State and Local Govt Flashcards
Historical cost/constant purchasing power accounting
It is a method of accounting based on measures of historical prices in units of a currency, each of which has the same general purchasing power.
Materiality and relevance are both defined by
What influences or makes a difference to a decision maker.
A Full Set of Financial Statements includes
Statement of Financial Position, Statement of Earnings, Statement of Comprehensive Income, Statement of Cash Flow & Statement of Changes in Owners’ Equity
Example of Matching Concept
The provision for uncollectible accounts matches the net credit sales for the year. Co. estimates uncollectible accounts expense using the ratio of past actual losses from uncollectible accounts to past net credit sales, adjusted for anticipated conditions.
Statements of Financial Accounting Concepts (SFACs)
SFAC objectives are designed to constitute a foundation for financial accounting standards.
SECs accounting standard setting process
The SEC has broad statutory powers to make, amend, and rescind any rules and regulations that may be necessary to carry out the provisions of the law.
Which guidance is included in the FASB Accounting Standards Codification?
Securities and Exchange Commission (SEC) content
The FASB’s due process for setting accounting standards includes which procedure?
The FASB can seek information about accounting and reporting issues by holding public forums, usually based on an exposure draft.
Does deferred income tax liability fall under CL?
No, it’s a NON-CURRENT LIABILITY
Gains that are unusual and infrequent should be reported as a direct increase in _____________
Income from continuing operations but NOT net of income tax as it’s a separate line item.
Would Market Adjustment account would have any effect on NET INCOME?
No effect
How are Gains or losses from the sale of long-term investments reported
Reported as income from continuing operations.
The impairment loss should be recognized in which period?
In the period in which a sale at a loss is arranged.
Accrual accounting recognizes expenses in the period they are incurred rather than when paid
Yes, when they are incurred and not when they are paid.
The cost method views the purchase and subsequent disposition of TREASURY stock as one transaction.
No gain or loss to be recognized
Formula for Forward contracts - Gain or loss to be recorded in Income Statement
Difference between Remaining maturity of the contract , 60 day forward rate (from the date when it was booked) e.g. Sep 1
and the Contracted forward rate, e.g. Sep 30
Does stock dividend result in a decrease in Retained Earnings?
Yes. The stock dividend is a dividend paid in the form of stock and results in a decrease in Retained Earnings and increase in Common Stock, meaning total equity will not change.
Other financing use
Term used by Modified Accrual (Govt funds - General fund, Special revenue funds, Debt Service, Capital projectetc.)
True or False: General fund reports encumbrances. Internal Service fund does not report budgetary accounts or encumbrances
True (General fund is used to finance day to day operations of the govt, including public safety, education, administration, parks, recreation - such as property, sales and income taxes, licenses and permits, fines and forfeitures, charges for services and intergovernmental revenue (grants not restricted for specific purposes).
Internal service funds (serves internal users)are used to account for the financing of goods and services provided by one dept to other depts or agencies on a cost-reimbursement basis. e.g. Centralized motor pools, IT services, printing and duplicating servides. COnsolidated into the govt activites column in Govt wide financial statements. Focused on internal efficiency.
Enterprise - serves external users(the general public). Reported in Business type column of the govt wide FS
GOVT FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES uses which accounting basis?
Modified accrual basis
General Fund - Measurable and available
True
What is Recognized in Govt wide statement of activities and not in statsment of revenues, expenditures and changes in fund balances ?
Property tax revenue for an amount deferred because it was not available
True or False: A LOCAL govt unit could have funds using both the accrual and modified accrual basis of accounting.
True
PROPRIETARY Funds present a statement of net position.
True. This is not a presentation requirement of Govt funds, only required for proprietary funds.
Permanent fund
If only earnings can be expended
Special Revenue
If both principal and earnings can be expended
Separate fund financial statements should be presented for governmental and propertiary funds to report additional and detailed information about the primary government.
