FAR 69 - Format and Content of Comp Annual Financial Report 2 - Encumbrance Acct/Deferred Outflows and Inflows Flashcards Preview

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Flashcards in FAR 69 - Format and Content of Comp Annual Financial Report 2 - Encumbrance Acct/Deferred Outflows and Inflows Deck (10):
1

Encumbrances outstanding at year's end in a state's general fund may be reported as a
A. Liability in the general fund.
B. Fund balance assigned in the general fund.
C. Liability in the general long-term debt account group.
D. Fund balance designation in the general fund.

B. Encumbrances outstanding at year's end represent outstanding purchase orders or unfilled contracts. The fund balance classification is either restricted, committed, or assigned depending on the level of authority behind the encumbrance. If the government intends to use the resources the specific purposes but is not a constraint imposed by external parties or enabling legislation (i.e., restricted) or by formal action of the government's highest decision making authority (i.e., committed) then a portion of the fund balance needs to be assigned for the outstanding encumbrances to indicate that a portion of the fund balance needs to be assigned for the outstanding encumbrances to indicate that a portion of the fund balance is not available for future appropriations.

2

For state and local governmental units, generally accepted accounting principles typically require that encumbrances outstanding at year's end be reported as
A. Expenditures.
B. Assigned or committed fund balance.
C. Deferred liabilities.
D. Current liabilities.

B. The fund balance classification is either restricted, committed, or assigned depending on the level of authority behind the encumbrance. If the government intends to use the resources the specific purposes but is not a constraint imposed by external parties or enabling legislation (i.e., restricted) or by formal action of the government's highest decision making authority (i.e., committed). Assigned fund balances should be used to indicate that a portion of the fund balance is not available for expenditure. The use of reserve for encumbrances indicates that a portion of the fund balance has been segregated for expenditure on vendor performance.

3

Encumbrances would not appear in which fund?
A. Capital Projects.
B. Special Revenue.
C. General.
D. Enterprise.

D. Encumbrance accounting is used for budgetary control and, therefore, is commonly used in Governmental Fund types, including the General, Special Revenue, and Capital Projects Funds. It is usually not used by Debt Service Funds since the terms of the debt control spending. It is rarely used by Proprietary Funds so the Enterprise Fund (answer D) is the best choice for this question.

4

Excel City issued $40,000 of purchase orders. Assume that when all the orders were received, the actual cost was $39,100. How much would be recorded as expenditures when the purchase orders were issued?
A. $39,100
B. $40,000
C. $900
D. $0

D. No expenditures are recorded at the time purchase orders were issued. Encumbrances represent a commitment made to the vendor in the form of a purchase order prior to incurring actual expenditures. At the time a purchase order is issued, the encumbrance account is increased by the amount of the purchase orders - in this case, $40,000. Expenditures of $39,100 will be recorded when goods are received along with the invoices, and at that time the $40,000 encumbered will be also be reversed out.

5

T/F: The unencumbered, unexpended appropriation can be calculated by subtracting Expenditures from the Appropriation.

False
+ Appropriations
- Encumbrances
- Expenditures
= Unencumbered, unexpended Appropriation

6

T/F: At the beginning of the fiscal year, outstanding encumbrances from the prior year are recognized by debiting Encumbrances of Prior Year.

True

7

T/F: When previously encumbered goods are received, normally the Budgetary Fund Balance account is debited.

True

8

In Year 20x1 a local government levied $5,000,000 in special assessments. The assessments are due and payable in five equal installments at the beginning of each of the next five fiscal years, starting in Year 20x2. Assume that all installments are collected four months (120 days) into the year that they are due. The Special Assessment Debt Service Fund would report revenues in Year 20x2 in the amount of:

$1 million
The Debt Service Fund reports the amount that is measurable and available as revenue, which in Year 20x2 is the $1,000,000 collected

9

T/F: A government that receives a grant before a time requirement is met should record the grant as a deferred revenue until the time requirement is satisfied.

False.
As long as all other eligibility requirements are met other than the time requirement, it should be reported as a deferred outflow of resources by the provider and as a deferred inflow of resources by the recipient.

10

T/F: A local government acquires a private golf course that was in financial trouble because of the effect the course would have on assessed property tax values. The government paid $2.5 million and the course had an acquisition value of $2.3 million. The difference is recognized as an expense.

False.
The difference will be recognized as a deferred outflow of resources.

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