Exam 1 Flashcards
(211 cards)
1
Q
governmental accounting
A
refers to all accounting functions of the public sector in the United States
2
Q
two levels of government accounting in the U.S.
A
Federal level and state/local level
3
Q
federal level
A
Federal Accounting Standards Advisory Board (FASAB)
4
Q
State and local level
A
Government Accounting Standards Board (GASB)
5
Q
Attributes of a government entity (one or more)
A
- Popular election of officers or appointment or approval of a controlling majority of the members of the organization’s governing body by officials of one or more state or local governments
- The potential for unilateral dissolution by a government with the net assets reverting to a government
- The power to enact and enforce a tax levy
- Ability to issue debt directly that pays interest exempt from federal taxation
6
Q
3 reasons to study GNP accounting
A
- Governments and NFP organizations hire accountants
- CPA firms and states engage accountants to perform their audits
- As citizens and donors we wish to better understand how taxes and charitable donations are used
7
Q
Organizational Purpose Gov.
A
Provide efficient, effective service to citizens regardless of “profit”
8
Q
Organizational Purpose NFP
A
Provide efficient, effective service to beneficiaries regardless of profit
9
Q
Organizational Purpose FP
A
Generate profit for owners
10
Q
Stakeholders Gov.
A
Creditors, taxpayers, other government oversight, bodies & grantors
11
Q
Stakeholders NFP
A
Creditors, members, beneficiaries, donors, volunteers, government grantors
12
Q
Stakeholders FP
A
Creditors, owners/investors
13
Q
Revenue Sources Gov.
A
taxes and other non-exchange transactions, not voluntary, may or may not receive benefit
14
Q
Revenue Sources NFP
A
voluntary transactions
15
Q
Revenue Sources FP
A
sales of goods/services, receives benefit
16
Q
Longevity Gov.
A
doesn’t go out of business (very rare)
17
Q
Longevity NFP
A
can go out of business
18
Q
Longevity FP
A
can go out of business
19
Q
Relationship with Stakeholders Gov.
A
compelled to use resources for specified purposes & demonstrate accountability
20
Q
Relationship with Stakeholders NFP
A
compelled to use resources for specified purposes & demonstrate accountability
21
Q
Relationship with Stakeholders FP
A
can use resources as desired
22
Q
Role of Budget Gov.
A
expression of public policy; carries authority of law; public information
23
Q
Role of Budget NFP
A
planning & control document; not public
24
Q
Role of Budget FP
A
planning & control document; not public
25
Financial Reporting Document Gov.
Annual Comprehensive Financial Report (ACFR)
26
Financial Reporting Document NFP
Annual Report
27
Financial Reporting Document FP
Annual Report
28
4 federal level standard setters
FASAB, GAO (Governmental Accountability Office), U.S. Treasury Department, OMB (Office of Management and Budget)
29
GASB Concepts Statements: Statement #1- Objectives
allow comparison of actual with budgeted results
help users assess financial condition and results of operations
show compliance with laws, rules and regulations
assist in evaluating efficiency and effectiveness
30
fund
1. represents a part of the activities of some government entity
2. is a separate accounting entity (resources and activities)
3. self-balancing set of accounts
31
general fund
the only fund required (1)
32
governmental (budgetary) funds
carry the authority of law
33
revenues (B/A)
B&A
34
appropriations (B/A)
B
35
encumbrances (B/A)
A
36
expenditures (B/A)
A
37
disbursements (B/A)
A
38
revenues
taxes, fees, charges for services, grants
39
appropriations
legally authorized monies allowed to be spent
40
encumbrances
future commitment of resources - P.O.