True
Legal restrictions and financial control - Fund Accounting
Which are one of the primary user groups of the external financial reports of a state government?
Advocate groups within the state are logically associated with citizens, citizen groups, etc. External financial reports are used by three primary user groups including citizens, legislative/oversight groups and investors/creditors.
Accrual Accounting and Economic Resources
Govt Wide, Proprietary funds and Fiduciary funds
Modified Accrual and Financial Resources
Govt Funds
- General Fixed Assets
- General Long term debt
Accounted for in a self balancing account group
Infrastructure Fixed Assets
Reporting is optional. When costs are incurred for infrastructure, the fund incurring the cost records amounts incurred as expenditures. The govt. unit may then recognize the cost in the general fixed assets account group.
Enterprise Fund Cash
Accounted for in a proprietary fund
General Fund
Property Tax Revenues
General LT Debt
Accounted for in a self-balancing account group. Proceeds from general LT debt are recognized as other financing sources by the fund receiving them. The liability is recorded in the general LT debt account group, a self balancing account group.
Since the truck was purchased with general revenues the entry is in the ________________
General Fund
Sales tax restricted for a particular purpose other than debt service or capital assets are accounted for in a ____________
SPECIAL REVENUE FUND (e.g. Sales taxes dedicated to mosquito abatement were collected)
Permanent endowments whose earnings are used for the government are accounted for in PERMANENT funds.
A local philanthropist donated funds for a permanent endowment to generate earnings to use to maintain a city park named in her honor.
Bonds are sold to finance street improvement projects approved in a recent bond election.
CAPITAL PROJECTS FUND (Used to construct capital assets are accounted for in a capital projects fund)
A CUSTODIAL fund is used when a govt collects taxes for other governmental units
E.G. city collects taxes for the city, Blake ISD and Blake County
The city’s self insurance fund is accounted for as an internal service fund.
e.g. Claims are paid from the Blake City Self-Insurance Fund. e.g. The city’s self-insurance fund settles lawsuit claims related to a public works vehicle involved in a car accident.
Hotel tax occupancy fund is a___________
Special Revenue Fund which is a govt fund type using modified accrual basis of accounting.
Capital project funds are used to account for and report financial resources that are restricted, committed or assigned to expenditures for capital outlays of the general govt.
True
New computers are purchased for the city manager’s office.
General fund (Expenditures in general administration of the county are accounted for in the general fund.)
Airport fund is an __________
Enterprise Fund
The tax assessor collection fund is a
Fiduciary fund
An irrevocable split-int estate gift is received in which the donor receives a monthly annuity until death and the county the remainder.
Private purpose trust fund
The credit losses are operating expenses reported separately from net patient revenue and not adjusted in this.
Gross patient service revenue
(less) Charity care
(less) Discounts
(less) Contractual adjustments
(less) Implicit price concessions
———————————————–
Net patient service revenue
Appropriations 50k
Less: Expenditures -6k
Less: Outstanding Encumbrances-40k
_______________________________________
Appropriations remaining (available for use) 4k
Available from Budget
Unpaid bills of 3k relates to the expenditures of 40k and do not affect this calc
Disadvantage of perpetual system - COGS includes both the cost of inventory sold and inventory shortages
True
Once an impairment loss for a long-lived asset used in operations has been recorded, it cannot be ________________
restored wholly or partially.
Exception: if a LT asset is classified as held for sale, restoration of previous impairment losses is allowed up to the CV of the asset before reclassification.
Recoveries net effect is zero on AR as these are reinstated after being deducted
+17k -17k
AFS = If FV is lower than cost in one period(Yr 1) and higher than cost in the subsequent period (yr 2),AFS unrealized loss account is ________, and the excess FV is recognized in AFS securities - unrealized gains
Eliminated
E.g. Year 2 Year 1
Cost 200000 200000
FV 240000
Debt service funds
General obligation bonds, revenue bonds and LT governmental debt (paying off principal debt and int)
