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Government And Nonprofit Accounting > SU 2: GOV Fund Accounting > Flashcards

SU 2: GOV Fund Accounting Flashcards

1
Q

Reporting entity

A

Defines the financial reporting boundaries of a particular entity by describing whose assets, liabilities, expenses, and equities are included in its financial reports

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2
Q

Component units

A

Legally separate entities for which the primary government is financially accountable.

May be reported as part of the primary’s financial statements or separately within the financial statements

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3
Q

Fund

A

A fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations

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4
Q

Fiscal entity

A

The separate budgetary nature of an individual fund

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5
Q

Accounting entity

A

The unit treated as an entity for accounting and reporting purposes

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6
Q

Fund balance

A

Aka net position

The difference between assets and liabilities (and deferred inflows of resources) for an entity in the absence of owners ewuity

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7
Q

General Fund

A

Residual fund to account for resources not accounted for in other funds. Also most important fund: from which government appropriates resources for day to day operations

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8
Q

Categories of funds

A
  • governmental
  • proprietary
  • fiduciary

Mirror the broad types of activities the funds perform

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9
Q

Governmental-type funds

A

Used for day to day governmental services

Primarily financed by tax revenue

Use capital assets financed by issuing debt (debt is accounted for in a separate governmental-type fund)

Expenditures controlled by legally adopted budgets (appropriationsL

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10
Q

Proprietary type funds

A

Aka business-type funds

Used to account for govt activities that operate in a similar manner to private sector business. Charge fees for services and measure of revenue covers expenses though may receive transfers from the general Fund.

Cost data may be used to determine fee amounts

Tend to be supporting activities that may receive subsidies, maybe provide govt revenues (lotteries)

Focus on cost recovery so use accounting principles similar to commercial entities

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11
Q

Proprietary fund accounting

A

Used by government business type enterprises that are legally separate from the government

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12
Q

Fiduciary type funds

A

Used to account for resources that governments hold (or transaction they make) in trust or custodial capacity for others.

Cannot be used to support government’s own programs

Report as fiduciary activity only if government controls the assets of that activity (has the ability to direct use)

Assets in fiduciary funds cannot be used to support government’s own programs

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13
Q

Governmental-type fund financial statements

A
  • resource inflows and outflows (statement of revenue, expenditures, and changes in fund balance: operating statements)
  • financial position (balance sheets)
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14
Q

Proprietary type fund financial statements

A
  • Operating statements
  • statements of net position
  • statements of cash flows
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15
Q

Fiduciary type funds financial statements

A

-statements of net position and changes in net position

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16
Q

Government wide financial statements

A

Consolidate individual funds into two groups:
Governmental vs business type

Starts with funds statements and adjusts them so all activities use same measurement focus and basis of the accounting

Excludes fiduciary funds (they do not support government’s own programs)

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17
Q

Measurement focus

A

What is being expressed and which resources are being measured in the report

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18
Q

Governmental accounting measurement focus

A

Only measures current financial resources: financial assets, short term liabilities, and matured long term liabilities

This tracks the amount of financial resources available for current spending by recording inflows and outflows of financial (or near term) assets

Inflows: revenues/ other financing sources
Outflows: expenditures/ other financing uses

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19
Q

Basis of accounting

A

When the assets, liabilities. Revenues and expenses are recognized (recorded) in financial statements

A timing concept

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20
Q

Measurement focus and basis of proprietary and fiduciary funds

A

Measurement focus: all the economic resources available to the activity (economic resources measurement focus)

Basis: accrual basis

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21
Q

Information needs of government budget officer and central budget office

A

Amount of financial resources available for current spending

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22
Q

Basis of accounting for Governmental-type funds

A

Modified accrual basis

Focuses on flows of current financial resources

No measurement of capital assets or long term liabilities

Only accruals of NEAR-TERM financial resources recorded (inflows and outflows)

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23
Q

Five types of governmental funds

A 
General Fund
Special revenue funds
Debt service funds
Capital projects funds
Permanent funds
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24
Q

Governmental funds: general

A

Day to day activities. Anything not accounted for in another fund

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25
Q

Governmental funds: special revenue

A

Proceeds of specific revenue items (taxes and fees) restricted/ limited to spending for specific purposes (other than debt service or capital projects)

Generally established by law or contract

May be supplemented with funds from the general Fund

Provides greater transparency in how dollars collected from specific source are used