41
expenditures
resources received - liability exists - payable
42
disbursements
payment of payable
43
state and local government fund categories (3)
fiduciary type, proprietary type, governmental type
44
fiduciary type
acting as an agent or trustee of monies that generally belong to other parties
as such, they cannot be used for the government's main purposes. for example, a public school district's main purpose is formal academic teaching, usually K-12)
45
proprietary type
business-type activities
46
governmental type
used for activities that are largely unique to the government environment
47
fiduciary funds
private-purpose trust, investment trust, pension trust, custodial
48
fiduciary basis of accounting
accrual
49
fiduciary fund-basis financial statements
statement of this net position
statement of charges in this net position
50
proprietary funds
internal service, enterprise
51
proprietary basis of accounting
accrual
52
proprietary fund-basis financial statements
statement of net position
statement of revenues, expenses and changes in fund net position
statement of cash flows
53
governmental funds
permanent, debt service, capital project, special revenue, general
54
governmental basis of accounting
modified accrual
55
governmental fund-basis financial statements
balance sheet
statement of revenues, expenditures and changes in fund balances
56
general fund
accounts for most of the basic services provided by the government. Technically, it accounts for and reports all financial resources not accounted for and reported in another fund
57
capital projects funds
account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays. As such, it accounts for the purchase or construction of major capital improvements, except those purchased or constructed by a proprietary (and less commonly, fiduciary) fund
58
permanent fund
account for and report resources that are restricted to the extent that only earning, and not principal, may be used for purposes that support the reporting government's programs
59
special revenue funds
account for and report the proceeds of specific revenue sources that are restricted or committed (not merely assigned) to expenditure for specific purposes other than debt service or capital projects. Those include activities funded by federal or state grants or by taxes specifically restricted to certain activities
60
debt service funds
account for and report financial resources that are restricted, committed or assigned to expenditure for principal and interest, other than interest or principal on proprietary or fiduciary activities
61
enterprise funds
a fund established for the purpose of measuring net income for a governmental department providing goods or services primarily to outside consumers, in which it is the intent of the government that the department operate on a cost recovery or profitable basis. Resources = sales and service charges
62
internal service fund
a fund established for the purpose of measuring net income to a governmental department providing services primarily to other departments or agencies within the governments, in which it is the intent of the government that the department operate on a cost reimbursement basis. Occassionally provided to other governments
63
custodial (or agency) fund
used to account for resources held by a government entity which are not owned by the entity, but which are payable to some outside party such as another governmental unit
64
investment trust fund
accounts for the external portion of investment pools, governed by a trust government in which the sponsoring government is a trustee
65
pension (and other employee benefit) fund
used to account for pension and employee benefit funds for which the governmental unit is the trustee. The earnings of these assets are used to pay the pensions (or benefit) of public
66
private-purpose trust funds
report all other trust arrangements under which principal and/or income benefit individuals, private organizations or other governments
67
Annual Comprehensive Financial Report
contains the financial report of the governments
68
State and local governments report various funds to the extent their activities meet the fund criteria. Government funds include
A. Internal service funds
B. Nonexpendable trust funds
C. Enterprise funds
D. Permanent funds
D. Permanent funds
69
The accounting systems of state and local government entities should be organized and operated using which structure?
A. Proprietary fund
B. Fiduciary fund
C. Governmental fund
D. Find
D. Fund
70
When a snowplow purchased by a governmental unit is received, it should be recorded in the general fund as a(n)
A. Encumbrance
B. Expenditure
C. General capital asset
D. Appropriation
B. Expenditure
71
Proprietary fund financial statements are prepared using the
Economic resources measurement focus
Current financial resources measurement focus
Accrual basis
Modified accrual basis
Economic resources measurement focus and accrual basis
72
A public school district should recognize revenue from property taxes levied for its debt service fund when
A. Bonds to be retired by the levy are due and payable
B. Assessed valuations of property subject to the levy are known
C. Funds from the levy are measurable and available to the district
D. Proceeds from collection of the levy are deposited in the district’s bank account
C. Funds from the levy are measurable and available to the district
73
Should a special revenue fund with a legally adopted budget maintain its accounts on an accrual basis and integrate budgetary accounts into its accounting system?
Yes, yes
74
Chase city imposed a 2% tax on hotel charges. Revenues from this tax will be used to promote tourism in the city. Chase should record this tax as what type of nonexchange transaction?
