Comprehensive Final including 8 &10 Flashcards
(117 cards)
1
Q
3 required sections of the ACFR
A
1) Management’s Discussion and Analysis
2) Basic Financial Statements
3) Require Supplementary Information (Other than MD&A)
2
Q
3 parts of the basic financial statements
A
1) Government-wide financial statements
2) Fund-basis financial statements
3) Notes to the financial statements
3
Q
2 parts of the government-wide financial statements
A
1) Government-wide Statement of Net Position
2) Government-wide Statement of Activities
4
Q
3 parts of the fund basis financial statements
A
1) governmental
2) proprietary
3) fiduciary
5
Q
3 statements for governmental
A
1) balance sheet
2) statement of revenues, expenditures and changes in fund balance
3) reconciliation of governmental statements to government-wide statements
6
Q
3 statements for proprietary
A
1) statement of net position
2) statement of revenues, expenses and changes in fund net position
3) statement of cash flows
7
Q
2 statements for fiduciary funds
A
1) statement of fiduciary net position
2) statement of changes in fiduciary net position
8
Q
governmental funds on the modified accrual basis
A
all
9
Q
governmental funds that use the current financial resources focus
A
all
10
Q
governmental funds that record budgets
A
general fund & special revenue fund
11
Q
governmental funds that use encumbrances
A
general fund, special revenue fund and capital projects fund
12
Q
governmental funds that have an indefinite life
A
general fund and permanent fund
13
Q
when are entity-wide statements prepared
A
year-end
14
Q
how are entity-wide statements prepared
A
1) converting government type funds to the accrual basis; including inclusion of depreciation, long-term assets and long-term liabilities,
2) Adding in the asset and liability balances from internal service funds along with any income earned through transactions with external parties,
3) consolidating fund financial statements (other than fiduciary funds).
15
Q
what happens to governmental statements during the entity-wide conversion process
A
converted to the Accrual Basis and Economic Resource Measurement Focus through worksheet entries and then appear in the Governmental Activities columns of the government-wide statements
16
Q
what happens to enterprise funds during the entity-wide conversion process
A
entered directly into the business activities columns of the government-wide statements
17
Q
what happens to internal service funds during the entity-wide conversion process
A
added to Governmental Activities through worksheet entries
18
Q
where does converting fund statements to government-wide statements take place
A
worksheet only
19
Q
what are the 5 worksheet adjustments needed
A
1) Capital asset entries
2) Long-term debt entries
3) Miscellaneous accrual-related entries
4) Interfund transaction elimination entries
5) Bring in internal service fund balances entries
20
Q
How are beginning of the year capital assets of governmental activities (net of accumulated depreciation) recorded?
A
through worksheet entry
21
Q
what happens to the balance in capital expenditures during the conversion adjustment
A
eliminated and replaced with assets acquired during the year
22
Q
what happens to the balance in proceeds from sale of capital assets during the conversion adjustment
A
eliminated, the assets and accumulated depreciation are removed, and the resulting gain or loss is recorded
23
Q
Beginning of the year capital assets of governmental activities (net of accumulated depreciation) are recorded through worksheet entry (journal entry)
A
Dr. Capital assets (net)
Cr. Net Position beginning of year
24
Q
The balance in “Capital expenditures” is eliminated and replaced with assets acquired during the year (journal entry)
A
Dr. Capital assets (net)
Cr. Capital expenditures
25
Depreciation for the current period is recorded (journal entry)
Dr. Depreciation expense
Cr. Capital assets (net)
26
The balance in “Proceeds from sale of capital assets” is eliminated, the assets and accumulated depreciation are removed, and the resulting gain or loss is recorded (journal entry)
Dr. Proceeds from sale of capital assets
Cr. Capital assets (net)