Financial statements must include purpose of the special revenue fund

No unassigned portion of fund balance - all classified restricted

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26
Q

Governmental funds: capital projects

A

Financial resources restricted for the acquisition or construction or capital facilities (inc infrastructure) /other capital assets

Not used for outflows financed by proprietary funds or for assets held in trust

Used when capital outlays are financed by general obligation bond proceeds (separate funds for separate bonds for transparency)

May have transfers from other funds

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27
Q

Governmental funds: debt service

A

Financial resources restricted or otherwise limited to spending for principal and interest on general long term debt

May also be used to accumulate resources for paying long-term liabilities (debt-like commitments)

Use if legally mandated or if financial resources are being accumulated for principal and interest that comes due in future years (bonds that require a sinking fund)

May be different funds for different bonds

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28
Q

Governmental funds: permanent

A

Resources restricted to the extent that only earnings (not principal) may be used for government programs (endowment funds).

Do not include private-purpose trust funds (fiduciary type funds)

Usually a special revenue fund designated as the beneficiary of the permanent fund to which earnings are transferred and from which they are then used

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29
Q

Revenue recognition for modified accrual accounting

A

Recognition of revenue that is measurable and available (collectable soon enough to pay current period bills) = taxes accrued as revenue

Property tax: if collectable within 60 days of the end of the accounting period accrued in that period

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30
Q

Expenditure recognition for modified accrual accounting

A

Three types of expenses in operating statements of governmental type funds

  • current operating items (liabilities payable shortly after accrual)
  • capital asset acquisitions (financial resources consumed cannot be spent elsewhere)
  • debt service (interest and principal on long term borrowing but only when due for payment. Decrease in financial resources)

What is accounted for in the current budget

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31
Q

Expenses that would be recognized on full accrual accounting left off of modified accural

A

Long term liabilities are recognized only when they mature (not provided for in the current budget!). This includes payroll accruals of vacation and retirement as well as debt that is not yet mature

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32
Q

General obligation bonds

A

GO bonds

Secured by a state or local government’s full faith, credit, and taxing power. Government presumed to be able to pay via taxes or other resources

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33
Q

Bond proceeds in governmental-type funds

A

No long term liability reported. Cash inflow from general obligation bonds reported as “other financing source” on operating statement

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34
Q

Budgetary basis of government accounting

A

Set by legislature not standard setting body

35
Q

Government-wide financial reporting of governmental-type funds

A

Aggregated with other funds and adjusted to the economic resources measurement focus and accrual basis of accounting

36
Q

Governmental-type fund statement of revenues, expenditures, and changes in fund balance

A

Done for a period (year ending in x)

Revenues section
Taxes - list of taxes- total taxes
List of other revenues
Total revenues

Expenditures section
Split into current (general), debt service, and capital outlay
Total expenditure

Excess (deficiency) of revenue over expenditures

List of other financing sources (uses)
- includes intergovernmental transfers that are not changes in revenue or expense but do change fund balance
Total other financing sources(uses)

Net change in fund balance
Fund balance, beginning
Fund balance, end

37
Q

Governmental-type funds balance sheet

A

For position on a specific date

Assets section (only current financial)
Total assets

Liabilities, deferred inflows of resources and fund balance liabilities section
Liabilities section
Current liabilities

Deferred inflows of resources: unavailable revenue

Fund balance section
Should restricted/assigned/ unassigned amounts

Total fund balance

Total liabilities, deferred inflows of resources and fund balances

38
Q

Source of general funds

A

Taxes: real property, sales, personal & corporate income

Intergovernmental grants

Licenses, fees, and fines

39
Q

Governmental funds operating statements

A

Show financial resources available for spending

Ignores: long term (capital) assets and liabilities

Essentially modified cash flow statement

Sections:

  • revenues
  • expenditures
  • other financing sources(uses)
40
Q

Other financing sources (uses) section of operating statement

A
  • accommodates financial resources measurement focus

- report interfund transfers

41
Q

Governmental-type fund balance sheet

A

No capital assets included, just current financial resources including transfers from other fund

No longer-term liabilities

42
Q

Due from other funds

A

When an entity has an asset for short term receivables due from other funds

43
Q

Advances to other funds

A

Long term loans to other funds

44
Q

Due to other funds

A

Short term loans from other funds on the liabilities section of the governmental-type funds on a balance sheet

