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Government And Nonprofit Accounting > SU 5: GOV Expenditures > Flashcards

SU 5: GOV Expenditures Flashcards

1
Q

What do modified accrual basis accounting and governmental budgeting practices focus on?

A

Near-term liquidity

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2
Q

When are revenues recognized under modified accrual accounting?

A

When they are measurable and available (“susceptible to accrual”)

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3
Q

When are expenditures recognized under modified accrual accounting?

A

Fund liability accrued n the period the related liabilities are incurred

Subject to certain significant exceptions for liabilities that do not require liquidation with current financial resources

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4
Q

What liabilities are reported in general and special revenue funds?

A

Only those that represent claims against the funds current financial resources

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5
Q

What expenditures are accrued under modified accrual accounting?

A

Expenditures that, once incurred, normally are paid in a timely manner and in full from current financial resources

Matured liabilities to be liquidated with current financial resources

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6
Q

Why do governments often require short term financing?

A

Because revenue inflows tend to be “lumpy” and uneven while required outflows (incurred expenditures) are consistent

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7
Q

TANs

A

Tax anticipation notes

Notes issued in anticipation of tax receipts and payable from those receipts

Generally issued to meet temporary operating cash flow requirements

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8
Q

RANs

A

Revenue anticipation notes

Notes issued in anticipation of other revenue sources (usually from higher level governments)

Generally issued to meet temporary operating cash flow requirements

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9
Q

BANs

A

Bond anticipation notes

Issued in anticipation of future bond issue to provide interim financing of capital projects

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10
Q

Accounting for proceeds of TANs and RANs

A

Recorded as liabilities in the general fund or a special revenue fund

Dr cash
CR tax or revenue anticipation note payable

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11
Q

Accounting for interest payable on RANs and TANs

A

If liability maturing early in the next year (aka short term from issue) interest will need to be accrued at year end

Dr expenditure - debt service
CR interest payable

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12
Q

Accounting for short term investments under modified accrual

A

Dr temporary investment
CR cash

Interest accrued if it meets criterion of availability

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13
Q

Availability criteria for recognizing revenue

A

Must be available in cash in the current period or soon enough thereafter to pay the bills of the current period

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14
Q

Horizon for governmental budgets

A

Short term

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15
Q

Liabilities not reported in government funds

A

Long term debt
Noncurrent liabilities (compensated absences, judgements and claims, pensions..m)

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16
Q

Short term liabilities

A

Expenditures that, once incurred, normally are paid in a timely manner and in full from current financial resources

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17
Q

Matured long term liabilities

A

Matured liabilities to be liquidated with current financial resources

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18
Q

Near term liabilities

A

Combination of short term and matured long term liabilities

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19
Q

Accounting equation for government funds

A

Financial assets + deferred outflows of resources = short-term liabilities and matured long term liabilities + fund balance + deferred inflows of resources

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20
Q

Deferred inflows

A

(unearned income)

Government acquisition of assets (or reduction of expenditures)applicable to a future reporting period

On balance sheet in separate section after liabilities

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21
Q

Deferred outflows

A

Consumption of net assets applicable to a future period (prepaid expenses)

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22
Q

Governmental fund liabilities

A

Claims against current financial resources

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23
Q

General long-term liabilities

A

Liabilities that are not currently payable

Not reported in fund accounting, nor are the accrued expenditures until they become due and payable with current financial resources

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24
Q

Accounting for expenditures once incurred normally paid in a timely manner and in full from current financial resouces

A

As claims against current financial resources anything not paid at lear end is accrued as expense and liability in the governmental fund

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25
Q

Accounting for items that create liabilities that governments normally expect to liquidate over future periods with financial resources available in those periods

A

Recognized in governmental funds only as liabilities mature each year on the occurrence of relevant events

Portions not matured are long term debt, not fund debt

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26
Q

Examples of items that create liabilities that governments normally expect to liquidate over future periods with financial resources available in those periods

A

Claims and judgements
Compensated absences
Special termination benefits
Landfill closure and post closure care costs

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27
Q

Accounting for liabilities resulting from promises to pay pensions, retiree health care, other postemployment benefits

A

Varies by government and type of benefit

Government fund expenditure should =
Amount paid by employer to the plan
Plus
Benefits that are due and payable but the plan lacks sufficient resource to pay benefits