A. Derived tax revenue
B. Imposed nonexchange revenue
C. Government-mandated transaction
D. Voluntary nonexchange transaction
A. Derived tax revenue
75
Park city uses encumbrance accounting and formally integrates its budget into the general fund’s accounting records. For the year ending July 31, the following budget was adopted:
Estimated revenues $30,000,000
Appropriations 27,000,000
Estimated transfer to debt service fund 900,000
When Parks budget is adopted and recorded, park’s budgetary fund balance should have a
A. $3,000,000 credit balance
B. $3,000,000 debit balance
C. $2,100,000 credit balance
D. $2,100,000 debit balance
C. $2,100,000 credit balance
76
During its fiscal year ended June 30, cliff city issued purchase orders totaling $5,000,000 which were properly charged to encumbrances at that time. Cliff received goods and related invoices at the encumbered accounts totaling $4,500,000 before year end. The remaining goods of $500,000 were not received until after year end. Cliff paid $4,200,000 of the invoices received during the year. What amount of cliff’s encumbrances were outstanding at June 30?
A. $0
B. $300,000
C. $500,000
D. $800,000
C. $500,000
77
What is the major difference between an exchange transaction and a nonexchange transaction for governmental units?
A. The relationship between the amount of value given and received
B. Time requirements and whether the transaction is required by law
C. Purpose restrictions placed upon fund balances
D. Whether resources acquired can be further exchanged
A. The relationship between the amount of value given and received
78
Budgetary comparison schedules presented by a state or local government must
A. Be reported for the general fund and each major special revenue fund with a legally adopted budget
B. Be presented instead of budgetary comparison statements included in the basic statements
C. Convert the appropriated budget information to the GAAP basis for comparison with actual amounts reported on that basis
D. Compare only the final appropriated budget with actual amounts
A. Be reported for the general fund and each major special revenue fund with a legally adopted budget
79
The ___ funds are used to account for situations in which the government is acting as a collecting/disbursing agent
A. Special revenue
B. General
C. Enterprise
D. Custodial (Agency)
D. Custodial (Agency)
80
What basis of accounting would the enterprise fund use?
A. Accrual
B. Modified accrual
C. Cash
D. Expended accrual
A. Accrual
81
What are enterprise funds used for?
A. To account for pension and employee benefit funds for which the governmental unit is the trustee
B. To report resources that are legally restricted so only earnings, not principal, may be expended, and for purposes to benefit the government and its citizenry
C. To account for most of the basic services provided by the governmental units
D. To account for resources provided primarily through the use of sales and service charges to parties external to the government
D. To account for resources provided primarily through the use of sales and service charges to parties external to the government
82
The financial accounting standards board (FASB) is the standard setting organization for which of the following reporting organizations?
A. Private not for profits
B. Public not for profits
C. Investor owned business
D. A and c are both correct
D. A and c are both correct
83
The GASB is under the oversight of
A. GAO
B. FASAB
C.FAF
D. FASB
C. FAF
84
Governmental type funds label the excess of assets over liabilities on the balance sheet as:
A. Net assets
B.net fund balance and liabilities
C. Fund balance
D. Assets net of liabilities
C. Fund balance
85
Which of the following is true with respect to the general fund?
A. The general fund is considered to be a major fund if the combined total of assets, liabilities, revenues an expenses exceeds 10% of the total of all governmental funds
B. The general fund is always considered to be a major fund when preparing fund basis financial statements
C. The general fund is considered to be a major fund when preparing fund basis financial statements if it bears a financial benefit or burden to the primary government
D. The general fund is not reported as part of the CAFR
B. The general fund is always considered to be a major fund when preparing fund basis financial statements
86
Governmental fund statements are prepared using:
A. Economic resources measurement focus and modified accrual basis of accounting
B. Current financial resources measurement focus and modified accrual basis of accounting
C. Economic resources measurement focus and accrual basis of accounting
D. Current financial resources measurement focus and accrual basis of accounting
B. Current financial resources measurement focus and modified accrual basis of accounting
87
In addition to a statement of net position, what statements are required in the government wide financial statements?
A. Statement of activities
B. Statement of cash flows
C. Both of the above
D. Neither of the above
A. Statement of activities
88
The modified accrual basis is a distinct system of accounting that:
A. Differed from accrual accounting only in its failure to recognize long term assets and liabilities
B. Records expenditures and fund balances
C. Recorded expenses and revenues the same as accrual accounting
D. Is equivalent to cash basis accounting
B. Records expenditures and fund balances
89
Which of the following is true with respect to rainy day funds?
