Yellow Book Flashcards
Governmental Financial reports are used primarily to:
- Compare actual financial results with legally adopted budget
- Assess financial condition and results of operations
- Assist in determining compliance with fincnace-related laws, rules, and regulations
- Assist in evaluating efficiency and effectiveness
- Accountability is the cornerstone of all financial reporting in government
What is not the goal of governmental entities?
Earning a profit is not the goal.
Who are the main users of governmental financial reports?
- The citizenry
- Legislative and oversight bodies
- Investors and creditors
What are the major types of governmental entities?
General purpose governments
- Provide wide array of services
- Examples: Federal government, state governments, cities, towns, townships, villages, counties, boroughs, and parishes.
Special purpose governments
- Governmental entity engaged in a single governmental activity-usually provide only a single or just a few services
- Examples: Park district, independent school systems, public colleges, public hospitals.
Not for Profit Organization
Legally separate organizations
Usually exempt from federal, state and local taxation
Religious, community service, private educational and health care, museums.
who is responsible for establishing GAAP for state and local governments and Governmental not for profits?
GASB -Governmental Accounting Standards Board
The Comprehensive Annual Financial Report (CAFR) contains what 3 main sections?
- Introductory Section
- Financial Section
- Statistical Section
What are the required supplementary info in the financial section?
- Management Discussion and Analysis (MD&A)
- Budgetary Comparison Schedule
- Information on Infrastructure
What are the two sets of “basic” financial statements required in the CAFR?
- Government Wide Statements
- Fund Statements
The Government Wide Statements consist of what statements? and on what basis are they reported?
- Statement of Net Position (like a BS)
- Statement of Activities (a statement of revenues and expenses)
All financial info in the government wide FSs reported on the ACCRUAL BASIS with economic resources focus.
Assists in assessing operational accountability- How efficiently resources are being used.
The Fund Statements consist of what funds and what statements?
-
Governmental Funds
- A BS
- A Statement of Revenues, Expenditures and Changes in Fund Balance
-
Proprietary Funds
- A Statement of Net Position
- A Statement of Revenues, Expenses and Changes in Net Positions
- Cash Flows (direct method)
-
Fiduciary Funds
- A Statement of Net Position
- A Statement of Changes in Fiduciary Net Positions
The Reporting Entity consists of:
the primary government and all component units for which the primary government is financially accountable.
What are component units?
Legally separate organizations for which the elected officials of the primary government are financially accountable.
Most component units are reported by what kind of presentation?
reported by discrete (separate column) presentation, rather than blending the component units financial info with the appropriate fund columns of the primary government.
What is Discrete Presentations?
Is when one or more component units are reported in separate columns, in addition to those pertaining to the primary government.
What is blending?
Is when the component units’ transactions and balances are reported as if they were part of the primary government- that is, the component units’ funds are accounted for just as if they were funds of the primary government.
*Blending is required when governing boards having the same member controls the primary government and the component units or the component unit provides services solely to the primary government. If those conditions are not satisfied then discrete presentation is required*
Full Accrual basis is used on the?
Government Wide Statements
Proprietary Funds
Fiduciary Funds
Modified Accrual basis is used on the ?
Governmental Funds
What is modified accrual?
- Recognizes revenue when measurable and available to cover liabilities of the current period
- Recognizes expenditures in the period that current resources are expected to be used
- Measurement focus is on short term assets and liabilites
- LT assets and liabilities are excluded from the BS
- Only shows the amounts that are needed/used in the current period
- Focus on cash resources that are measurable and available to finance current amounts due.
What are funds?
Separate fiscal and accounting entities within the organization. Each fund will have its own separate and distinct cash and noncash resources, obligations and fund balance.
What is the accounting formula for governmental accounting?
Assets=Liabilities + Fund balance
*Fund balance is used instead of owner’s equity, as governmental entities have no real owners*
What are Expendable Funds?
Funds are collected and spent or expended (Governmental Funds). The resources of this fund are to be used for a specific purpose. These funds are intended to be used in the current period to meet the objectives of the fund.
what are non-expendable funds?
Funds are continually replenished thru charges for the services provided (Proprietary Funds). Used for funds that are operated like a Business enterprise.
what are the three main funds for State and Local Governments?
Governmental
Proprietary
Fiduciary
What are governmental funds used for and what are the primary types of governmental funds?
Governmental- used to account for the governments operating and financing activities.
- General-the main fund used to account for all unrestricted resources that are not accounted for in other funds.
- Special Revenue- Revenues restricted for specified purposes
- Debt Service- Funds set aside for payment of principal and interest on LT debt
- Capital Projects- funds set aside to be used for acquisition or contruction of major capital items
- Permanent- used to report resources that are legally restricted- the main resource must stay intact- but the earnings on the principal may be used to support various governmental programs
How many general funds and other types of funds can a governmental entity have?
