State and Local Government - FAR 6

Question 1

The Government Conceptual Framework

Answer 1

A few of the main ideas about how Government Accounting is set up:

• First, the proceeds from taxation is unique to governments. No other form of an organization can generate tax revenue like governments do.
• the primary authoritative body for determining accounting standards for governments is the GASB- the governmental accounting standards board.
• the primary intended users of governmental financial statements are citizens, taxpayers, school boards, and investors and creditors
• internal users are NOT considered primary users

The 2 most important concepts of governmental financial reporting:

1. accountability :
2. inter-period equity: means having current year revenues cover current year expenditures. The idea is so future taxpayers don’t end up paying for current benefits for current taxpayers.

Question 2

There are 6 characteristics of effective Financial Reporting:

Answer 2

1. Understandability
2. Reliability
3. Relevance
4. Timeliness
5. Consistency
6. Comparability

Question 3

There are 5 elements of the Statement of Financial Position:

Answer 3

1. Assets
2. Liabilities
3. Deferred inflow of resources
4. Deferred outflow of resources
5. Net position

Question 4

The Legally adopted annual budget has 4 financial reporting implications

Answer 4

1. an expression of financial intent

2. form of control and may provide the basis for evaluating performance

Question 5

The Measurement Focus of Accounting for Governmental Accounting happens in 2 ways:

Answer 5

1. Government Fund Accounting- the modified accrual basis is used. The measurement focus is the flow of current financial resources. The idea is to show the extent to which financial resources obtained in the period are sufficient to cover claims against financial resources.

*****-Under Modified Accrual Accounting, revenues are recorded when they are measurable and AVAILABLE.

-In Accrual Accounting, revenues are recorded when they are measurable and EARNED.****
^ key difference between the two

2. Proprietary Fund Accounting- The Accrual basis is used and the measurement focus is the flow of economic resources. The same as it is with accrual accounting.

Question 6

Within Governmental Accounting, it is FUND BASED.

Answer 6

there are 3 categories of Funds:
A FUND is a fiscal entity and an accounting entity

1. Governmental funds: these account for the sources and balances of general government financial resources. They use modified accrual accounting.
2. Proprietary funds: are accounts for business type activities and they use accrual accounting.
3. Fiduciary funds: These account for resources held by the government in a trustee or agent capacity for the benefit of other. They also use accrual accounting.

Question 7

The specific funds within governmental funds….. there are 5 types:

Answer 7

1. General Fund: accounts for everything not required to belong to another type of fund
2. Special Revenue Funds: these account for revenue sources that are restricted or committed to be spent for specific purposes other than debt service or capital projects
3. The Capital Projects Funds: These are funds that are restricted for construction or acquisition of capital facilities
4. Debt Service Funds: These are funds that are restricted or committed to debt service principal and interest expenditures
5. Permanent funds: These account for endowments for which the earnings are restricted to support government programs dedicated to a public purpose

Question 8

Sooo…within the Proprietary Funds (which are the business type funds) ..

Answer 8

the first type is an

1. enterprise fund: account for business type activities that the public is the primary user of
   * *think enterprise car rental the public is the primary user of
2. internal service funds: business type activities except where other government agencies are the primary user.

Question 9

There are 4 types of Fiduciary Funds:

Answer 9

1. Pension Trust Funds: These are where assets are held in a trust to provide employee retirement benefits
2. Private Purpose Trust Funds: These are assets held in trust to benefit individuals
3. Investment Trust Funds: These account for assets held in trusts for other government agencies.
4. Agency funds: These are for assets held in a custodial capacity