Chapter FAR 8-1: Governmental Acctg Overview Flashcards Preview

FAR CPA Review - (Becker, Roger, Wiley CPA Excel, NINJA) > Chapter FAR 8-1: Governmental Acctg Overview > Flashcards

Flashcards in Chapter FAR 8-1: Governmental Acctg Overview Deck (20):
1

What makes up the governmental funds?

What are its accounting method?

What is its measurement focus?

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

Accounting method = modified accrual method (current and available)

Measurement focus = current financial resources

2

What is a general fund?

General fund: used for government unit's ordinary operations like police station, fire station.
Its resources = taxes and other general revenues
All accounts here = "current" (i.e. current assets and current liabilities). Not long term.

There are no fixed assets or long-term debit accounts in the general fund's

3

What is a special revenue fund?

Special revenue fund = set up to use specific tax money or other earmarked money sources that are RESTRICTED or COMMITTED to finance a particular activity.

Example: this money is restricted only to build a public park and that's it. Cannot be used to spend on other government activity.

4

What is a debt service fund?

Debt service fund = put money in here to pay off debt's interest and principle on all "general obligation debt."

All resources here are Restricted, Committed, or Assigned to debt service expenditures.

5

What is a capital projects fund?

Capital projects fund = money put here that are Restricted, Committed, or Assigned to acquire or construct major capital assets by governmental unit.

This does not include funding for construction projects done by Enterprise fund or special assessment.

6

What is a permanent fund?

Permanent fund = report legally restricted resources where only the income not the principal is used for supporting government programs.

Example: interest income in the permanent fund (not the principal amount (total funded amount in the first place) is only used to benefit the public like a cemetery.

7

What are proprietary funds?

What are the different types of proprietary funds?

Proprietary funds = business-type funds.
* Uses accounting similar to commercial accounting = i.e. uses Full-accrual accounting
* Economic resource measurement focus

Proprietary funds type:
* Internal service fund = a fund with resources set up to provide tools and supplies and services to other departments on a cost reimbursement fee basis\

* Enterprise fund = self-contained, self-supported fund that operates government facilities and services and charges them a fee to external users.

8

Fiduciary trust funds, what are they?

What are the different types of FID funds?

Fiduciary funds = funds that are used as a trust or agency fund to pay usually benefits to government employees.

Different types of FID funds:
1) Pension trust funds = accounts for defined benefit plans, defend contribution plans, post-employment benefit plans, and other long-term employee benefit plans.

2) Agency funds = it's a temporary storage fund to store funds before transferring them to another government entity. Example: Agency fund to collect taxes before transferring them to a city/county or state government entity

3) Private purpose trust fund = holds resources to be given out as a benefit to a specific individual, private organizations, or other governments.

4) Investment trust funds = account for external investment pools.

9

What leads to the use of fund accounting by governmental organization?

Financial control and legal restrictions.

This is where there is a control of how much to spend within legal restrictions on what to only spend on and how much.

10

Which fund would only show a positive unassigned fund balance amount?

General fund

11

Which funds can have a negative unassigned fund balance?

Special revenue fund
Debt service fund
Capital projects fund
Permanent funds

12

What are the 5 reporting constraints on the governmental funds?

4 reporting constraints:

1) Non-spendable = resources in form that cannot be spent (i.e. inventories or prepaid expenditures).

It can also be resources that legally/contractually required to remain whole as in it cannot be changed. (Ex: Permanent fund principal)

2) Restricted = limited by external sources i.e. debt covenants, contributors, other government,s, laws, constitutional provisions or enabling legislation

3) Assigned = government's intent to use this fund only for specific purpose (not restricted or committed though)

4) Committed = only use for this purpose as per formal action/decision by a government high level decision-making authority

5) Unassigned = funds that are neither restricted, committed, nor assigned.

It's a residual equity classification for general fund.

13

Which fund can be

non-spendable,
restricted,
committed,
assigned,
and
is it's unassigned fund balance is negative or positive?

General fund can be

non-spendable
restricted,
committed,
assigned,
and it has only Positive Unassigned fund balance

14

Which fund can be

non-spendable,
restricted,
committed,
and
is it's unassigned fund balance is negative or positive?

Special revenue fund can be

non-spendable,
restricted,
committed,
and
is it's unassigned fund balance = negative.

15

Which fund or funds can be

restricted,
committed,
assigned,
and
is it's unassigned fund balance is negative or positive?

Debt service fund can be

restricted,
committed,
assigned,
and
is it's unassigned fund balance = negative

And

Capital projects fund can be:

restricted,
committed,
assigned,
and
is it's unassigned fund balance = negative

16

Which fund can only be

restricted

and

is its unassigned fund balance negative or positive?

Permanent fund

restricted

and

has negative unassigned fund balance

17

What is the difference between

Government-wide financial statements

and


Major fund financial statements???

Government-wide financial statement:
* Use full-accrual accounting
>> that includes report everything via every method in effect on the balance sheet date.

* Economic resources measurement focus
* Converts different dis-aggregated fund-based financials into ONE single consolidated financial statement
* reports Governmental activities and Business-type activities only (it does not report anything on Fiduciary activities)

Major fund statements:
* Each fund statement is reported based on its own accounting method.
* Major funds are reported. The non-major funds are displayed as an aggregate amount.

18

When reporting a liability on the government-wide financial statements, any rate to calculate the liability should normally be the rate in effect on ____________

balance sheet date

19

Funds can be non-spendable - what does non-spendable mean? Give an example.

When a fund is committed - when does this happen and by whom?

When a fund is restricted - what does restricted mean in this case?

The portion of fund balance that reflects equity for amounts that cannot be spent because they are not in spendable form would be termed “nonspendable.” Both supplies inventory and prepaid expenses are not spendable. Also, Non-spendable means certain resources of governmental funds are NOTmonetary in nature and will NOTlead to a collection of monetary resources in the future. These assets, usually prepaid items and inventories, are considered nonspendable. At year-end, a category of Fund balance is set aside equaling the total of such assets. (GASB 1800.166)

Committed fund balance would result from an action of the highest level of the government and assigned fund balance would reflect action by a government designee.

Restrictions of fund balance would reflect specific purposes externally imposed by creditors, grantors, or enabling legislation.

20

Expenditures of a governmental unit for insurance extending over more than one accounting period:

may be allocated between or among accounting periods or may be accounted for as expenditures of the period of acquisition.

What does this mean?

It means: GASB 1600.127.b states: “Expenditures for insurance and similar services (prepaid items) extending over more than one accounting period need not be allocated between or among accounting periods, but may be accounted for as expenditures of the period of acquisition.”

So, it's not a have to thing. but an optional thing to allocate portion of the spending between periods or among periods. Or as reported as one item in the period that was spent.

Acquisition = another word for spending money to acquire or to do something

Decks in FAR CPA Review - (Becker, Roger, Wiley CPA Excel, NINJA) Class (61):