Cr. Gain on sale of capital assets
27
4 conversion adjustments for long-term debt
1. Beginning of the year long-term liabilities of government activities are recorded through worksheet entry.
2. Convert this year’s “bond proceeds” to bond liability (and premium if applicable)
3. Eliminate balance in “expenditure - bond principal” and reduce the balance of the liability
4. Amortize premium/discount on bonds
28
Beginning of the year long-term liabilities of government activities are recorded through worksheet entry (journal entry)
Dr. Net position beginning of year
Cr. Bonds payable
29
Convert this year’s “bond proceeds” to bond liability (and premium if applicable) (journal entry)
Dr. Proceeds from sale of bonds
Dr. Proceeds from bond premium
Cr. Bonds payable
Cr. Bond premium
30
Eliminate balance in “expenditure - bond principal” and reduce the balance of the liability (journal entry)
Dr. Bonds payable
Cr. Expenditure - principal on bonds
31
Amortize premium/discount on bonds (journal entry)
Dr. Bond premium
Cr. Interest expense
32
4 other conversion adjustments
1. Deferred Inflows of Resources – Property taxes = Property taxes deferred under the 60 day rule may need to be recognized under the accrual basis (and prior year’s accrual reversed)
2. Expenses not recorded in government funds under their current economic resources model may need to be accrued (e.g. the long-term portion of compensated absences )
3. Accrue interest on bonds outstanding and other accruals as necessary
4. Eliminate interfund transfers
33
Deferred Inflows of Resources – Property taxes = Property taxes deferred under the 60 day rule may need to be recognized under the accrual basis (and prior year’s accrual reversed) (journal entry)
Dr. Deferred inflows - property taxes
Cr. property tax revenue (current year deferred taxes
Dr. property tax revenue
Cr. Net position beginning of the year
(reverse previous year deferred taxes)
34
Expenses not recorded in government funds under their current economic resources model may need to be accrued (e.g. the long-term portion of compensated absences ) (journal entry)
Dr. Expenditures
Cr. Liability for compensated absences
35
Accrue interest on bonds outstanding and other accruals as necessary (journal entry)
Dr. Interest expense
Cr. Interest payable
(current year accrual)
Dr. Net position - beginning of the year
Cr. Interest expense
(prior year accrual - reversal)
36
Eliminate interfund transfers
(journal entry)
Dr. Transfers in
Cr. Transfers out
37
internal service funds
reported as proprietary funds, the activities accounted for in them are usually more governmental than business-type in nature. If enterprise funds are the predominant or only participant in an internal service fund, however, the government should report that internal service fund’s residual assets and liabilities with the business-type activities. (GASB 34)
Think print shop services or fleet maintenance. Adding internal service funds into the Governmental Activities vs. the Business-Type Activities is common.
We will be adding the Internal Service Funds into the Governmental Activities in our Homework Problem Set.
38
4 Worksheet entries for internal service funds included in governmental activities
1. Add Internal Service Fund’s Assets and Liabilities to the Governmental Activities section of the Government-wide Statement of Net Position
2. Income of the Internal Service Fund with entities external to the governmental activities should be brought into the Statement of Activities. Most commonly this is interest expense or investment income.
3. Reduce (increase) governmental expenditures by the amount of ISF operating income (deficit)
4. Eliminate Interfund activities between the Internal Service Fund and other Funds represented within Governmental Activities.
39
Add Internal Service Fund’s Assets and Liabilities to the Governmental Activities section of the Government-wide Statement of Net Position (journal entry)
Dr. Cash
Dr. Due from other funds
Dr. Supplies inventory
Dr. Capital assets (net)
Cr. Accounts Payable
Cr. Note Payable
Cr. Net position
40
Income of the Internal Service Fund with entities external to the governmental activities should be brought into the Statement of Activities. Most commonly this is interest expense or investment income. (journal entry)
Dr. net position
Cr. investment income
41
Reduce (increase) governmental expenditures by the amount of ISF operating income (deficit)
(journal entry)
Dr. net position
Cr. general government expenses
42
Eliminate Interfund activities between the Internal Service Fund and other Funds represented within Governmental Activities (journal entry)
Dr. net position
Cr. transfers in (this will then be eliminated against transfers out)
43
statement of net position
Separate columns are presented for Government and Business type activities (statements are ‘consolidated’ within columns)
Would have another column for component units if the government has any (discretely presented).
