SU 13: Government Permanent Funds

Question 1

Uses of permanent funds

Answer 1

To account for resources that are legally restricted in a manner such that:

• only earnings on principle of the resources can be expended
  And
• earnings must be used to support the programs that benefit the government or its citizens in general

(ie: endowments)

Question 2

Difference between permanent funds and fiduciary funds

Answer 2

Permanent fund proceeds benefit government’s own programs

Fiduciary funds are held in a trustee capacity for other individuals, organizations, or governments

Question 3

When to establish permanent funds

Answer 3

Only when required by legal agreement or law

Otherwise use general or special revenue fund based on restrictions

Question 4

Is a budget required for a permanent fund?

Answer 4

Not unless legally stipulated for specific find.

Usually activities financed by permanent funds are budgeted in the fund that receives the earnings (likely special revenue funds)

Question 5

Permanent fund entry to record original principal

Answer 5

Dr cash
CR Revenues (bequest, grant etc)

Question 6

Permanent fund entry to record investment of principal

Answer 6

Dr investments
CR cash

Question 7

Permanent fund entry to record investment income

Answer 7

Dr cash
CR Revenues - investment income

Question 8

Permanent fund entry to record operating expenditures

Answer 8

Dr expenditures - operating
CR cash

Question 9

Permanent fund entry to record transfer of income to pertinent fund

Answer 9

Dr transfer to fund
CR cash

Amount depends on requirements of particular fund

Question 10

Permanent fund entry to record change in fair value of investments

Answer 10

Increase in FV:
Dr investments
CR Revenues - net increase in fair value

Question 11

Financial statements for permanent fund

Answer 11

Balance sheet
Statement of revenues, expenditures, and changes in fund balance