Governmental Accounting 1

Question 1

Primary user groups of external financial reports of a state government

Answer 1

• The citizenry: to which government is accountable to
• Legislative & Oversight bodies: who represent the citizenry
• Investors & Creditors: those who participate in the lending process

Question 2

What is included in general-purpose external financial reporting

Answer 2

• financial statements
• notes to the financial statements
• required supplemental information
• other supplemental information

Question 3

Involuntary Resource Provider

Answer 3

Cannot choose whether or not to pay; like taxes

Question 4

Purpose of Financial Reporting

Answer 4

• Accountability: taxpayer has right to know by providing information to help in determining whether government was operated within legal constraint

Interperiod Equity: shows whether current-year revenues are sufficient to pay for current-year services or whether future taxpayers will be required to assume burdens for services previously provided

Question 5

Financial Reporting Implications

Answer 5

• Expression of public policy
• Expression of financial intent
• Form of control
• May provide basis of evaluating performance

Question 6

Outcome Measures

Answer 6

indicate the results that occur because of services provided including accomplishments as a result of the services provided like clearance rate of crime

Question 7

6 Characteristics of Effective Financial Reporting

Answer 7

• Understandability
• Reliability
• Relevance
• Timeliness
• Consistency
• Comparability

Question 8

Output Measures

Answer 8

Quantity of service provided like miles or road repaired

Question 9

Accounting Equation for a Fund

Answer 9

Assets + Deferred Outflows of Resources = Liabilities + Deferred Inflows of Resources + Fund Balance

Question 10

3 Types of Funds

Answer 10

• Governmental
• Proprietary
• Fiduciary

Question 11

Governmental Funds

Answer 11

Nonexchange revenues like taxes, intergovernment revenues, and grants provide resources or most of the general government’s expenditures

Question 12

Proprietary Funds

Answer 12

Use exchange transactions from examples like public utilities, convention centers, motor pools, and airports. They charge users for goods

Question 13

Fiduciary Funds

Answer 13

Used to manage resources on behalf of entities or individuals

Question 14

Basis of Accounting for Funds

Answer 14

Government: modified accrual
Proprietary: accrual
Fiduciary: accrual

Question 15

Types of Government Funds

Answer 15

Government Fund
Special Revenue Fund
Debt Service Fund
Capital Project Fund
Permanent Fund

Question 16

Types of Proprietary Funds

Answer 16

Enterprise Funds

Internal Service Funds

Question 17

Types of Fiduciary Funds

Answer 17

Custodial Funds
Pension Trust Funds
Investment Trust Funds
Private Purpose Trust Funds

Question 18

Fund Balance Equation

Answer 18

Current Assets + Deferred Outflows of Resources − Current Liabilities − Deferred Inflows of Resources = Fund Balance

Question 19

General Fund

Answer 19

• Revenues usually come from taxes, licensing, fines, and other fees
• Expenditures can be made for any general government services not specifically accounted for in another fund
• The only required fund & there can only be one general fund

Question 20

Special Revenue Fund

Answer 20

Accounts for specific revenues for purposes other than debt service or major capital projects like a gasoline tax that is for road maintenance

Question 21

Capital Projects Fund

Answer 21

• Account for monies designated for acquisition or construction of significant capital items like land, buildings, and equipment
• Any remaining money is usually transferred to debt service funds unless there was debt then it goes to general fund

Question 22

Debt Service Fund

Answer 22

Account for monies set aside to pay interest and principal on the governmental unit’s long-term general obligation debt.

Question 23

Permanent Fund

Answer 23

ccount for resources received by the governmental entity with the stipulation that the principal amount remain “intact” but that earnings must be spent, for purposes that benefit the governmental entity

Question 24

Proprietary Fund Equation

Answer 24

(Current Assets + Capital Assets + Deferred Outflows of Resources) − (Current Liabilities + Long-Term Liabilities + Deferred Inflows of Resources) = Net Position

Question 25

Enterprise Funds

Answer 25

Account for activities that provide goods and services to the general public as well as to the governmental entity itself

Question 26

Internal Service Fund

Answer 26

Account for activities that provide goods and services only to other government agencies and departments (i.e. motor pools, printing services, data processing services, central supplies, etc.)