44
government activities column includes
government type funds (G-C-S-P-D) and (most) Internal service funds.
45
statement of activities net cost approach
Start with functional expenses less allocable program revenues shows net cost.
From the net cost add general revenues, special items and transfers to show the overall change in net position for Governmental and Business type activities.
Change plus beginning net position = ending balance (this should agree with Statement of Net Position)
46
Reconciliation of Governmental Fund Balances to Government-Wide Net Position
Starts with Government fund balances
Summarizes all the changes made to get entity-wide governmental activities net position
Note typical reconciliation items include:
Addition of long-term assets (+)
Inclusion of ISF assets & liabilities (usually +)
Handling of deferred revenue as revenue instead of as liability (+)
Addition of long-term liabilities (-)
47
activity statement reconciliation
Reconciles changes in fund balances to changes in net position for the governmental activities (Shows difference in accrual vs. modified accrual)
48
examples of activity statement reconciliation
Excess of depreciation over capital outlay expenditures
Gain/loss on sale of assets vs. “proceeds”
Deferred revenue items treated as revenues under accrual
Difference in bond proceeds and retirements
Net Internal Service Fund profit from government funds
Bond premium amortization
49
record keeping of capital assets
While no specific method of keeping track of long-term assets is required by GASB, obviously some type of records should be kept on the cost, location, and life of all fixed assets in order to support amounts reported in the government-wide statements.
Historically this was done in the General Fixed Asset Account Group
50
plant, infrastructure and equipment
record as asset and depreciate
51
land
record as asset, do not depreciate
52
collections (encouraged to be capitalized, record as expense if not)
Must be held for public exhibit, education or research
Protected
Proceeds of any sale must be put back into other collections
53
examples of infrastructure
roads, bridges, drainage systems, sewer systems, dams, lighting …
Capitalization was optional before GASB 34
54
To quality for the modified approach to infrastructure accounting, a government must
Maintain an inventory of infrastructure
Do condition assessments every 3 years
Estimate annual cost to maintain at target level
And,
Document that target maintenance level is being met
55
infrastructure accounting
General repairs expensed under both methods
Improvements to extend useful life expensed under MA
Additions to existing assets capitalized under both
Depreciation NOT under modified approach
56
most common types of long-term debt
Most general obligation
bonds
Long-term lease obligation amounts
Compensated absence amounts
Claims and judgments
Landfill closure liabilities
57
long term debt record keeping
Similar to capital assets, some record must be maintained of the balances and changes to long-term liabilities.
Historically this was done in the General Long-term Debt Account Group
58
Schedule of Changes in Long-Term Debt
Shows difference in new debt vs. amount paid off
59
Schedule of Debt Service Requirements to Maturity
Helps users see any future ballooning of debt service that may require tax increases
60
Computation of Legal Debt Margin
Shows additional debt that can be legally issued
61
Schedule of Direct and Overlapping Debt
Helps citizens see their total debt obligation
62
4 characteristics of not-for-profits
1) Not owned or controlled by a government
2) Contributions/Donations
3) Operating Purpose- other than a profit, mission statement
4) Absence of Commercial Ownership and interest
63
2 examples of not-for-profits
United Way and ARC
64
Can NFP be involved in an exchange or profitable activity?
Yes, like Girl Scouts or the YMCA
65
GASB
Authority over government-related not-for-profits
Not-for-profits owned or controlled by a governmental entity should follow applicable GASB standards.
GASB 34 Special Purpose Entity requirements may apply
GASB 35 for Public Colleges and Universities
66
FASB
Private not-for-profits
AICPA audit guides also applicable
ASU 2016-14 and specifically FASB 958
FASB issued ASU 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, on August 18, 2016. It enables not-for-profits to better tell their financial story, make financial statements more useful to readers, and provide more consistency in reporting between organizations.
