Flashcards in Governmental Accounting Deck (55):
What are the three major types of funds in governmental accounting?
Governmental, Proprietary, Fiduciary
Which two accounting bases are used in governmental accounting?
Accrual basis - current economic resources focus (revenues recognized when earned)Modified accrual basis - current financial resources focus (revenues recognized when available and measurable)
What is a budget appropriation? Pg. Govt Accouting Class example
The highest amount allowed for a particular expenditure under a budget; what you are authorized to spend
What is an encumbrance? Pg. Govt Accouting Class example
Records purchase and reserves it for the encumbrance; money that is set aside because a lot of people (senators) want to use the money; has to be within the budget
Only includes infrequent spending and not salaries; other wise just:
**No need for encumbrance journal entry
What is the opening budgetary entry?
Dr Estimated Revenues Control
Cr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
What is the closing budgetary entry?
Dr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
Cr Estimated Revenues Control
What are the types of governmental funds?
Special Revenue Fund
Capital Projects Fund
Debt Service Fund
What is a General Fund?
The operating fund of the governmental unit
Records Significant Revenues: Taxes; Tickets; Fines; Licenses
Records Significant Expenditures: Police; Education; Fire Dept
What is a Special Revenue Fund?
Restricted for a specific purpose such as street repair.
What is a Permanent Fund? Pg. 30-12
Legally restricted fund; where only earnings can be used to fund programs.Principal remains intact.
What is a Capital Projects Fund?
Used to acquire and build facilities.
What is a Debt Service Fund?
Handles repayment of long-term debt and related interest.
Which fund statements are issued in Governmental Accounting? Pg. 30-2
Balance SheetStatement of Revenues; Expenditures; and Changes in Fund Balance => Governmental funds which is part of Fund Financial Statements a major section in Financial Reporting for Govt Accounting
When is Revenue recorded in Governmental Accounting?
When it is BOTH available and measurable; regardless of when it is spent.
What is Derived Tax Revenue?
Money collected from people doing things:
Sales tax (buying cars) or income tax (people working)
What is Imposed Tax Revenue?
Tax assessed just because things exist
Example: property tax on a car (even if it's never driven); real estate tax
Recorded as a revenue when BUDGETED.
Estimated uncollectible property tax revenues don't offset revenues; so don't net them.
What are the types of Proprietary Funds?
Internal Service Funds - to serve the needs of other governmental units (i.e. motor pool)
Enterprise Funds - provide goods or services to external users (i.e. post office)
What are the types of Fiduciary Funds?
Agency Fund - government acts as an agent or custodianPension Trust Fund - Government is a trustee for a pension planInvestment Trust Fund - Government is a trustee over a series of investmentsPrivate Purpose Trust - Trust that benefits various individuals and entities
How are Assets & Liabilities presented on the Statement of Net Position?
Assets (Current & Non-Current)
Deferred Outflows of Resources
Liabilities (Current & Non-Current)
Deferred Inflows of Resources
How are Capital Assets shown on a governmental Statement of Net Assets?
They are shown net of debt
Asset Cost - Accumulated Depreciation - Asset Liabilities : Net Assets
How is infrastructure reported on a governmental Statement of Net Assets?
Reported at cost; no accumulated depreciation
How is a Statement of Net Assets divided?
Into Governmental Activities and Business Activities
How are activities presented in a Statement of Activities?
They are divided by function
If the activities of a component are distinguishable from the rest of the governmental entity; then discreet presentation is required
If the activities of the component cannot be identified and separated from the rest of the governmental activities; then blended presentation is warranted.
Component units are reported in the Entity-Wide Financial Statements and not the Fund Financial Statements.
What is the primary objective of governmental accounting?
To provide information that is useful and benefits a wide range of users including:
Costs of services provided
Sufficiency of revenues to cover costs
Financial position of entity
What Financial Statements are required for Defined Benefit Pension plans?
Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position
What are the components of the Statement of Fiduciary Net Position for Defined Benefit Pension Plans?
Assets; Deferred Outfows; Liabilities; Deferred Outflows; Fiduciary Net Position
What are the components of the Statement of Changes in Fiduciary Net Position for Defined Benefit Pension plans?
Additions (Contributions and Net Investment Income) - Deductions (Benefits Payments and Admin Expense) : Net Change in Fiduciary Net Position
What should be included in the Financial Statement notes for Defined Benefit Pension Plans?