Question 27

Custodial Fund

Answer 27

Just holds it and distributes it

Question 28

Private Purpose Trust Fund

Answer 28

Hold and distribute other entities besides the government and are often held longer than custodial

Question 29

Investment Trust Fund

Answer 29

Account for monies received into an investment pool created through a formal legal trust or similar arrangement from other governmental agencies to be included in the governmental entity's investment pool

Question 30

Measurement Focus Basis of Accounting

Answer 30

Modified Accrual > Flow of Financial Resources > Net Current Financial Position Full Accrual > Flow of Economic Resources > Financial Position

Question 31

Modified Accrual Revenue recognition

Answer 31

Recognized when - Measurable: amount is known and can be reasonably estimated Available: amount is both legally due and cash is received whether it is by the end of the fiscal period or in time to pay obligations in current fiscal period (60 day rule)

Question 32

Modified Accrual Revenue Recognition 60 day rule

Answer 32

A governmental entity may recognize monies received during the first 60 days of a new fiscal period as revenue of the old fiscal period.

Question 33

60 day example In Fiscal Year X, Bishop County levied property taxes totaling $5,000,000. The County received payments of $4,000,000 by the end of Fiscal Year X, received $300,000 during the first 60 days of the Fiscal Year Y, received an additional $500,000 by the end of Fiscal Year Y, and received the remaining $200,000 during the first 60 days of Fiscal Year Z.

Answer 33

Bishop County recognizes $4,300,000 (4,000,000 + 300,000) of property tax revenue in Fiscal Year X and $700,000 (500,000 + 200,000) of property tax revenue in Fiscal Year Y.

Question 34

Modified Accrual Revenues Subject to Accrual Accounting

Answer 34

Revenues that are measurable and legally due prior to the receipt of cash are normally recognized on the accrual basis. These revenues typically result from charges that are billed to the customer/constituent by the governmental entity - Property taxes - Interest and penalties on delinquent taxes - Investment revenue - Regularly billed charges for services - Taxes collected by other government units but not yet remitted

Question 35

Journal Entries for amounts billed and received in current period and first 60 days of next period

Answer 35

Receivables -----Revenues Revenue -----Deferred Inflows of resources

Question 36

Modified Accrual Ependitures

Answer 36

Generally on the accrual basis that is expenditure is recognized when liability in incurred and measurable expect for 4 things

Question 37

4 things expenditures under modified accrual accounting not accounted for under accrual method

Answer 37

Interest on general long term debt: not recorded until actually due No distinction between capital expenditures like land or buildings and period expenditures like wages or rent, they are all just expenditures Prepaids are recognized as expenditures either when purchased or when used Increases & Decreases in fund balance other than revenues & expenditures - other financing sources - other financing uses

Question 38

Entry to record a budget and close it

Answer 38

Estimated Revenues ----------Appropriations Appropriations ----------Estimated Revenues

Question 39

Surplus Budget Journal Entry

Answer 39

Estimated Revenues $110 - ---------Appropriations $100 - ---------Fund Balance $10 *Fund Balance is an example of transfers from other funds or proceeds from Bonds*

Question 40

Deficit Budget

Answer 40

Estimated Revenues $90 Fund Balance $10 ----------Appropriations $100 *Fund balance is an example of transfer out of other funds*

Question 41

What Funds need budgetary comparison

Answer 41

General Fund and all major special revenue funds for which a budget is legally adopted.

Question 42

Other Financing Sources

Answer 42

Increases in the fund balance of a fund that do not result in an increase in the net position of the organization as a whole. Proceeds from long term debt & transfers of assets from other funds; either reported with revenue or netted against other financing uses

Question 43

Other Financing Uses

Answer 43

Decreases in the fund balance of a fund that do not result in a decrease in the net position of the organization as a whole. Transfers of assets to other funds(transfers out) is the most common example & are either reported with expenditures or netted against other financing sources

Question 44

Unassigned Fund Balance Shit

Answer 44

Closing Appropriations increases fund balance Closing Expenditures account decreases fund balance So if closing entries for appropriations is greater than actual expenditures then you have an increase in unassigned fund balance

Question 45

Encumbrance Order Issued J/E

Answer 45

Encumbrances | ----Budgetary Fund Balance

Question 46

Encumbrance Order Filled J/E and year end closing

Answer 46

Budgetary Fund Balance | ----------Encumbrances

Question 47

To record invoice for goods received

Answer 47

Expenditures | -----Vouchers Payable

Question 48

Things that are rarely encumbered and not encumbered

Answer 48

Payroll and interfund transactions are rarely encumbered Petty cash is never encumbered

Question 49

Amount of available appropriations

Answer 49

Authorized appropriation minus encumbrances and expenditures But remember that encumbrances reverse and give way to the actual expenditure so appropriations may either decrease or increase depending if the expended amount is greater or less than the encumbrance

Question 50

Note about interfund transfers

Answer 50

If in governmental you transfer to other government funds it is considered a transfer but if you transfer to proprietary or fiduciary then is an expenditure