67
4 Financial statements for NFPs
1. Statement of Financial Position as of the end of the reporting period,
2. Statement of Activities for the reporting period
3. Statement of Cash Flows for the reporting period,
4. Accompanying notes to financial statements.
68
donations
made without expectations of receiving anything in return
69
operating purpose
mission-driven, anything other than earning a profit
70
no business-type ownership or interest
no EPS
71
unconditional pledge
"no strings attached" (recognize revenue then)
72
conditional pledge (vs. intent to give)
"strings attached"
73
accrual basis (NFP)
This includes calculation and recording of depreciation expense.
The financial statements report expenses, not expenditures or encumbrances.
74
funds (NFP)
use fund designations internally for bookkeeping purposes, but the financial statements are on an overall basis and do not make reference to funds except in the notes or supplemental schedules
75
how are expenses reported for NFPs
by both functional and natural categories.
76
how can a detail of expenses of NFPs be provided
on the face of the Statement of Activities, in the notes to the financial statements, or through a separate schedule such as the Statement of Functional Expenses.
77
statement of financial position
Assets and liabilities are not required to be classified as current and non-current, but may be.
Long-term assets and debt are reported.
Net Assets (equities) are classified as:
With Donor Restrictions
Without Donor Restrictions
78
when are contributions recorded
when promised
79
statement of activities
The statement must distinguish changes in net assets that are without donor restrictions from those with donor restrictions. Restrictions must be outside donor-imposed
As donor restrictions are satisfied, reclassifications are reported as “net assets released from restriction.”
The excess of revenues over expenses is termed “Change in Net Assets.”
80
statement of activities expenses
All expenses are reported in the Without Donor Restrictions column
Classify expenses as program or supporting services. Support = management & general, fundraising, membership development
81
statement of activities restrictions
With Donor Restriction resources must be ‘released’ or moved from the With Donor Restrictions column to the Without Donor Restrictions column as restrictions are satisfied
82
how are expenses reported
always as without donor restrictions
83
what is revenues - expenses called in NFP
change in net assets
83
what happens to cash that is spent according to the donor's wishes
we reclassify $ from W/Donor Restrictions to W/O Donor Restrictions
84
3 categories on the statement of cash flows
1) operating
2) financing
3) investing
85
operating
Interest expense, interest revenue, and gains and losses
86
financing
Issuance of debt; repayments of principal of debt
87
investing
Purchases or sales of fixed assets as well as purchases or sales of long-term investments
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approach for statement of cash flows NFP
Like businesses, not-for-profits have the option of using either the indirect approach or the direct approach. NEW No reconciliation is required when using the indirect method
89
statement of functional expenses
This is a matrix (spreadsheet) of expenses where the columns are the program or supporting activities and the rows are the type of expense (salaries, supplies, depreciation, etc.)
This statement shows more detail than the Activity Statement on how the expenses were allocated to programs and supporting services.
This optional statement can be used to efficiently report expenses by nature and function.
The purpose of this statement is to show the details of the entity’s spending on direct programs activities versus overhead (supporting services).
It helps donors assess entity efficiency
90
accounting for contributions received and made
Contributions, including unconditional promises of support, must be recognized as contribution revenue in the period received at their fair market value.
91
Under accrual basis, unconditional pledges can be recorded even before the cash is received
Record the receivable at the present value, net of an allowance for estimated uncollectibles
92
If there is expected to be an extended time period before the gift is received, record the receivable at its present value:
The present value will increase as the expected date of receipt approaches. The change in present value is recorded as additional contribution revenue rather than interest
93
contributed services should be recorded when
if they
Create or enhance a nonfinancial asset:
OR
Require specialized skills, were provided by someone possessing those skills, and would have been purchased if not donate
94
The most commonly used ratio for not-for-profit is the Program Expense Ratio
Program Service Expenses / Total Expenses
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program services
include expenses associated with performing the mission of the organization
96
supporting services
include management and general; fund raising and membership development
97
The criteria to determine whether part of the cost of a fund raising campaign applies to program expense are:
Purpose: Does the communication help meet program goals and functions?