A. Rainy day funds are classified as committed if they are created by a resolution or ordinary age that identified the specific circumstances under which the resources may be expended
B. If rainy day funds are available in emergencies or periods of revenues shortfalls they are classified as committed
C. Both a and b
D. Neither a nor b
A. Rainy day funds are classified as committed if they are created by a resolution or ordinary age that identified the specific circumstances under which the resources may be expended
90
Property taxes, special assessments and fines and forfeits are types of nonexchange transactions. These are examples of:
A. Government mandated nonexchange transactions
B. Imposed nonexchange transactions
C. Deferred tax revenues
D. Voluntary nonexchange transactions
B. Imposed nonexchange transactions
91
The general ledger journal entry in the general fund to record the adoption of a budget would include:
A. A debit to estimated revenues control
B. A credit to estimated other financing sources control
C. A debit to budgetary fund balance-reserve for encumbrances
D. A debit to appropriations control
A. A debit to estimated revenues control
92
According to GASB statement no 54 which of the following is an example of a nonspendable fund balance?
A. Resources (such as supplies) that are used in operations rather than converted to cash
B. The corpus of a permanent fund that may not be spent
C. Prepaid insurance
D. All of the above
D. All of the above
93
Assume estimated revenues exceed appropriations. When the budget for the general fund is recorded, the journal entry will include:
A. A credit to budgetary fund balance
B. A credit to estimated revenues control
C. A debit to appropriations control
D. A credit to budgetary fund balance — reserve for encumbrances
A. A credit to budgetary fund balance
94
Which of the following will increase the fund balance of a government at the end of a fiscal year?
The sum of revenues and other financing sources is more than the sum of expenditures and other financing uses
Expenditures are more than the difference between revenues and the excess of other financing sources over other financing uses
Revenues are less than the sum of expenditures, other financing sources and other financing uses
The sum of fund balance, revenues and other financing sources is more than the sum of expenditures and other financing uses
The sum of revenues and other financing sources is more than the sum of expenditures and other financing uses
The sum of fund balance, revenues and other financing sources is more than the sum of expenditures and other financing uses
95
The Fort Worth city council approved and adopted its budget for FY 2017. The budget for the general fund contained the following amounts:
Estimated revenues $1,900,000
Appropriations $1,860,000
Authorized transfer to the debt service fund $30,000
When the general fund budget for FY 2017 is recorded, indicate whether each of the following accounts should be debited (D), credited (C), or is not affected (N)
1. Estimated revenues
2. Budgetary Fund Balance
3. Appropriations
4. Estimated other financing uses
5. Expenditures
1. D
2. C
3. C
4. C
5. N
96
The complete Annual Comprehensive Financial Report (ACFR / CAFR) is (recommended/required)
recommended
97
minimum parts of ACFR
1) Management’s discussion and analysis
2) Basic Financial Statements (Government-wide, Fund Basis, and Footnotes)
3) Required supplementary information (other than MD&A)
98
3 main sections of the ACFR
1) Introductory
2) Financial
3) Statistical
99
is the introductory section of the ACFR audited
no
100
what does the introductory section of the ACFR include
Table of contents
Letter of transmittal
Miscellaneous items such as organizational
chart or names of chief government officers
101
what is included in the financial section of the ACFR
Auditor's report
Management Discussion & Analysis (MD&A)
Financial Statements & Notes
Required Supplementary Information (RSI)
Combining statements - more details about main statements, if needed
102
are the financial statements & notes of the acfr audited
yes
103
what are the two parts of the basic financial statements
1) Government-wide financial statements
2) Fund-basis financial statements
104
what are the two parts of the government-wide financial statements
1) Government-wide statement of net position
2) Government-wide statement of activities
105
what are the three parts of the fund basis financial statements
1) governmental type funds
2) proprietary funds
3) fiduciary funds
106
what are the three parts of the governmental type funds
1) Balance Sheet
2) Statement of Revenues, Expenditures and Changes in Fund Balances
3) Reconciliation of government statements to government-wide statements
107
what are the three parts of proprietary funds
1) statement of net position
2) statement of revenues, expenses, and changes in fund net position
3) statement of cash flows
108
what are the two parts of fiduciary funds
1) statement of fiduciary net position
2) statement of changes in fiduciary net position
109
fund
Fiscal and Accounting entity with a self-balancing set of accounts recording cash and other financial resources
110
governmental (5 types)
1. General Fund
2. Capital Projects
3. Permanent
4. Special Revenue
5. Debt Service
111
proprietary (2 types)
1. Enterprise
2. Internal Service
112
fiduciary (4 types)
1. Custodial (Agency)
2. Pension (and other employee benefit) trust
3. Investment
4. Private-purpose trust
113
governmental basis of accounting
modified accrual
114
proprietary basis of accounting
accrual
115
fiduciary basis of accounting
accrual
116
Included in GWS: governmental
yes
117
Included in GWS: proprietary
yes
118
Included in GWS: fiduciary
no
119
Statement of Net Position
(measures assets and liabilities using the economic resource measurement focus, similar to business balance sheets)
120
Statement of Activities
(measures revenues and expenses using the accrual basis, similar to business income statements)
121
how are the assets listed in the government-wide statement of net position?
