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Name the primary authoritative body for GAAP for governmental entities

Governmental Accounting Standards Board (GASB)


What are the three accounting themes addressed by governmental accounting?

- Fund structure
- Fund accounting
- External reporting


Identify the major categories of funds used by state and local governmental units

- Governmental
- Proprietary
- Fiduciary


What terms define the manner and timing of transaction recognition in governmental fund accounting?

Fund accounting principles are defined by:
- Measurement Focus (how transactions are recognized)
- Basis of Accounting (when transactions are recognized)


What are the objectives of external reporting?

- Operational accountability
- Fiscal accountability


What types of external reports meet the accountability objectives of government?

- Operational accountability: government-wide financial statements
- Fiscal accountability: fund financial statements


Name each governmental fund type

General Fund
Special Revenue Funds
Debt Service Funds
Capital Projects Funds
Permanent Funds


What are the fund accounting principles applicable to governmental funds?

Measurement Focus: Current financial resources
Basis of Accounting: Modified accrual


What specialized accounting practices are followed by the governmental funds?

Budgetary Accounting
Activity (Actual) Accounting
Encumbrance Accounting


Name and define the five classifications of fund balances used by governmental fund types

1) Non-spendable: resources that are not available to be spent (e.g. inventories)
2) Restricted: resources that are constitutionally, legislatively, or otherwise externally limited as to use
3) Committed: resources that are internally limited as to use by the governments highest level of decision-making authority
4) Assigned: resources intended to be used by the government for specific purposes whose constraints do not rise to the level of restricted or committed
5) Unassigned: residual classification of equity that represents resources that are the least limited as to use.


Name each proprietary fund type

Internal Service Funds
Enterprise Funds


What are the fund accounting principles applicable to proprietary funds?

Measurement Focus: Economic resources
Basis of Accounting: Full accrual


Name each fiduciary fund type

-Pension (and other employee benefit) Trust Funds
-Agency Funds
-Private-Purpose Trust Funds
-Investment Trust Funds


What are the fund accounting principles applicable to fiduciary funds?

Measurement Focus: Economic resources
Basis of Accounting: Full accrual


Distinguish between alternative measurement focuses

Current Financial Resources (GRSPP)
- no fixed assets are recorded; capital outlays displayed as expenditures
- no depreciation
- no noncurrent liabilities are recorded; debt proceeds displayed as resource inflows
- principle payments displayed as an expenditure
- premiums and discounts on debt are not amortized; they are included as an increase or decrease of debt proceeds

Economic Resouces (SE PAPI)
- fixed assets are recorded
- noncurrent liabilities are recorded


Define modified accrual and list the funds that use it as a basis of accounting.

Modified accrual:
Revenues should be recognized when measurable and available; expenditures are generally (with the exception of interest expenditures) recognized when fund liability is incurred.

Funds using modified accrual basis:
- General Fund
- Special Revenue Funds
- Debt Service Funds
- Capital Project Funds
- Permanent Funds


What do the terms "measurable" and "available" mean in the context of the modified accrual basis of revenue accounting?

- Measurable means reasonably estimable or of a known determined amount.
- Available means collectible within (generally) 60 days of year-end.


When are revenues recorded in governmental funds?

Governmental funds record revenues when measurable and available. This concept applies to accrual of different types of revenues depending on their character.

Accrue when:
Billed/Recorded (imposed non-exchange transactions)
- Real estate taxes (due)

Received (derived non-exchange transactions)
- Income taxes
- Sales taxes

Earned (government mandated and voluntary non-exchange transactions)
- Real estate taxes paid in advance
- Restricted grants


Define the different classifications of expenditures

Expenditure classifications include:
- Function (e.g. public safety)
- Organizational unit (e.g. police dept, fire dpt, etc)
- Activity (e.g. drug enforcement, highway safety patrol)
- Character (e.g. current, capital outlay, debt service, intergovernmental)
- Object (e.g. personal services, building occupancy, insurance)


What is the journal entry to record the annual budget?

Dr. Estimated revenues
Cr. Appropriations
Cr. Budgetary control

Actual expenditures have a natural debit balance. Appropriations to which those expenditures are compared have a natural credit balance. Computation of unexpected appropriations is a pure arithmetic sum of these two accoutns.


Define encumbrance and give the journal entry to recognize a purchase order on supplies

Encumbrance: A commitment related to an unperformed contract for goods or services (generally an open purchase order)

Dr. Encumbrance
Cr. Budgetary control

Encumbrances have a natural debit balance. Appropriations, to which those encumbrances are compared, have a natural credit balance. Computation of unemcumbered appropriations is a pure arithmetic sum of these two accounts. Computation of unexpended and unencumbered appropriations is the sum of the three accounts: Appropriations (credit), Expenditures (debit), and Encumbrances (debit)


What journal entries are made to record the liabilities incurred associated with previously encumbered funds?

Expenditure of previously encumbered funds results in the following entries:

Dr. Expenditure
Cr. Accounts payable
Dr. Budgetary control
Cr. Encumbrance

The entries serve to reverse the full effect of the encumbrance entry and record the full amount of the expenditure (BAE - BAE)


When are the budgetary, actual, or encumbrance entries combined?


Budgetary, actual, and encumbrance transactions are always segregated on the books. Do not net:


Beg of the year: book [B]udget
Through year: book [A]ctuals, book [E]ncumbrances
At year end: close the [B]udget, close the [A]ctuals, close the [E]ncumbrances


What are the closing budget, activity, and encumbrance journal entries?

Dr. Revenues
Dr. Unreserved fund balance
Cr. Expenditures

Budget (deficit):
Dr. Appropriations
Cr. Estimated revenues
Cr. Budgetary control

Dr. Budgetary control
Cr. Encumbrance

At the beginning of the next year, the above encumbrance entry is reversed. The entry will keep the Budgetary Control intact in order to account for resources spent in the next year that would have been budgeted in the current year.


Journal entry to recognize supplies remaining at year-end

Purchase method:
Dr. Supplies on hand inventory
Cr. Fund balance, non-spendable
This journal entry indicates that these supplies are not available spendable resources.

Consumption method:
No entry may be needed as supplies were debited to inventory and then recognized as expenditures as they were used. A corresponding entry changing the related non-spendable classification of fund balance should have been done as each use of inventory was recorded.


List the types of transactions that qualify for treatment as deferred outflows or resources (reported after assets) or deferred inflows of resources (reported after liabilities)

1) Changes in fair value of hedging derivative instruments
2) Resources to be reported by a transferor government in a qualifying service concession agreement.
3) Other deferred outflows/inflows of resources.


What is the purpose of the general fund?

The general fund is created at the beginning of the government unit and it exists throughout the life of that unit. The general fund accounts for the general activities of a governmental unit that are not accounted for by any other fund.

The general fund is always a major fund.


What are the typical revenue sources of the general fund?

- Taxes (property taxes)
- Public safety and regulations (fines, inspection fees, etc)
- Intergovernmental (shared revenues)
- Charges for services
- Other revenues (interest income)


What is the purpose of the special revenue fund?

Special revenue funds account for revenues and expenditures that are restricted or committed for specific purposes. The life of a special revenue fund may be limited or unlimited.


What are the typical revenue sources of a special revenue fund?

- Intergovernmental revenues (e.g. sales taxes or gasoline taxes restricted for use)
- Intergovernmental revenues (e.g. grants and other financial assistance provided for a specific purpose)
- Specific fees (e.g. parking fees, museum admission fees, etc.)
- Seizure of assets surrendered as a result of illegal acts (e.g. Forfeiture Act)