45
Q

Advances from other funds

A

Long term loans between funds

Have special treatment in balance sheet

46
Q

Classifications of fund balwnce

A 
Nonspendable
Restricted
Committed
Assigned
Unassigned
47
Q

Governmental funds accounting equation

A

Financial assets = short term and matured long term liabilities + fund balance

Financial assets: cash, investments, receivables

Short-term liabilities: payables (less than the 1-year short term of financial accounting)

48
Q

Discontinuing special revenue designation

A

When government no longer expects the specific revenue sources to be a substantial portion of the special revenue funds resources

48
Q

Discontinuing special revenue designation

A

When government no longer expects the specific revenue sources to be a substantial portion of the special revenue funds resources

49
Q

Capital projects funds financial statements

A

Governmental-type funds

Other financing sources: long-term borrowing and transfers from other funds (are not revenues)

Revenues: intergovernmental grants

Do not show capital assets or the related long-term debt issued to acquire those assets (those go in government-wide statements

50
Q

General long term debt

A

Debt other than that related to and expected to be paid from proprietary type or fiduciary type funds

51
Q

Debt service fund resource sources

A
  • transfers from the general Fund
  • income from investment of resources held by the fund
  • taxes assessed specifically to service the debt
  • portion of bond proceeds
52
Q

Defeasance

A

a provision in a contract that voids a bond or loan on a balance sheet when the borrower sets aside cash or bonds sufficient enough to service the debt.

53
Q

Proprietary fund measurement focus and basis

A

Economic recourses measurement focus

Accrual basis of accounting

54
Q

Types of proprietary funds

A

Enterprise fund

Internal service fund

55
Q

Enterprise fund

A

Resources used to supply goods and services, for a fee, to users who are entirely or primarily external to the government

Generally a separate find for each type of activity

56
Q

Internal service fund

A

Resources used to supply goods or services, based on cost reimbursement, within the government itself and to other governments

(Central motor pool, central purchasing)

User-charge or cost reimbursement structure

Used ONLY if the reporting government is the predominant participant in it’s activity (otherwise enterprise fund). Separate funds used for separate activities

57
Q

Criteria for enterprise fund

A

If one of the following is true enterprise funds must be used:

1) the activity is financed with debt that is secured solely by a pledge of net revenues from the activity’s fees and charges
Or
2) laws or regulations require that the costs of providing services, including capital costs (depreciation, debt service) be recovered through fees and charges rather than taxes
Or
3) the activity’s pricing policies set fees and charges that are designed to recover it’s costs, including capital costs

58
Q

Revenue bonds

A

Bonds secured with a pledge of the net revenues from an activity’s fees and charges

59
Q

Accounting for public authorities/public benefit organizations

A

Legally separate from the parent government, so reported separately from the enterprise funds of the parent government

Use enterprise type (accrual basis) accounting

60
Q

Reasons to use of internal service funds

A

Cost savings via:

  • consolidation of similar support type activities into a single unit
  • purchasing in volume
61
Q

Accounting system for internal service finfd

A
  • bills other funds receiving goods and services
  • billed amounts are expenses for other funds and revenues for the internal service fund
  • provides information on real total cost of goods or services
  • economic resources measurement focus
  • full accrual accounting basis
  • interfund billings eliminated in government wide financial statements
62
Q

Financial statements for proprietary funds

A
  • operating statement (statement of revenues, expenses, and changes in net fund position)
  • statement of net position
  • statement of cash flows
63
Q

Operating statement for proprietary type funds

A

Multistep.

Operating revenues
(List and total)
Operating expenses
(List and total)
Revenues - expenses = operating income
Nonoperating revenues (expenses)
(List and total)
Add or subtract from operating income to get income before transfers
Add capital contributions
Add and subtract transfers in or out
Extraordinary items 
= Net change in position
Net position beginning of year
Net position, end of year
64
Q

Proprietary fund statement of net position

A

Prepared in classified form

Assets
Current assets
Noncurrent assets
Total assets

Liabilities and net position 
Liabilities
      Current liabilities
      Noncurrent liabilities
          Total liabilities
Net position 
   Total net position
        Total liabilities and net position
64
Q

Proprietary fund statement of net position

A

Prepared in classified form

Assets
   Current assets
   Noncurrent assets
      Total assets
   Deferred outflows of resources
       Total
Liabilities and net position 
Liabilities
      Current liabilities
      Noncurrent liabilities
          Total liabilities
Deferred inflows of resources
    Total
Net position 
    Net investment in capital assets
    Unrestricted 
       Total net position
           Total liabilities and net position