in order of liquidity
122
three categories of net position
1. Net Investment in capital assets
2. Restricted
3. Unrestricted
123
government-wide statement of activities
This statement shows the net ‘cost’ of activities after deducting the revenues that can be directly attributed to each function
General revenues, such as property taxes, are then added at the bottom to get the “Change in net position”
124
governmental funds
general citizen service
125
proprietary funds
business-like activities such as water utility
126
fiduciary funds
holding money in trust for others
127
what fund is always considered a major fund
general fund
128
characteristics to be a major fund
Fund has 10% of the total assets, liabilities, revenues, or expenditures in the GOVT category, and
5% of total the total assets, liabilities, revenues, or expenditures of GOVT + ENTERPRISE amounts
Or ANY fund may be designated MAJOR if reporting that FUND separately would be useful
129
how are expenditures classified
by character (time or interperiod equity issues)
130
reconciliation schedules
This schedule reconciles the changes in net assets/position shown on the government-wide and the fund-level statements
131
why is reconciliation necessary
because the government-wide statements are on the accrual basis, and government fund statements are on the modified accrual basis
132
budgetary comparison schedule
Shows the original budget and the final revised budget after revisions during the year. Variance column is useful, but optional.
The ‘actual’ figures may not be the same as those shown on the Statement of Revenues and Expenditures. The Actual column should reflect the basis of accounting assumed in the budget.
Need to show a reconciliation when budget basis is not the same as that on fund statements.
133
summary of significant accounting policies
Explains which funds use accrual and which use modified accrual basis
Gives the choice made whenever more than one approach is allowed
Explains what is included in the financial statements
134
major RSI items
Management Discussion and Analysis (precedes financial section)
May include Budgetary Comparison Schedule
Information about infrastructure assets if modified approach is used
Information about pension funding progress
Schedules for external risk pools
135
A city government issued general obligation bonds to finance the construction of a new jail
1. Capital Projects
2. Governmental
3. Modified
4. Yes
136
A tax of $1.00 per residential phone number is collected by a city government from the phone company. This amount is required by state law to be used for the operation of the 911 emergency phone system.
1. Special Revenue
2. Governmental
3. Modified
4. Yes
137
A county government expended $1 million to expand the water treatment plant.
1. Enterprise
2. Proprietary
3. Accrual
4. Yes
138
A donor signed a trust agreement and provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships.
1. PPT
2. Fiduciary
3. Accrual
4. No
139
A donor provided $50,000 to be used to purchase newspaper and magazine subscriptions for the public library. There is no requirement that the original principal may not be spent
1. Special revenue
2. Governmental
3. Modified
4. Yes
140
A city government sold surplus street maintenance trucks for $10,000.
1. General Fund
2. Governmental
3. Modified
4. Yes
141
A city government contributed $500,000 to a pension trust administered by the city for its teachers, public safety employees, and employees of the water department
1. General Fund
2. Governmental
3. Modified
4. Yes
142
modified accrual accounting
a distinct system of accounting that contains financial statement elements that appear nowhere else.
143
how are revenues recognized using the modified accrual basis of accounting
measurable and available
144
what is used instead of expenses in modified accrual accounting
expenditures
145
3 types of permanent accounts
1) Assets
2) Liabilities
3) Fund Balances
146
2 types of accounts that are closed at year end
1) Budgetary accounts
2) Financial Statement Activity Accounts
147
what is the measurement focus of modified accrual
current financial resources measurement focus - no long-term assets & no long-term liabilities
148
fund balance
serves a purpose similar to retained earnings, in that activity accounts are closed to this account at the end of each accounting period.
