CPA FAR - Governmental

Question 1

What are the characteristics of information in governmental financial reports?

Answer 1

1. Understandability
2. Reliability
3. Relevance
4. Timeliness
5. Consistency
6. Comparability

Question 2

Understandability

Answer 2

Information in financial reports should be expressed as simply as possible so the reports can be understood by individuals who may not have detailed knowledge of accounting principles.

Question 3

Reliability

Answer 3

Reports should be verifiable and free from bias and should faithfully represent the subject matter.

Note: This does not imply precision or certainty.

Question 4

Relevance

Answer 4

Information provided should have a close logical relationship to the purpose for which it is needed. This implies reported information will make a difference to users.

Question 5

Timeliness

Answer 5

Reported information should be issued in time to have an effect on decisions. This may supersede absolute precision or detail.

Question 6

Consistency

Answer 6

The accounting principles used to prepare financial reports should not change year over year. Accounting principles relate to such issues as transaction valuation, basis of accounting, and the determination of the financial reporting entity.

Question 7

Comparability

Answer 7

Differences between financial reports should be due to substantive differences in underlying transactions or government structure rather than the selection of methods. AKA financial reports should be comparable.

Question 8

What are the three fund categories?

Answer 8

1. Governmental Funds
2. Proprietary Funds
3. Fiduciary Funds

Question 9

What are the different funds that fall under the Governmental Fund?

Answer 9

1. General Fund
2. Special Revenue Funds
3. Debt Service Funds
4. Capital Projects Funds
5. Permanent Funds

Question 10

What is the General Fund?

Answer 10

The general fund is set up to account for the ordinary operations of a governmental unit that is financed from taxes and other general revenues. All transactions not accounted for in other funds are accounted for here.

Question 11

What is the Special Revenue Fund?

Answer 11

The special revenue fund is set up to account for revenues from specific taxes or other earmarked sources that are restricted or committed to finance particular activities of government.

Taxes for a specific purpose

Question 12

What is the Debt Service Fund?

Answer 12

The debt service fund is set up to account for the accumulation of resources and the payment of interest and principal on all “general obligation debt,” other than that serviced by enterprise funds or by special assessments in another fund.

Question 13

What is the Capital Project Fund?

Answer 13

The capital project fund is set up to account for resources restricted, committed, or assigned for the acquisition or construction of major capital assets by a governmental unit, except those projects financed by an enterprise fund.

Question 14

What is the Permanent Fund?

Answer 14

The permanent fund is used to report resources that are legally restricted to the extent that income, and not principal, may be used for purposes supporting the reporting government’s programs (i.e., for the benefit of the public).

Note: You can’t touch the principle but can use extra from funds gained in the investment.

Question 15

How should Governmental Funds be accounted for?

Answer 15

Using the following:

1. Modified accrual basis
2. Current financial resources measurement focus (i.e., no long-term assets or liabilities)

Question 16

What are the funds in the Proprietary Funds?

Answer 16

1. Internal Service Funds
2. Enterprise Funds

Question 17

What is the purpose of Proprietary Funds?

Answer 17

Proprietary Funds account for business-type activities (i.e., the government acting like a business).

Question 18

How should Proprietary Funds be accounted for?

Answer 18

Using the following:

1. Full accrual basis
2. Economic resources measurement focus

Question 19

What is the Internal Service Fund?

Answer 19

The internal service fund is set up to account for goods and services provided internally to another department and charging a fee.

Question 20

What is the Enterprise Fund?

Answer 20

The enterprise fund is set up to account for the acquisition and operation of governmental facilities and services that are intended to be primarily self-supported by user charges. Customers of the enterprise fund are primarily external.

Question 21

What are the funds in the Fiduciary (Trust) Funds?

Answer 21

1. Custodial Funds
2. Investment Trust Funds
3. Private Purpose Trust Funds
4. Pension (and Other Employee Benefit) Trust Funds

Question 22

How should Fiduciary (Trust) Funds be accounted for?

Answer 22

1. Full accrual basis
2. Economic resources measurement focus

Question 23

What is the Custodial Fund?

Answer 23

The custodial fund is used for temporary custody of the governmental unit (i.e., taxes collected for another governmental entity) and any fiduciary activities that are not required to be reported in other fiduciary fund classifications.

Question 24

What is the Investment Trust Fund?

Answer 24

The investment trust fund accounts for external investment pools.

Question 25

What is the Private Purpose Trust Fund?

Answer 25

The private purpose trust fund is used for activities not properly accounted for either as a pension or investment trust funds, in which assets are dedicated to providing benefits to recipients in accordance with benefit terms and assets are legally protected from creditors of the government.

Question 26

What is the Pension (and Other Employee Benefit) Trust Fund?

Answer 26

The pension trust fund is for resources of defined benefit plans, defined contribution plans, post-employment benefit plans, and other long-term employee benefit plans.

Question 27

What funds use the Current Financial Resources method?

Answer 27

GRaSPP General Fund Revenue Special Fund and Service Debt Fund Project Capital Fund Permanent Fund

Question 28

What funds use the Modified Accrual basis method?

Answer 28

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

Question 29

What funds use the Economic Resources method?

Answer 29

SE-CIPPOE and Government-wide Service (internal) Enterprise Custodial Investment Trust Private Purpose Trust Pension (and Other Employee benefit) Trust

Question 30

What is the Current Financial Resources method?

Answer 30

Under the current financial resources measurement focus, fund balance is a measure of available, spendable, or appropriable resources. Only current assets and current liabilities are included on the balance sheet. - No fixed assets are reported - No non-current liabilities are reported.

Question 31

What is the Modified Accrual Basis method?

Answer 31

Modified accrual basis is a blend of accrual and cash basis accounting. - Revenue is recognized when measurable and available to finance the expenditures of the current period. The only difference between modified and accrual is the manner in which each basis defines the word available. - Available under modified accrual means collectible within the current period or soon enough thereafter to be used to pay liabilities in the current period (generally within 60 days after year-end). - Expenditures are generally recorded when the fund liability is incurred, with some exceptions (debt service expenditures both principal and interest are not recognized until either due or paid).

Question 32

What is the acronym for governmental funds?

Answer 32

MAC-GRaSPP Modified Accrual Accounting Current financial resources measurement focus GRaSPP

Question 33

What is the acronym for Proprietary and Fiduciary Funds?

Answer 33

SCARE SE CIPPOE Accrual Accounting Record non-current assets and liabilities Economic resources measurement focus