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CGFM Exam 2 > Section 2: Chapters 1 and 2 > Flashcards

Section 2: Chapters 1 and 2 Flashcards

1
Q

What is the main purpose of an internal service fund?

A

To be able to identify and accumulate the costs for various services and facilities used by funds, entities and programs throughout the government, and to charge these funds, etc. for the cost of the centralized services.

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2
Q

What is a fiduciary fund?

A

Fiduciary funds are used to account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, or other governmental units or funds and, therefore, cannot be used to support the government’s own programs.

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3
Q

Where are fiduciary funds reported?

A

Fiduciary funds are reported only in fund financial statements, not in the government-wide financial statements.

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4
Q

What is an investment trust fund?

A

A trust fund used to report the activities of an external investment pool.

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5
Q

What is a private-purpose trust fund?

A

This fund type is used to report arrangements for bequests and other arrangements where the use of principal and earnings is restricted and the beneficiaries are outside the government.

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6
Q

What is an agency fund?

A

Agency funds are used to report resources held by the reporting government in a purely custodial capacity. Another common use of agency funds is for pass-through grants.

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7
Q

What are the fund types that cannot be reported as major funds?

A

Internal service funds (a type of proprietary fund) and any Fiduciary fund.

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8
Q

What is always reported as a major fund?

A

The General fund.

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9
Q

What are the three categories of funds?

A

Governmental, Proprietary, and Fiduciary.

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10
Q

What are the two criteria for a major fund?

A
  1. the total assets plus deferred outflows of resources, liabilities plus deferred inflows of resources, revenues or expenditures/expenses of the fund are at least 10 percent of the corresponding total for all funds of the category (governmental) or fund type (enterprise);
  2. the total assets plus deferred outflows of resources, liabilities plus deferred inflows of resources, revenues or expenditures/expenses of the fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined.
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11
Q

What are the required financial statements for Governmental funds?

A

the Balance Sheet and the Statement of Revenues, Expenditures and Changes in Fund Balances (Operating Statement).

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12
Q

What are the five classifications of Fund Balance reporting?

A

Nonspendable Fund Balance, Restricted Fund Balance, Committed Fund Balance, Assigned Fund Balance, and Unassigned Fund Balance.

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13
Q

What is nonspendable fund balance?

A

This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, such as inventory and prepaid amounts.

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14
Q

What is restricted fund balance?

A

Fund balance should be reported as restricted when constraints placed on the use of the resources are either:

a) Externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or
b) Imposed by law through constitutional provisions or enabling legislation.

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15
Q

What is committed fund balance?

A

Amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority should be reported as committed fund balance. The authorization specifying the purposes for which amounts can be used should have the consent of both the legislative and executive branches of the government, if applicable.

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16
Q

What is assigned fund balance?

A

Amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed, should be reported as assigned fund balance, except for stabilization arrangements.

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17
Q

What is unassigned fund balance?

A

This is the residual classification for the general fund and represents the amount that has not been assigned to other funds and that has not been restricted, committed or assigned to specific purposes within the general fund.

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18
Q

What amounts comprise assigned fund balance?

A

Assigned fund balance includes (a) amounts in the general fund that are intended to be used for specific purposes and (b) all remaining amounts that are reported in governmental funds that are not classified as nonspendable and are neither restricted nor committed.

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19
Q

What is a stabilization agreement?

A

Formally setting aside amounts for use in emergency situations or when revenue shortages or budgetary imbalances arise.

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20
Q

Where are stabilization agreements reported?

A

The General fund.

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21
Q

What is the balance sheet format / equation?

A

assets + deferred outflow of resources = liabilities + deferred inflow of resources+ fund balances

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22
Q

What is the format of the Statement of Revenues, Expenditures, and Changes in Fund Balances (operating statement) for a Governmental fund?

A 
Revenues
Expenditures
     Excess or deficiency of revenues over expenditures
Other financing sources (uses) including transfers
Special and extraordinary items
     Net change in fund balances
Fund balances - beginning of period
Fund balances - end of period
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23
Q

What are the required financial statements for Proprietary funds?

A

Statement of Net Position or Balance Sheet; Statement of Revenues, Expenses, and Changes in Fund Net Position (or Fund Equity) (Operating Statement); and Statement of Cash Flows.

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24
Q

What is the Statement of Net Position format?