Audience: General audience, not just sent to last year’s donors.
Content: Calls for specific action directed at program goals.
98
If the not-for-profit agrees to transfer the assets to a specified beneficiary, the not-for-profit is deemed to merely be acting as an agent
liability recorded
99
If the not-for-profit has the ability to redirect the assets to another beneficiary, or if the not-for-profit and beneficiary are related,
assets recorded as a contribution
100
Legitimate reasons for a not-for-profit to have a profit are:
To replace and expand equipment and facilities.
To provide working capital.
To retire debt.
To continue programs beyond the time frame when seed money grants are available.
101
Governmental fund statements are prepared using:
a) economic resources measurement focus and modified accrual basis of accounting
b) economic resources measurement focus and accrual basis of accounting
c) current financial resources measurement focus and modified accrual basis of accounting
d) current financial resources measurement focus and accrual basis of accounting
c) current financial resources measurement focus and modified accrual basis of accounting
102
what is the first step a government takes in acquiring goods or services through the general fund?
a) requisition order
b) appropriation
c) expenditure
d) encumbrance
b) appropriation
103
Robert City received a gift, the principal of which is to be invested in perpetuity with the income to be used to support the local library, which is run and operated by Robert City. In which fund should this gift be recorded?
a) permanent fund
b) investment trust fund
c) special revenue fund
d) capital projects fund
c) special revenue fund
104
an activity that provides goods and services only to other subunits of the primary government on a cost reimbursement basis should be reported as a(n)
a) internal service fund
b) custodial (agency) fund
c) fiduciary fund
d) enterprise fund
a) internal service fund
105
which of the following results in an expenditure? In other words, when would a Debit to Expenditures be warranted under the Modified Accrual system?
a) receive goods previously ordered
b) payment of an invoice previously received
c) place a purchase order
a) receive goods previously ordered
106
Gifts in which the principal must be invested and preserved ("endowment") but the earnings can be used for public purposes:
permanent fund
107
Grant revenues restricted for particular operating purposes:
special revenue fund
108
Administrative expenses of the city manager's office:
general fund
109
cost of operating a municipal swimming pool. All patrons pay admission to the pool:
enterprise fund
110
Gifts in which the principal must be invested and preserved but the investment earnings must be used to provide scholarships to children of police officers who died in the line of duty:
private purpose trust fund
111
A public school district should recognize revenue from property taxes levied for its debt service fund when:
a) Proceeds from collection of the levy are deposited in the district's bank account
b) bonds to be retired by the levy are due and payable
c) assessed valuations of property subject to the levy are known
d) funds from the levy are measurable and available to the district
d) funds from the levy are measurable and available to the district
112
The city of Kenton receives a trust donation to be used to maintain flower beds in the city parks. The donor does NOT specify that the principal must be maintained (i.e. the principal may be spent). This type of trust would most appropriately be accounted for in a:
a) permanent fund
b) special revenue fund
c) internal service fund
d) private purpose trust fund
b) special revenue fund
113
The following information pertains to Park Township's general fund at December 31:
Total assets: $1,000,000
Total liabilities: 600,000
Fund balance, committed: 100,000
At December 31, what amount should Park report as unassigned fund balance for the General Fund on its governmental funds balance sheet?
a) $500,000
b) $300,000
c) $400,000
d) $200,000
b) $300,000
114
The principal of permanent funds must be classified as ______ Fund Balance
a) Restricted
b) Committed
c) Nonspendable
d) Assigned
c) Nonspendable
115
Which of the following should be accounted for in a permanent fund?
a) A gift of $100,000 to a city, to be expended next year to purchase books for the city library
b) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to maintain the city war memorials
c) A gift of $100,000 to a school board, to be given out $10,000 a year to the class valedictorian as a college scholarship
d) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to distribute to one or more nonprofit groups
b) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to maintain the city war memorials
116