Types of Benefits; Plan Member Classes; Board Information; Investment Policies and FV Determination
Private Business VS Government Revenues Pg. 30-1
a) What type of accounting methods are used and why are they used?
b) Name examples of what the government accrues for? (2)
c) What about bonds?
a) Private: (FASB) accrual accounting which uses the economic resources approach (ie takes away depreciation); utilized because revenues are received VOLUNTARY
Govt: (GASB) modified accrual which uses the financial resources approach; utilized because revenues are received INVOLUNTARY
b) 1) Property Tax (60 days)
2) Grants (intergovernmental revenue: *unrestricted => when approved
*restricted => spent
c) It is considered a SOURCE of funds and not revenue; also "transfer in" are considered sources
Private Business VS Government Cost Characteristics
a) Private: Selfish => spends money to make money; examples include expenses, matching, depre expense
b) Govt: Unselfish => give money for food stamps (doesn't make money => no correlation to revenues, therefore its called EXPENDITURES and not expense)
Private Business VS Government Goal Pg. 30-1
a) Private: Profit motivated
b) Govt: Budget compliance; accountability to constituents
What are types of revenues for Govt accounting? (2)
1) Derived tax revenues
2) Imposed non-exchange transaction
3) Govt mandated non-exchange
4) Voluntary non-exchange
a) Exchange transactions: equal value are exchanged
b) Non-exchange transactions:
1) Self-assessed; a revenue when occurs
2) Not derived from transactions
3) One level of govt funds another level of govt (federal fund)
4) Entered willingly by parties (unrestricted grants &
What are the 3 broad categories of funds? Pg. 30-11
Name the types of funds within each broad category
1) Governmental Funds: similar to GASB chart Pg. 30-1;
utilizes MODIFIED ACCRUAL; expenditures
*PD-Consents-to-Smoking Grass Pg. 30-13
P Permanent: Set aside and cannot be spent => must be
invested in a permanent basis
D Debt Service: Services bonds (principle and interest)
C Capital Projects: Construction
S Special Revenue: Earmarked sources (ie maintains
bridge from tolls) => use of funds are restricted (only
to paint/maintain bridge)
G General: Junk drawer
2) Proprietary Funds similar to FASB chart Pg. 30-1; utilized
ACCRUAL; expenditures; like private business
a) Internal Sevice: for insiders of govt; no user fee
b) Enterprise: for outsiders / insiders of govt; user fee
(ie for public pools there are user fees)
3) Fiduciary Funds: like non-profit; ACCRUAL
a) Pension trust: for govt employees
b) Investment trust: pool govt money and invest
c) Private purpose trust: tabacco tax => use for cancer
d) Agency: IRS; collect money and give to someone else; no fund balance
What are the 5 fund balance classifications? Pg. 30-13
a) Nonspendable fund balance
b) Restricted fund balance
c) Committed fund balance
d) Assigned fund balance
e) Unassigned fund balance
*Where would you put this
a) Funds cannot be spent due to legal or constractural restrictions
b) Funds that are externally restricted or restricted by law
c) Funds committed for a specific purpose by formal govt action; encumbrance that is not yet spent
d) Funds INTENT to be used for a specific purpose
e) Not in other 4 categories
What are the 5 major sections to the general purpose financial statements of a government entity? Pg. 30-19
1) Mgmt discussion and analysis (MD&A): significant activities of the government, and an overview of the government's financial activity
2) Government-wide financial statements (use ACCRUAL)
a) Statement of net position (like B/S): capital assets, restricted net assets, and unrestricted net assets
i) Govt Activities: financed through taxes; includes
government (PD-C-SG) and internal service funds
(5 govermental funds + 1 internal)
ii) Business-type activities: Enterprise => user
iv) Component Units of govt (ie school district): if blended goes to government activities column; if not goes to separately stated (discreetly presented)
**NO statistical section is mentioned
b) Statement of activities (like I/S / RE) => 5 + 1; 5 govt
fund and 1 internal service
3) Fund financial statements
a) Government Funds: Balance sheet, Statement of
revenues, expenditures, and changes in fund balances
b) Proprietary Funds: Statement of Net Position,
Statement of revenues, expenses, and changes in net
assets, and Statement of Cash Flows (Operating,
Investing, Noncapital financing, and Capital and related
c) A statement of fiduciary net assets and statement of changes in fiduciary net assets
4) Notes to the financial statements
5) Required supplementary information other than MD&A; includes a statment of revenues, expenditures, and changes in fund balance (similar to govt funds)
For government accounting when is the only time you can accrue? (2) Pg. 30-1
1) Property taxes (60 days)
2) *Unrestricted grants => when approved
*Restricted grants => when spent
What are funds for government accounting? Pg. 30-11
A self-balancing set of accounts in which some accounts are using accrual and some are using modified accrual
What are the two requirements to satisfy the modified accrual approach?