Net resources that are currently available for future spending.
149
GASB 54 - Establishes the Reporting of Fund Balances
to provide clearer fund balance classifications.
Users want to know whether the use of amounts reported in governmental funds is constrained and how binding those constraints are
150
5 categories of fund balances for governmental type funds
nonspendable, restricted, committed, assigned, unassigned
151
nonspendable
equals the balance of supplies inventories in the asset section of the balance sheet
152
restricted
by outside parties through grant agreements and and bond covenants
153
committed
restricted by City Council as a reserve for revenue shortfalls (general fund) and by contractual obligation (capital projects fund)
154
assigned
residual balance of the special revenue and capital projects fund, includes amounts assigned within the general fund by expressed intent (e.g. purchase orders)
155
unassigned
the residual balance of the general fund
156
encumbrances
Purchase orders, basically. Intent
to spend money
no separate reporting within the fund balance section of the governmental funds’ balance sheet
157
negative balances
Statement 54 does not permit the reporting of negative restricted, committed or assigned fund balances. If this occurs, the government should reduce any assigned fund balances (in that fund) by the amount of the negative balance.
The rationale is that if expenditures exceed restricted or committed resources, then funds have in effect been reallocated to the purpose used.
If a deficit remains once all assigned fund balances are zero, the remaining negative amount should be reported as unassigned fund balance.
158
$150,000 unexpended proceeds of a state grant required by law to be used for health education
restricted
159
$15,500 of prepaid insurance
nonspendable
160
$600,000 rainy day fund approved by city council for use under specified circumstances
committed
161
$125,000 provided for contractual obligations for capital projects
committed
162
$16,000 unexpended proceeds of a tax required by law to be used for emergency 911 services
restricted
163
$715,500 to be used to fund government operations in the future
unassigned
164
$200,000 budget stabilization fund to be used in the event of revenue shortfall
unassigned
165
revenues
defined as all other inflows and include taxes, charges for services, and amounts provided by other entities such as the state or federal government
166
other financing sources
include transfers in from other funds and the proceeds of long-term borrowing
167
expenditures
Bill is received that will be settled with current financial resources in the fund
168
examples of expenditures
salaries (current), land, buildings or equipment (capital) or for payment of interest and principal on debt (debt service).
169
other financing uses
Transfers out of a fund to other funds
170
three outflow classifications
CURRENT, CAPITAL OUTLAY, and DEBT SERVICE
171
current
typically classified by function: General government, public safety, streets and highways
172
nonexchange transactions
transactions in which a government receives resources without directly giving equal value in exchange
173
most common forms of nonexchage transactions
tax revenues and intergovernmental grants
174
eligibility requirements for nonexchange transactions
required characteristics of recipients, time requirement, reimbursement, contingencies
175
required characteristics of the recipient
recipient must have the characteristics specified by the provider.
176
reimbursement
For those grants and gifts that are payable only upon the incurrence of qualifying outlays, revenues would be recognized only when the expenditures have been incurred
177
contingencies
resources pledged with this are not recognized as revenue until it has been met
178
four types of nonexchange transactions
Imposed nonexchange revenues
Derived tax revenues
Government mandated transactions
Voluntary nonexchange transactions
179
imposed nonexchange revenues examples
property tax, special assessments, fines/forfeits
180
derived tax revenues examples
sales, income, motor fuel taxes
181
government mandated transaction examples
federal government requires lower level expenditures
182
voluntary nonexchange transaction examples
grants, donations
183
imposed nonexchange revenue accounting basis
modified
184
imposed nonexchange revenue
Record the receivable (and an allowance for uncollectibles) when an enforceable claim exits.
Revenues should be recognized in the period for which the taxes are levied (i.e. budgeted), but are also subject to the 60 day rule. Revenues expected to be collected > 60 days after year-end are deferred
185
property taxes levied journal entry
Taxes Receivable ………Dr
Estimated Uncollectible Taxes ….…..Cr
Revenues……….. .……………….….Cr
186
deferral of portion expected to be collected > 60 days after year end (property taxes)
Revenues ………………Dr
Deferred (Inflows) Property Taxes ….Cr
187
derived tax revenue accounting basis
modified
188
derived tax revenue
Record the receivable when the taxpayer’s underlying transaction takes place.