Traditionally assets = liabilities + net position

Could also be framed: assets - liabilities= net position

65
Q

Proprietary type funds statement of cash flows

A

Prepared using direct method

Bottom section reconciles operating income and changes in net position to cash provided by (used in) operating activities

66
Q

Statement of cash flows direct format

A

Cash flows from operating activities
List
Net cash provided by operating activities

Cash flows from Noncapital financing activities
Net cash used in Noncapital financing activities

Cash flows from capital and related financing activities
Net cash used in capital and related financing activities

Cash flows from investing activities
Net cash provided by investing activities

Net change in cash and other money market instruments
Beginning of the year
End of the year

Reconciling operating income to net cash provided by operating activities
(Indirect statement of cash flows method)

67
Q

Fiduciary

A

involving trust, especially with regard to the relationship between a trustee and a beneficiary

68
Q

Pension (and other employee benefit) trust fund

A

Most widely are used/ significant type of fiduciary funds

Administered by government for benefit of members and their beneficiaries

69
Q

Requirements for employee benefit trust funds

A

Must meet all three

  • contributions to and earnings of the benefit plan are irrevocable
  • assets in the benefit plan are dedicated to providing benefits for plan members
  • assets in the benefit plan are legally protected from the creditors of the contributing entities, plan administrators, and plan members of defined benefit plans
70
Q

Types of employee pension plans

A

Defined benefit plan
Vs
Defined contribution plan

71
Q

Types of fiduciary type funds

A
  • pension (and other employee benefit) trust
  • investment trust
  • private purpose trust
  • custodia
72
Q

Investment trust funds

A

Fiduciary type fund

An investment pool sponsored by the government in which they invest and managed resources belonging to the sponsoring government and other governments

73
Q

Requirements for an investment trust fund

A

To be classified as an investment trust fund, assets held must be:

    • administered through a trust in which the government itself is not a beneficiary
  • dedicated to providing benefits in accordance with the benefit terms
  • legally protected from the government’s creditors
74
Q

Reporting for an investment trust fund

A

Sponsoring governments portion of the pool of investments: reported as assets in funds for which investments were made

External portion of pool: reported in investment trust funds

75
Q

Private-purpose trust funds

A

Used to report all fiduciary activities that
- are not required to be reported in pension (or other employee benefit) or investment trust funds
And
- are held in a trust meeting the criteria of an investment trust fund

Ex: escheat property fund (property that reverts to a governmental entity in absence of legal claimant/heirs). Fund holds in case later claim established

76
Q

Custodial funds

A

Fund for fiduciary activities that are not required to be reported in a pension, investment, or private- purpose trust

Ex: state government held clearing account for county sales tax until distribution

Only undistributed amounts not belonging to holding government reported in custodial fund. Amounts belonging to the holding government should be reported in their appropriate fund

Used to hold deposits by contractors when submitting bids on government construction contracts

77
Q

Financial statements for fiduciary type funds

A
  • statement of changes in fiduciary net position

- statement of fiduciary net position

78
Q

Statement of changes in fiduciary net position

A

Statement for period

Additions
Contributions
Investment income (changes in value + interest and dividends - investment expense) 
    Total additions
Deductions
Benefits
Withdrawals
Admin expenses 
    Total deductions

Net increase or decrease in fiduciary net position
Net position beginning of year
Net position end of year

79
Q

Statement of fiduciary plan net position

A

Statement on a certain date of assets held in the trust

Assets
Investments
Cash & receivables
   Total assets
Liabilities
Accounts payable
Refunds payable
Net position
  List restrictions 
      Total net position

Does not list liability for total pension promise (so cannot discern if obligation for pension benefits is met). That information is in government-wide financial statements and in notes

80
Q

Financing for general fund

A 
Taxes (mostly property, also sales tax, income tax, and taxes on select items)
Intergovernmental grants from higher levels of gov
Miscellaneous item (license charges, fees, fines, etc..)
81
Q

General fund revenue reporting

A

Aggregated by category for statement purposes but different revenue sources must go to separate accounts

82
Q

General fund operating expenditures

A

Generally in five to ten broad categories depending on government need

Categories may contain different org units with the government

Government And Nonprofit Accounting (14 decks)

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