Section 2, Chapter 2 Flashcards
What is the definition of a fund?
A fiscal and accounting entity with a self balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances - which are segregated for the purpose of carrying on specific activities.
Why do governments have a number of funds?
Each fund is a fiscal and accounting entity that is intended to stand alone. Fund financial statements do not provide information about the entity as a whole.
What are the three fund categories?
- ) Governmental
- ) Proprietary
- ) Fiduciary
What are governmental funds used for?
To account for the general services provided to the public - public safety, public services, administration of government.
What are examples of non-exchange revenues?
- ) taxes
- ) fines
- ) grants
What is an important characteristic of a governmental fund?
the lack of a match between resources and their uses - annual budgets identify the resources availible and the appropriations to be used for specific programs and services.
What measurement focus do governmental funds use?
current financial resource management
What basis of accounting do governmental funds use?
modified accrual basis
What does it mean for governmental funds to use the modified accrual basis of accounting?
Inflows of resources are recorded as revenues when they are measurable and availible. (see page II-42)
What is a proprietary fund?
A fee or charge is required because it is required to match revenues to expenses.
Whicy major category of fund is similar to the private sector?
Proprietary Fund
Proprietary funds use which measurement focus?
economic resources measurement focus
Proprietary funds use which basis of accounting?
accrual basis
When is a fiduciary fund required?
When a government holds assets as a trustee or agent.
What is an example of a fiduciary fund?
Pension Fund
Why are budgets not required for a fiduciary fund?
Funds cannot be used to support a governments programs.
What does fiduciary fund reporting focus on?
net assets and changes in net assets
Why is reporting required for fiduciary funds?
To demonstrate the governments accountability over the assets held.
What measurement focues do fiduciary funds use?
economic resources
What basis of accounting do fiduciary funds use?
accrual basis of accounting
What are the 5 Governmental Funds?
- ) General Fund
- ) Special Revenue Fund
- ) Capital Project Fund
- ) Debt Service Fund
- ) Permanent Fund
What is the most important Governmental Fund?
General Fund, it is the default fund type
How many general funds can there be?
only one
What are the three criteria that provide a basis for using funds other than the general fund?
- ) GAAP Requirements
- ) Legal Requirements
- ) Demands of sound financial administration
What are common revenue sources reported in the general fund?
- ) Taxes - property tax, sales tax, and income tax
- ) License Fees
- ) Intergovernmental Grants
- ) Fines and Forfeitures
- ) Investment earnings
What are special revenue funds?
used to account for proceeds of specific revenue sources (other than capital projects) that are legally restricted to expenditure for specified purposes.
What are special revenue funds frequently used to asscount for?
- ) Federal and State grants
- ) Special Assessments
- ) Component Units
- ) Related nonprofit organizatoins
What revenue sources do special revenue funds typically include?
- ) Tax assessments
- ) earmarked property and other taxes
- ) intergovernmental revenues
- ) license and permit fees
- ) charges for services
What are capital projects funds used for?
to account for financial resources to be used for the acquisition and construction of major capital facilities other than those financed by proprietary and trust funds.
What revenue sources are recorded in a capital project fund?
- ) bonds
- ) intergovernmental revenues
- ) interest income
- ) earmarked taxes
- ) transfers from other funds
For bonds, what is reported as other financing souces on the operating statement?
Face Value of the Bond
How are bond premiums, discounts, and the cost to issue bonds reported?
seperate from the face value on the operating statement
How are fund balances of capital projects normally reported?
as restricted net assets on the statement of net assets
What are debt service funds used for?
to account for the accumulation of resources for, and the payment of, general long term debt principal and interest
What 2 situations does GASB require the use of a debt service fund?
- ) when legal requirements mandate the use of a debt service fund
- ) when financial resources are being accumulated for principal and interest payments.
What types of revenue are reported in a debt service fund?
- ) earmarked taxes
- ) grants
- ) investment earnings on balances
How are fund balances reported in a debt service fund?
restricted net assets at government wide level
What are term bonds?
do not require the payment of principal until the completion of the term, although they may require the annual payment of interest.
What are sinking funds?
A type of debt service fund that facilitates the retirement of long term debt where financial resources are set aside and the expenditure if not recorded in the debt service fund until the payment is due.
What are serial bonds?
require annual payment of principal and interest.
What is level debt service?
the amount paid each year is about the same - similar to a mortgage.
What is a special assessment?
governemnt issues debt to undertake a project and use debt service fund to make principal and interest payments.
What is debt refunding?
Where a government issues new debt that carries a lower interest rate than the older issue - similar to refinancing.
What is a permanant fund?
when a government recieves bequests from individuals stipulating that donated resources are to be invested by the government. The bequest reqtricts the use of resources so that only the earnings from the investments can be used for activities that benefit the government.
How are expenditures from a permanant fund recorded?
It is common to transfer these earnings to a special revenue fund to account for the expenditures.