A governmental entity will have ONE general fund but it may have an UNLIMITED number of the other types.
What are Proprietary funds and what are the primary funds of Proprietary Funds?
Proprietary Funds are typically known as Business Type Funds- these funds are used to account for non-expendable funds that have business type activities that are similar to those of the private sector.
- Enterprise- business type activities provided to the public. The governmental entity actually sells the goods or services. (Utilities, golf courses, hospitals, parking, airport, housing)
- Internal Service- Funds are used to account for business type activities provided within the organization for a fee. (Computer services, copying services, automobile repair, office supplies)
What are Fiduciary funds used for that what are the primary funds used in Fiduciary funds?
Fiduciary- used to account for resources held by the governmental unit as either a trustee or an agent.
The funds of this type of fund typically are intended to benefit some party other than the governmental organization that holds them.
- Trust funds-pension and investment trust, private purpose.
- Agency funds- assets held on behalf of another entity. One governmental entity may collect taxes to be remitted to another.
What is a budget?
it is a financial plan submitted to the appropriate body for approval. Once approved, budgets carry the status of law:
- When voted upon, an appropriation act give the legal authority to spend and generally sets the max limit for spending
- An approved budgetary expenditure is an appropriation.
For Budgetary Comparison Schedule, GASB standards require governments to present a comparison of budgeted and actual results at year end for?
For the general fund and special revenue funds with legally adopted budgets.
For the Budgetary Comparison Schedule what is shown and what is optional?
- Both the original and the final adjusted budget is shown
- A variance column is typically shown, but IS OPTIONAL
How are budgetary accounts recorded?
Budgetary accounts are recorded opposite of the actual accounts- this serves to monitor the remaining amounts and helps prevent going OVER budget.
What is the entry to record the budget?
DR: Estimated Revenues
DR: Estimated Other Financing Source
CR: Appropriations
CR: Estimated Other Financing Use
CR: Budgetary Fund Balance (PLUG)
Assume $1,200,000 of revenues is budgeted along with $950,000 of estimated expenditures. A $100,000 transfer out and $50,000 transfer in is anticipated. What is the JE?
DR: Estimated Revenues $1,200,000
DR: Estimated Other Financing Source $50,000
CR: Appropriations $950,000
CR: Estimated Other Financing Use $100,000
CR: Budgetary Fund Balance $200,000 (PLUG)
Why record encumbrances?
- Governmental Entities use encumbrances to monitor expenditures and overall spending in relation to the budget
- Encumbrance accounting recognizes that an outstanding order will turn into an expenditure and a liability when the goods arrive.
- To prevent over-spending outstanding orders are entered into the books as encumbrances.
If an order for $150,000 is placed which consists of 3 buses costing $50,000 each it should be recorded as:
DR: Encumbrances $150,000
CR: Budgetary Fund Balance Reserved for Encumbrances $150,000
When encumbrances do not lapse, the portion of the fund balance still outstanding is classified as fund balance:
Restricted, commited, or assigned.
Is encumbrances account closed at year end?
The encumbrances account is closed at year end for both lapsed and not lapsed entries.
Explain the terms:
Appropriations
Encumbrances
Expenditures
Unencumbered Balance
Appropriations: legally engacted budget for this type of Expenditure
Encumbrances: Commitments to Expenditures that have not yet occurred
Expenditures: Exenses that have occurred
Unencumbered Balance: Total Budget less any Encumbrances and Expenditures that have been recorded. The balance in this account tracks exactly how much is available in the expense category
what two funds will have separate budgets?
General funds and special revenue funds will have separate budgets. Separate budgets are optional for other governmental funds and are not used for proprietary and fiduciary funds.
Revenue accounting in Governmental funds: For property taxes available, collection must occur in the current period or within how many days?
Within 60 days of year end (any not received with the 60 day is deferred inflow- an account used to hold it until recognition)
What is the JE for tax revenues not collected within 60 days of end of current period?
DR: Revenues
CR: Deferred inflows
What is “imposed- non excahgne transactions”?
When the government gives/receives without something of equal value exchanged.
how do you record loans of cash from one fund to another fund that are expcted to be repaid?
Receivable- due to
Payable- due from
How to record a tax levy that is expected to have 2% uncollectible out of $1,00,000?
DR: Taxes Receivable $1,000,000
CR: Estimated Uncollectible $20,000
CR: Revenue $980,000
Under the modified accrual basis of accounting for a governmental unit, revenues should be recognized in the accounting period in which they:
Became available and measurable.
List program revenues:
- Charges for services
- Operating grants and contributions
- Taxes levied by a state and shared with a local government
- Capital grants and contributions