Revenues should be recognized when available and measurable. Revenues not expected to be collected in time to settle current liabilities are deferred (i.e. available and measurable criteria).
189
income tax withholdings are received journal entry
Cash …………………….Dr
Revenues ……………………………Cr
190
additional income taxes expected to be received after year end. part of this will not be received in time to be available for current liabilities journal entry
Taxes Receivable ……….Dr
Revenues …………….……………………Cr
Deferred Revenues – Income Taxes ……Cr
191
government-mandated and voluntary nonexchange revenues accounting method
modified
192
government-mandated and voluntary nonexchange revenues
Record the receivable and the revenue when all eligibility requirements have been met.
Many of these are reimbursement grants. In this case, revenue is recognized only when qualified expenditures have been incurred
Advance receipts are deferred until expenditures are incurred. Revenue recognition is subject to the available and measurable criteria.
193
reimbursement type grants journal entries
Expenditures ……… …..Dr
Accounts Payable/Cash ……………..Cr
2. Due from grantor ……… Dr
Revenues ……..……………………Cr
194
Advance funded grant: (less common)
1. Receipt of advance funding.
2. Incur qualified expenditures and recognize revenue
journal entries
Cash ……………………Dr
Deferred Revenues – Grants ………..Cr
2a. Expenditures Control …...Dr
Accounts Payable/Cash ……………..Cr
2b. Deferred Revenues –
Grants .. ……… Dr
Revenues …………………Cr
195
expenditure cycle step #1
City Council approves the fiscal year budget for the general fund
196
expenditure cycle step #2
City departments issue purchase orders for goods and services
197
expenditure cycle step #3
goods and services are received and invoices are presented for payment
198
expenditure cycle step #1 journal entries
Dr. estimated revenues
Dr. Estimated other financing sources
Cr. Appropriations
Cr. Cr. Estimated other financing uses
Cr. Budgetary fund balance
To record the budget
199
expenditure cycle step #2 journal entry
Dr. encumbrances
Cr. Budgetary fund balance - reserve for encumbrances
to establish the encumbrance (issue P.O.)
200
expenditure cycle step #3 journal entries
Dr. Budgetary fund balance - reserve for encumbrances
Cr. encumbrances
to reverse the encumbrance
Dr. expenditures (current)
Cr. accounts payable
to record the liability
201
is an encumbrance a liability
An encumbrance is not a liability since the goods or services have merely been ordered, not received
202
why record encumbrances
To prevent over-spending, outstanding orders are entered into the books
203
Place an order for $150,000 which consists of three mini-buses costing $50,000 each. Recorded as:
Dr. Encumbrances 150,000
Cr. Budgetary Fund Balance -
Reserve for Encumbrances 150,000
204
Assume two of the buses arrive, but with freight, they cost $102,000 instead of $100,000
First, reverse a part of the encumbrances:
Dr. Budgetary Fund Balance -
Reserve for Encumbrances 100,000
Cr. Encumbrances 100,000
Second, record the actual amount of expenditure:
Dr. Capital Expenditure 102,000
Cr. Accounts Payable 102,000
205
estimated revenues
Revenues to be raised pursuant to law during a budget period
206
appropriation
legal authorization for the government to incur liabilities for purposes specified in the appropriations statue or ordinance
207
estimated other financing sources and estimated other financing uses
budgetary accounts reflecting anticipated inflows and outflows of resources from sources other than revenues and expenditures
208
budget revisions
may be necessary during the year due to changes in revenue projections or operating conditions … for example, electricity price increases, decrease in sales taxes due to low consumer spending
usually are taken back to the appropriate legislative body for approval, although some jurisdictions may allow some percentage of the budget to be transferred between accounts
209
recording a budget revision
Budgetary Fund Balance 150,000
Appropriations 70,000
Estimated Revenues 80,000
210
budgetary comparison schedule
Both the original and the final adjusted
budget is shown
The revised appropriations are compared to the Actual Expenditures for the current period plus Outstanding Encumbrances
A variance column is typically shown, but is optional
211