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28
Q

Postemployment benefits in governmental funds

A

Accounted for as expenditures and liabilities in period financed

Accruals made only for additional benefits that have matured and are due for payment by the government due to lack of financing in the open

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29
Q

Reporting full liability from underfunding post employment benefit plans

A

Goes in government wide statements only (with all long term debt)

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30
Q

Salary, supplies and utilities accrual (fund reporting)

A

Can be accrued in the fund if to be paid with current financial resources

Dr expenditure
CR accrued liability

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31
Q

Modified accrual accounting for claims and judgements

A

Only accrue matured liabilities - ones due and payable (expected to be liquidated with expendable current financial resources)

Dr expenditure
CR accrued liability

Long term liabilities in government wide statements only .

Settlements reported as expenditures as come due for payment

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32
Q

When are compensated absences accrued when benefits earned?

A
  • if employee’s right to receive compensation is based on services already performed
  • if it is probable that employer will compensate employee via paid time off or some other means
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33
Q

Accrual for compensated absences under modified accrual accountinf

A

Accrual made only for matured lability. Amounts coming due because employees have been terminated or retired but absences payment has not yet been made

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34
Q

Recognizing and measuring post employment benefit expenditures in governmental funds

A
  • for pensions: the amount paid during the year
  • for retiree health care plans: the amount paid during the year or due to be paid at year-end for incurred medical expenses
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35
Q

Types of interfund transactions

A
  • interfund services provided and used
  • interfund transfers
  • interfund loans
  • interfund reimbursements
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36
Q

Interfund services provided and used

A

When one fund sells goods to or performs services for another fund for a price approximating their external exchange value (typically enterprise or internal service fund)

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37
Q

JE for fund purchasing services in interfund transactions

A

Dr expenditures - service
Cr- due to service fund

(Short term payable)

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38
Q

JE for fund providing service in interfund transaction

A

DR due from general (or other) fund
CR Revenues -services

Short term receivables

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39
Q

Interfund transfers

A

Flow of assets from one fund to another without an equivalent flow of assets in return and without a requirement for repayment

Ex: operating subsidy transfers from general fund

NOT revenue or expenditures/expense

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40
Q

Reporting interfund transfers on governmental fund statements

A

Reported as other financing sources (uses)

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41
Q

Reporting interfund transfers on proprietary fund statements

A

Reported separately after totaled “income (losses) before transfers”

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42
Q

Interfund transfers transferor journal entry

A

Dr transfer out to xxx fund
CR cash (or due to xxx fund)

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43
Q

Interfund transfers transferee journal entry

A

Dr cash or due from general fund (or other)
CR transfer in from general fund (or other)

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44
Q

Interfund loans

A

When one fund lends cash to another with a requirement for repayment

No authoritative retirement to distinguish between long-term and short-term interfund loans but still generally done

45
Q

Short-term interfund loan, lender JE

A

Dr due from xxx fund (or loan receivalbe)
CR cash

46
Q

Short-term interfund loan, borrower JR

A

Dr Cash
CR due to general (or other fund)

47
Q

Issues in recording long term loans in governmental funds

A

Need a journal entry to show on the balance sheet of the lending find to show that portion of it’s fund balance is not currently available for spending

48
Q

Long-term interfund loan, lender JE

A

Dr advance to xxx fund aka Non-reciprocal transfer out
CR cash

Dr unassigned fund balance
CR nonspendable find balance

49
Q

Long-term interfund loan, borrower JE

A

Dr cash
CR advanced from general fund

50
Q

Interfund reimbursements

A

When one fund repays another for expenditures were made by the other fund on the first fund’s behalf

51
Q

Recording interfund reimbursement due

A

Dr due from xxx fund
CR expenditure (that had previously been incurred)

52
Q

Recording payment of interfund reimbursement (reimbursor side)

A

Dr expenditure (or expense)
CR due to general (or other) from nd

When cash is exchanged due from and due to are eliminated

53
Q

Purchases of capital assets by governmentalnfinds

A

Purchase accounted for as immediate expenditures (decrease available financial resources) not depreciable balance sheet assets

54
Q

JE for purchase of asset by governmental fund

A

Dr expenditures - capital outlay
CR cash or vouchers payable

No asset recorded to appear on fund balance sheet

55
Q

Governmental fund JE for sale of asset

A

Dr cash
CR other financing sources - proceeds from sale of general capital assets