What are the two requirements to satisfy the accrual approach?
*Modified accrual approach: include all expenditures!!!
1) Available to spend
In government accounting is a bond considered revenue or a source?
What is an infrastructure and what are the approaches to account for the assets? (2)Pg. 30-21
It includes streets, sidewalks, highways
1) Preferred approach: assets at historical cost and recognize depreciation
2) Modified approach: omits depreciation because indefinite life
What is a major fund? Pg. 30-24
General fund OR
Funds representing BOTH
*10% or more of total category assets
*5% or more of total entity
What is a closing entry?
Resets the temporary accounts to begin accumulating new transactions in the next accounting period (ie debit all revenue accounts and credit income summary, thereby clearing out the balances in the revenue account) => then close income summary to the retained earnings account
a) Authorized to spend on budget
b) How much you think it will cost when you order (expect to spend)
c) Actual cost
What is an interfund transaction? Pg. 30-17
Define the four different types of interfund transations
1) Operating transfers
2) Quasi-external transactions
Transfering cash to different funds
1) Movement of cash from one fund to another (think other financing uses journal entry)
2) One fund pays another fund for services or goods
3) Repayments from one fund to another for costs paid earlier on its behalf
4) Gave them money, but expect to get it back
What is the main objectives for the financial reports?
A Actual VS Budgeted
C Compliance with finance-realated laws, rules, and regulations
E Efficiency and effectiveness
F/S Financial condition and results of operations
*For government, which fund contains a cash flow?
*Name the four sections for the statement of cash flows
*What is significant with which event can be included for cash flows? Pg, 30-13
*ONLY Proprietary funds!!!
a) Internal service: within the govt entity; no fees
b) Enterprise: voluntary payments for goods / services
rendered; outside; there are user fees
3) Non-capital financing
4) Capital & related financing
*If in the government fund (PD-Commits-to-Smoking-Grass), do not include in cash flow; only include PROPRIETARY FUNDS (I-PIPE-Alot)
What financial statements are included for government accounting? Pg. 30-19
1) Government-wide financial statements (accrual)
2) Fund financial statement
Accounting for infrastructure asset; Govt Acctg #2
a) Preferred approach
b) Modified approach
a) Account for assets at historical cost => recognized and depreciate
b) Asset has indefinite life => Goes to required supplementary information in annual report
What financial statements are included in each fund?
a) Governmental funds
b) Proprietary funds
c) Fiduciary funds
d) Component units
a) 1) Balance sheet
2) Statement of revenue, statement of expenditure,
and changes in fund balance
b) 1) Statement of net position
2) Statement of revenues, expenses, and changes in
3) Statement of cash flows: Operating, Investing,
Noncaptial financing, and capital & related financing
c) 1) Statement of fiduciary net assets
2) Statement of changes in fiduciary net assets
d) 1) Statement of net assets
2) Statement of activities
What type of funds are excluded from government-wide financial statements? (broad fund)
Journal Entry for Government Accounting: Set-up Budget (Revenue)
Estimated Revenue: debit
Estimated other financing sources: debit (bonds & transfer in)
Budgetary Fund Balance - unreserved: credit (plug)
Appropriations: credit (authorize to spend on budget)
Estimated other financing uses: credit (spent)
Journal Entry for Government Accounting:
Pg. 30-7 (Expenditures)
a) Order Goods
b) Receive Goods
c) Actual invoice from vendor is recorded
d) Actual payment of the voucher
a) Encumbrances: debit
Reserved for Encumbrances: credit
b) Reserved for Encubrances: debit
c) Expenditures: debit
Vouchers Payable: credit
d) Vouchers payable: debit
What is a fund? Pg. 30-11
A self-balancing set of accounts
What is included in a statement of cash flows for a propiretary fund for governmental accouting? Pg. 30-24
1) Operating: direct method
2) Investing: interest and dividend income; loans
3) Noncapital financing: interest expense on unsecured loans; transfers, grants, subsidies
4) Capital financing: interest expense on secured loans; buying and selling capital assets