A

(assets + deferred outflows of resources) – liabilities – deferred inflows of resources = net position

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25
Q

What is the format of the Statement of Revenues, Expenses, and Changes in Fund Net Position (operating statement) for a Proprietary fund?

A 
Operating revenues
Operating expenses
     Operating income/loss
Non-operating revenues and expenses
     Income before other revenues, expenses, gains, losses, and transfers
Capital contributions
Special items
Extraordinary items
Transfers
     Increase or decrease in net position
Net position - beginning of period
Net position - end of period
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26
Q

What are the required financial statements for Fiduciary funds?

A

Statement of Fiduciary Net Position; Statement of Changes in Fiduciary Net Position.

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27
Q

Who established GASB, and when was it established?

A

The GASB was established in 1984 under the oversight of the Financial Accounting Foundation’s Board of Trustees (FAF).

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28
Q

Who issued statements of accounting principles for state and local governments before GASB?

A

The National Council on Government Accounting (NCGA).

29
Q

When did the FAF reaffirm GASB’s jurisdiction?

A

1989.

30
Q

How many board members does GASB have, and how many years is one term for a board member?

A

The board has seven members. The chairman serves full time and the other members serve part time. A member is appointed to a five-year term and may be reappointed for one additional term.

31
Q

Which organization serves as an advisor to GASB?

A

The Governmental Accounting Standards Advisory Council (GASAC).

32
Q

What does FAF stand for?

A

Financial Accounting Foundation’s Board of Trustees

33
Q

What are the three primary groups of users of external financial reports?

A
  • the citizenry at large, including the media and public interest groups;
  • legislative and oversight bodies; and
  • investors and creditors.
34
Q

What are the financial and reporting concepts for state and local governments?

A
  1. Financial reporting should assist in fulfilling government’s duty to be publicly accountable and should enable users to assess that accountability.
  2. Financial reporting should assist users in evaluating the operating results of the governmental entity for the year.
  3. Financial reporting should assist users in assessing the level of services that can be provided by the governmental entity and its ability to meet its obligations as they become due.
35
Q

What are the criteria for a special-purpose government to be considered a primary government?

A
  • It is legally separate.
  • It has a separately elected governing body.
  • It is fiscally independent of other state and local governments.
36
Q

What is legally separate?

A

An organization is legally separate if it has been created as a body corporate and politic, or otherwise possesses corporate powers.

37
Q

What are the three sections of a Comprehensive Annual Financial Report (CAFR)?

A

Introductory, financial and statistical.

38
Q

What is the format of the financial section of a CAFR?

A
  1. Auditor’s report.
  2. Management’s discussion and analysis.
  3. Basic financial statements.
    a. Government-wide financial statements.
    i. Statement of net position.
    ii. Statement of activities.
    b. Fund financial statements.
    i. Governmental funds.
    1. Balance sheet.
    2. Statement of revenues, expenditures and changes in fund balances.
    ii. Proprietary funds.
    1. Statement of net position or balance sheet.
    2. Statement of revenues, expenses and changes in fund net position.
    3. Statement of cash flows.
    iii. Fiduciary funds and fiduciary component units.
    1. Statement of fiduciary net position.
    2. Statement of changes in fiduciary net position.
    c. Notes to the financial statements.
  4. Required supplementary information other than MD&A.
  5. Combining statements and individual fund statements and schedules.
    a. Combining statements and supplemental information.
    b. Individual fund statements.
    c. Schedules.
    i. Schedules necessary to demonstrate compliance with finance-related legal and contractual balances.
    ii. Schedules to present information spread throughout the statements that can be brought together and shown in greater detail.
    iii. Schedules to present greater detail for information reported in the statements.
39
Q

What are the five informational categories in the statistical section of a CAFR?

A

Financial trends, revenue capacity, debt capacity, demographic and economic, and operations.

40
Q

What is included in financial trends information in the statistical section of a CAFR?

A

Information about net position and changes in net position, and information about governmental funds.

41
Q

What is included in revenue capacity information in the statistical section of a CAFR?

A

Three aspects of own-source revenues should be presented—revenue base, revenue rates and principal revenue payers.

42
Q

What is included in debt capacity information in the statistical section of a CAFR?

A

Four types of information should be presented—ratios of outstanding debt, direct and overlapping debt, debt limitations and pledged-revenue coverage.