Entire proceeds recognized as inflow of resources

56
Q

Options for recognizing expenditures for materials and supplies in government type finds

A

Purchases method (expenditure when purchased)
Consumption method (expenditure when consumed)

57
Q

Consumption method for inventories and prepayments

A

Recognized materials and supplies as assets when purchased and expenditures when consumed

58
Q

Consumption method JE- recording purchase

A

Dr supplies inventory
CR cash or vouchers payable

59
Q

Consumption method JE- to record supplies used

A

DR expenditures - supplies
CR supplies inventory

for Government wide just need to adjust expenditure - supplies to Supplies expense

60
Q

Purchases method for inventory and prepayments

A

Purchases of supplies recorded as expenditures when purchased

Requires year end adjustment to report inventory remaining on balance sheet

61
Q

Purchases method JE- purchase of supplies

A

Dr expenditures -supplies
CR cash or accounts payable

62
Q

Purchase method JE- year end adjustment for remaining inventory

A

Dr supplies inventory
CR fund balance non-spendable

(Readjusted at the end of every year based on change from previous year, not whole amount)

no government0wide adjustment required

63
Q

Purchase method JE- year end adjustment for remaining inventory

A

Dr supplies inventory
CR nonspendable fund balance

(Readjusted at the end of every year)

64
Q

Fund accounting for prepaid services

A

Generally purchases method used and prepaid amounts considered insignificant (no year end adjustment made)

65
Q

Warrant

A

An order, drawn by the appropriate authority, requesting payment of a specified sum of money to a particular person or organization

Purpose to prevent unauthorized payment

No journal entry recorded

66
Q

Actuarial treatment of differences between projections and actual experiences

A

GASB requires actuaries to defer and amortize differences when they calculate net pension and OPEB liabilities

This eliminates short term fluctuation

67
Q

Reporting deferred fluctuations in post employment benefit liability

A

Reported as deferred outflows and inflows

68
Q

Governmental fund expenditure thpes

A

Current operating item
Capital asset acquisition
Debt service

69
Q

Short term liabilities (receivables) in governmental funds

A

Due from
Due to

70
Q

Long term liabilities (receivables) in governmental fund

A

Not recorded!!

Movement of cash recorded as:
Advance from
Advance to

71
Q

Expenditures

A

Used in modified accrual accounting (Governmental Funds)

Fund liabilities liquidated with current resources / decreases in net financial resources not resulting from transfers or refunds

Decrease net current financial resources

72
Q

Expenses

A

Used in accrual accounting (government wide)

Costs expired or consumed during a period

cost in net economic resources

73
Q

Net financial resources

A

= Current financial resources - expenditures (or claims for payment)

74
Q

When to recognize expenditures under modified accrual accounting

A

Recognize in period when paid from current financial resources

75
Q

What expenditures require special recognition approaches

A
  • Materials/supplies/prepaid items
  • debt service expenditures on LT debt
  • pensions, claims & judgements, compensated absences
  • capital leases
76
Q

Modified accrual accounting for general operating costs

A

recognize in fund accounts in period paid from financial resources

can accrue future payable less than a due less than a year from period incurred

77
Q

Modified accrual accounting for operating cost payables due a year or more after they are incurred

A

Goes on the schedule of LT obligations

must bring into government wide financial statements via adjustments

recognized in the fund in period when opaid

78
Q

Modified accrual accounting for compensation expenditures

A

Recognized in period earned by the employee IF paid from financial resources

no encumbrance recorded for recurring expenditures like payroll

79
Q

Modified accrual accounting for compensation expenditures to be paid in the future

A

recognize in period paid, no fund payable entry made in current period

80
Q

Compensation entry adjustment from fund to government-wide

A

Adjust expenditure to expense and add entry for any wages payable in future period (DR wages and salary expense, Cr wages payable)

81
Q

Modified accrual accounting for compensated absences

A

Realized on fund accounts if will be paid from current financial resources, otherwise recognize in period when paid

no payable accrued for future period payments (on schedule on LT liabilities)

82
Q

Compensated absences

A

Earned in one period but not paid until several periods later - paid out based on salary/ wage in effect when the absence occurs

83
Q

Compensated absence entry adjustment to government wide

A

Just adjust expenditure to expense

if any due for payment in future period add payable (Dr Wages and salary expense - compensated absence, cr wages payable)

