Typical Items & Specific Transactions

Question 1

Net position

Answer 1

Equity section for proprietary and fiduciary fund types

Question 2

Three categories of net position

Answer 2

Unrestricted
Restricted
Net investment in capital assets

Question 3

Unrestricted

Answer 3

Funds that aren’t restricted or net investment in capital assets

Question 4

Restricted

Answer 4

To be restricted, the restriction needs to be due to an external reason such as creditors or legislation. The city council’s decision on how to use funds would still be “unrestricted”

Question 5

Net investment in capital assets

Answer 5

Balance is equal to capital assets - accumulated depreciation - any debt related to the capital assets

Question 6

Fund balance

Answer 6

Fund balance is the equity section for governmental fund types

Question 7

Two types of classifications

Answer 7

Non-spendable

Spendable

Question 8

Classification types for spendable section

Answer 8

Restricted
Committed
Assigned
Unassigned

Question 9

Non-spendable

Answer 9

Not in a spendable form or legally required to remain unspent, such as permanent endowments

Question 10

Restricted

Answer 10

Reserved for a specific purpose by external parties such as creditors, regulations, or imposed by law.

Question 11

Committed

Answer 11

Constrained by the government’s highest level of authority. Note the difference to restricted

Question 12

Assigned

Answer 12

Intended to be used for a specific purpose but doesn’t meet restricted or committed criteria

Question 13

Unassigned

Answer 13

Resources available for any purpose

Question 14

Capital Assets

Answer 14

Capital assets will be reported in the proprietary or fiduciary funds, not in the governmental funds. Recorded at historical cost and depreciated, except for land and inexhaustible works of art or historical items.

Question 15

Infrastructure Assets

Answer 15

These are assets such as bridges, roads, water systems, etc. that have much longer useful lives than ordinary capital assets such as machinery.

Inexhaustible infrastructure assets are not depreciated, and the rest are treated as capital assets and the depreciation will be reported in the government-wide statements, the proprietary fund statement of revenues, expenditures, and changes in fund net position, and the statement of changes in fiduciary net position.

Alternatively, governments have the option to take the modified approach which means the asset won’t be depreciated, but the government will record maintenance costs instead of depreciation. If this approach is taken the government must document that the asset is being preserved at a disclosed level.

Question 16

General liabilities in the government-wide financial statements:

Answer 16

Unmatured long term debt is reported in the government wide statement of net position
Unmatured long term debt includes bonds, capital leases, judgements, underfunded pension plans, notes, and other government debt
Debt in the GW financial statements can be reported at face value or discounted value

Due to the financial resources focus of governmental funds, there might be liabilities that are not currently due and are therefore not reported on the governmental balance sheet but need to be reported on the accrual basis (economic focus) of the government-wide financial statements.

Also, the liabilities of internal service funds, which are proprietary funds, are not included in the governmental funds but will be reported on the government-wide financial statements in the statement of net position.

Question 17

4 types of inter-fund transactions

Answer 17

Inter-fund sales/purchases
Reimbursements
Transfers
Loans

Inter-fund receivables and payables will he eliminated when preparing the government wide financial statements, similar to consolidation and eliminating entries.

Transactions between the government and any discretely presented component units are treated as external transactions and are not eliminated.

Question 18

Inter-fund sales/purchases

Answer 18

These are business-type transactions between funds. These are recorded as revenue and expenditures or expenses
The fund receiving the service records an
expenditure and the providing fund records
revenue

Question 19

Reimbursements

Answer 19

One fund reimburses another fund. These are recorded as an expenditure or expense in the fund giving the reimbursement, and a reduction in expenditure or expense in the fund that is reimbursed (NOT revenue)

Question 20

Transfers

Answer 20

These are transfers between funds with no repayment required

Question 21

Loans

Answer 21

Amounts between funds that are expected to be repaid. A receivable and payable is recorded. “Due” and “Due from” is used for short term loans and “advance to” and “advance from” are long term loans

Question 22

4 main classes of nonexchange transactions

Answer 22

Derived tax revenues
Imposed nonexchange transactions
Government mandated nonexchange transactions
Voluntary nonexchange transactions

Question 23

Derived tax revenues

Answer 23

These are taxes imposed on exchange transactions such as taxing personal income or taxes on goods and services.

Question 24

Imposed nonexchange transactions

Answer 24

These are taxes on non-government entities (individuals or property) but not on exchange transactions. These include property taxes or fines.

Question 25

Government Mandated Nonexchange transactions

Answer 25

When one government entity provides resources to another government entity to be used for a certain purpose. Example would be state government reimbursing a school district for certain programs

Question 26

Voluntary Nonexchange Transactions

Answer 26

A contractual agreement entered by two parties willingly, such as a donor donating funds to a local school or endowments.

Question 27

Nonexchange revenue under the modified accrual basis

Answer 27

Under the modified accrual basis a government recognized revenue as cash is received during the year, and up to 60 days after the end of the year when it is measurable and available.

Question 28

Nonexchange revenue under the accrual basis

Answer 28

Same as a business. If a city levied $500,000 in taxes, it would report $500,000 in revenue less any amount the city estimated to be uncollectible. So if they estimate $20,000 will be uncollectible, then revenue of $480,000 would be reported on the government-wide statement of activities.

Question 29

Expenditures and expenses

Answer 29

Term used in governmental funds since they use the modified accrual basis of accounting.

Expenditures are decreases in net assets, and they are recognized when a payment or disbursement happens, where an expense isn’t necessarily a cash payment, such as depreciation.

Question 30

Special items

Answer 30

Special items are listed separately at the bottom of the statement of activities. These are significant transactions that are unusual or infrequent but not both. Another distinction from extraordinary items is that special items are considered within the control of management.

Extraordinary items are transactions or events that are both unusual in nature and infrequent in occurrence.