totals. At the same time, the closing of the temporary accounts impacts fund balance. In the case of appropriations exceeding expenditures, the decrease to unassigned fund balance from closing expenditures would be less than the increase to fund balance from removing appropriations from the books.

Question 33

Reciprocal interfund activities

Answer 33

are activities that affect two funds resulting from loans or services provided and received. Nonreciprocal interfund activities consist of flows of assets without equivalent flows in return.

Question 34

Qualifying grant expenditures

Answer 34

are recognized as revenue when all applicable eligibility requirements are met and the resources are available

Question 35

Determining how much of encumbrances are outstanding?

Answer 35

When Cliff City approved the purchase orders, the estimated amount is recorded in the (summary) journal entry:

Encumbrances 5,000,000
Fund Balance–Reserved for Encumbrances 5,000,000
When the portion of the purchase orders were filled, the entry was reversed for the estimated cost amount of the portion of the purchase orders filled:

Fund Balance–Reserved for Encumbrances 4,500,000
Encumbrances 4,500,000
The actual amount of expenditures may be more or less than the estimated amount and the amount paid may differ from the encumbered amount. However, that does not affect the encumbrance or the Fund Balance—Reserved for Encumbrances amounts. Therefore, the amount outstanding at June 30, 20X1, was $500,000. In the closing process, the outstanding Encumbrances and Fund Balance—Reserved for Encumbrances of $500,000 would be removed, and $500,000 of the post-closing Fund Balance would be displayed as “committed” or “assigned.”

Question 36

Vouchers Payable, Fund Balance, and Fund Balance—Reserved for Encumbrances are all what type of accounts?

Answer 36

all balance sheet (real) accounts. Balance sheet accounts are not closed at fiscal year-end.

Question 37

To be considered a major fund, must do the following:

Answer 37

Governmental fund and proprietary fund financial statements focus on major funds that should each be shown in a separate column. Nonmajor fund information can be combined into one column for presentation. The General Fund is always a major fund. Other major funds meet the following criteria:

Total assets, liabilities, revenues, or expenditures(expenses) account for at least 10% of that item for all funds in the same category, governmental or enterprise, added together, and
Total assets, liabilities, revenues, or expenditures(expenses) account for 5% of that item for all governmental and enterprise funds added together.

Question 38

Combining financial statements

Answer 38

are financial statements of governmental entities reflecting a lower level of aggregation, presenting each fund of each fund type (where a governmental unit has more than one fund of a given type). Combining financial statements are presented in a columnar format, each fund in a separate column and a total column for the fund type.

Combining statements in support of the totals column for nonmajor funds appearing in the basic financial statements of a state or local government (SLG) must be included in the financial section of the SLG’s Comprehensive Annual Financial Report. The total column in the combining statements would be the same as the nonmajor funds column in the basic financial statements. The combining statements for nonmajor funds are required in each category: governmental, proprietary, and fiduciary.

Question 39

Internal service funds

Combining the internal service funds in this way simplified:

Answer 39

are exempted from the major funds reporting requirements

the conversion of the fund-based information to the government-wide financial statement format

Additional detail should be shown in a schedule in order to show compliance with finance-related legal and contractual provisions

Question 40

If no annual appropriation is required then recognized when what occurs?

Answer 40

The underlying transaction takes place

Question 41

With regard to infrastructure, change from depreciation to the modified approach

Answer 41

As a change in accounting estimate, not requiring restatement of prior periods

Question 42

Derived tax revenues

Answer 42

recognized when underlying transaction takes place

Question 43

Compensated absences liability should be recorded using the salary rate at…?

Answer 43

The balance sheet date

Question 44

Resources provided before that period of qualifying activity

Answer 44

Deferred Revenue

If amount of qualifying expenditures exceeded the amount of the advance, there would be no deferred revenues reported at year-end.

Question 45

At the fund level, derived tax revenues are reported using the modified accrual method. Using modified accrual, that portion of the ending receivable which is measurable but not available, or accounted for as an allowance, is accounted for as deferred revenue.

Answer 45

Deferred Revenues

Ending receivable $600,000
Less collections June 30 through August 30 (125,000)
Less ending allowance for doubtful accounts (60,000)
———
$415,000

Question 46

Donated art reflected in gov’t activities

Answer 46

revenue and expense

Question 47

Inflows of assets from other funds without a requirement for repayment are considered

Answer 47

Interfund transfer

Question 48

Reporting of general infrastructure assets by all public institutions that report as special-purpose governments either engaged only in governmental activities or engaged in both governmental and business-type activities is:

Answer 48

Required using full governmental model

Question 49

Direct operating expenses should be reported

Answer 49

by function

Indirect operating expenses may be allocated but are not required to do so by function

Question 50

Nonspendable

Answer 50

Supplies and Prepaid Inventory