84
Q

Modified accrual accounting for vacation leave

A

Recognized in period paid. NOT in current period unless paid from current financial resources

85
Q

Vacation leave not taken in period earned

A

no entry in fund accounting. Adjusting entry for government wide accounting to incur expense and wages payable

86
Q

Modified accrual accounting for sick leave

A

Recognize current payments from financial resources

recognizes liability ONLY if it is probable that the employer will compensate employees for unused leave at their termination or retirement (expected to pay out with current resources)

87
Q

Accounting for sick leave that does not vest

A

no payable recorded even in government-wide financials

88
Q

vested amounts of sick leave

A

only recognize anything paid with current financial resources in fund accounting

in government accounting recognize long term payable where applicable

89
Q

sick leave not paid in current period & not vested

A

no entries in fund or government-wide

90
Q

Types of sabbatical leave

A
  • approved activities: enhance job-related skills (expenditure recognized during period of leave)
  • compensated unrestricted time off (expense recognized during period leave is earned)
91
Q

Accounting for approved activities sabbatical

A

Modified accrual - entry when leave is taken, no entry when accrued
DR expenditure- sabbatical leave
CR cash

only adjustment for government wide is expenditure to epense

92
Q

Accounting for unrestricted time off

A

no fund JE when accrued, adjusted on to government-wide statements as expense and payable when accrued

93
Q

modified accrual accounting for Government contributions to pensions

A

recognize expense for amount paid from current financial resources, only record a payable if short term (paid with current financial resources)

94
Q

Government-wide accounting for pension contribution

A

Full pension accrual

DR Pension Expense
DR OCI - Loss
Cr pension liability
Cr OCI - Prior service costs
Cr - cash

95
Q

Modified accrual accounting for claims and judgements

A

recognize any portion of liability paid with current financial resources

liability not accrued for any outstanding balance

96
Q

Government-wide accounting for claims and judgements

A

Liability accrued if probable that liability exists by balance sheet date and loss can reasonably be estimate

recognize full expense and present value of structured settlements

adjusting entry adjusts expenditures to expense

97
Q

structured settlements

A

payments on fixed- determinable dates

98
Q

what method is required for government-wide accounting for supplies inventory

A

Consumption method

if funds use consumption method no AJE is necessary for purchases

99
Q

Consumption method for supplies inventory year end adjustment

A

Still needed to convert what balance is for in accounts

DR Fund balance -unassigned (end of year inventory amount)
Cr Fund balance -non spendable

100
Q

Accounting for prepayments in a governmental fund

A

May use consumption or purchase method BUT if services extend over more than one accounting period do not allocate among accounting periods. unused portion of insurance policy for multiple years reported as a current asset

government-wide must used consumption method

101
Q

What is the GASB standard for reporting expenditures from governmental funds for employee pension benefits and retiree health care benefits?

A

expenditures should be equal to (a) the amount contributed by the employer to the plan and (b) the year-to-year change in the amount normally expected to be liquidated with available financial resources.

102
Q

Prepayments modified accrual EOY journal entry under consumption method

A

DR fund balance - unassigned (EOY Prepaid balance)
Cr Fund balance -non spendable

No EYO fund entry under purchases method

103
Q

revenue recognition for non-exchange expenditures

A

Recognize when:
- recipient has satisfied all eligibility requirements
- when revenue is available for expenditure

104
Q

JEs when grant is approved for future distribution

A

No expenditure or liability recognized until distribution

105
Q

JEs from grantor when payment of grant is made on approval

A

As long as recipient is eligible to use the funds

DR expenditure (modified) or expense (accrual)
Cr cash

106
Q

Accrual of grant payable

A

only accrue under modified accounting if payable within one year

book current and future short-term distributions. do not book long-term distributions

107
Q

Grantee entry for grant received with eligibility requirements not met

A

Dr Cash
CR deferred revenue - grant

(in a special revenue fund)

108
Q

Expenditure from grant fund

A

expenditure recognized and amount from deferred revenue-grant is moved to revenue

DR Expenditure or Expense - Grant
Cr Vouchers payable

Dr Deferred Revenue Grant
CR revenue-Grant

109
Q

Categories of interfund activity

A

Reciprocal (purchase from internal service fund, short term loans receivable, long term loans receivable)

Non-reciprocal (transfer to establish internal service fund, interfund reimbursements)

Government And Nonprofit Accounting (14 decks)

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