43
Q

What is included in demographic and economic information in the statistical section of a CAFR?

A

Information about population, total and per capita personal income, and the unemployment rate should be presented.

44
Q

What is included in operations information in the statistical section of a CAFR?

A

Three types of information should be presented—number of government employees, operating indicators and capital asset information.

45
Q

What are the required Government-Wide Financial Statements?

A

Statement of net position or balance sheet and statement of activities.

46
Q

What are the types of Governmental funds?

A
  • General fund
  • Special revenue funds
  • Capital project funds
  • Debt service funds
  • Permanent funds
47
Q

What is the purpose of a Governmental Fund - Special Revenue Fund?

A

To account and report for the proceeds of specific revenue sources (other than major capital projects) that are restricted or committed to expenditure for specified purposes.

48
Q

What is the purpose of a Governmental Fund - Debt Service Fund?

A

Debt service funds are used to account and report financial resources that are restricted, committed, or assigned to expenditures for principal and interest.

49
Q

What is the purpose of a Governmental Fund - Permanent Fund?

A

Donated resources are to be invested by the government so that only the earnings, and not the principal, may be used for activities that benefit the government.

50
Q

What are the two types of Proprietary Funds?

A

Enterprise funds and Internal Service Funds.

51
Q

What are the types of Fiduciary Funds?

A
  • pension (and other employee benefit) trust funds;
  • investment trust funds;
  • private-purpose trust funds; and
  • agency funds.
52
Q

What are the four budgetary accounting accounts?

A

Estimated revenues; budgetary fund balance; appropriations; and encumbrances.

53
Q

What is the journal entry for receiving revenue?

A

(DR) Cash

(CR) Revenue

54
Q

What is unrealized revenue?

A

The difference between estimated revenues and actual revenues.

55
Q

At the start of the fiscal year, estimated revenues and appropriations are entered into the systems. If estimated revenues are greater than appropriations, what JE would be recorded?

A

(DR) Estimated revenues
(CR) Appropriations
(CR) Estimated Change in Fund Balance

56
Q

What JE would be recorded to increase estimated revenues?

A

(DR) Estimated revenues

(CR) Estimated Change in Fund Balance

57
Q

What would be the JE to record supplemental appropriations received?

A

(DR) Estimated Change in Fund Balance

(CR) Appropriations

58
Q

What are the three offsetting credit accounts for encumbrances?

A

The offsetting credit accounts are restricted fund balance, committed fund balance or assigned fund balance.

59
Q

When is restricted fund balance used as an offsetting credit for encumbrances?

A

If the encumbrance is to be used to set aside resources for a procurement involving grant funds.

60
Q

When is committed fund balance used as an offsetting credit for encumbrances?

A

If the purpose for establishing the encumbrance is to set aside resources for a procurement that required passage of a resolution, legislation, or an ordinance.

61
Q

When is assigned fund balance used as an offsetting credit for encumbrances?

A

If the purpose is to use resources that are not restricted or committed.

62
Q

What equation is used to determine the amount available for future spending?

A

Appropriations - Expenditures - Encumbrances = Available Balance

63
Q

What is the JE for when the goods or services have been received?

A

(DR) Restricted/committed/assigned Fund Balance
(CR) Encumbrances
(DR) Expenditures
(CR) Vouchers Payable

64
Q

At the end of the budget period, appropriations are no longer available for spending. Further, all revenue has been realized. What is the closing entry?

A

(DR) Appropriations
(DR) Estimated Change in Fund Balance
(CR) Estimated Revenues

65
Q

What are lapsed encumbrances?

A

Encumbrances cancelled because the final payment is less than the amount established that increase the fund balance.

66
Q

What is the budgetary comparison schedule?

A

The budgetary comparison schedule is required to present the original budget, final budget and actual revenues and expenditures on the budgetary basis of accounting.

67
Q

Where is the budgetary comparison schedule reported?

A

It is reported as required supplemental information (RSI).

68
Q

Which funds require a budgetary comparison schedule?

A

The budgetary comparison schedule is required for the general fund and each major special revenue fund with a legally adopted annual budget.

69
Q

Where is a discussion about significant variances between original budget and final budget, and final budget and actual budget reported?

A

In the MD&A.

CGFM Exam 2 (5 decks)

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