Flashcards in Governmental Accounting Deck (69)
What are the three major fund categories in governmental accounting?
Governmental, Proprietary, & Fiduciary
Which two accounting bases are used in governmental accounting? What are their respective focuses?
1) Accrual basis - current economic resources focus (revenues recognized when earned)
2) Modified accrual basis - current financial resources focus (revenues recognized when available and measurable)
What are the types of Governmental funds? What method of accounting do they use?
1) General Fund
2) Special Revenue Fund
3) Debt Service Fund
4) Permanent Fund
5) Capital Projects Fund
*Presented using MODIFIED Accrual accounting
What are the types of Proprietary funds? What method of accounting do they use?
a) Internal Service Funds - to serve the needs of other governmental units (i.e. motor pool)
b) Enterprise Funds - provide goods or services to external users (i.e. post office)
*Presented using ACCRUAL accounting
What are the types of Fiduciary Funds? What method of accounting do they use?
a) Pension Trust Fund - Government is a trustee for a pension plan (L-T)
b) Investment Trust Fund - Government is a trustee over a series of investments (L-T)
c) Private Purpose Trust - Trust that benefits various individuals and entities (L-T)
d) Agency Fund - government acts as an agent or custodian (S-T focus)
*Presented using ACCRUAL accounting
What are the balance sheet categories for Agency Funds?
Just Assets and Liabilities. There is NO fund balance!
When is Revenue recorded in Governmental Accounting (modified accrual)?
When it is MEASURABLE and AVAILABLE (to spend).
In Governmental Accounting (modified accrual), when looking at revenue, what does it mean to be "available to spend"?
Collectible in the current period or within 60 days after year end.
In Governmental Accounting (modified accrual), what are funds expected to be received beyond 60 days after year end called?
In Governmental Accounting (modified accrual), what types of revenue might be accrued for (as opposed to upon receipt)?
Property taxes (again, 60 day rule applies) and unrestricted grants. Also for restricted grants, but only once money is spent (correctly)
Distinguish between "exchange" and "non-exchange" transactions?
a) Exchange transactions - goods/services of equal value that are exchanged (as in GAAP). In government, this would be purchasing water or electricity from an enterprise fund.
b) Non-exchange transactions - transactions in which the government gives/receives without necessarily receiving/giving equal value in exchange.
What are the types of "non-exchange" transactions?
a) "Derived" tax revenues - taxes self-assessed on exchange transactions.
b) "Imposed" - assessed on assets or rights of the non-government (think: property taxes, fines, special assessments)
c) "Government-mandated" - i.e. federal grants to lower levels of government. Treated as revenue when eligibility requirements are met.
d) "Voluntary" - i.e. grants and donations
What is Derived Tax Revenue?
Money collected from exchange transactions, ala "people doing things", such as sales tax (buying cars) or income tax (people working)
What is Imposed Tax Revenue?
Tax assessed on assets or rights of non-government entities, ala "just because things exist". Examples include: 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 type of non-exchange transactions are property taxes and fines?
Imposed non-exchange revenue
Distinguish between an expenditure and an expense.
In private sector (accrual accounting), an expense can be related to a corresponding revenue. But under government (modified accrual accounting), government benefits aren't necessarily provided to those that pay for them (ala food stamps, fire department, police department). Accordingly, the focus is on the outflow of financial resources to pay for the good/service rather than the benefits resulting from their costs (no matching principle). As such, the costs are incurred in the period that the obligation arises and no capitalization of assets is necessary.
What are the types of governmental grants? Are they treated as revenue upon receipt by the governmental unit?
1) Unrestricted - Yes, treated as a revenue upon receipt as no restrictions on the funds' use
2) Restricted - Not treated as a revenue until money is SPENT in accordance with the associated terms. If incorrectly spent, money is owed back (a liability).
Are bonds a revenue?
No! They are a source of funds.
What are the types of expenditure categories/classifications? Provide an example for each.
a) Function or Program (WHY/purpose) - health and welfare, education, public safety, defense
b) Organizational Unit (department) - police, fire, parks & recreation
c) Activity (not often used) - police protection function/SWAT teams
d) Character (WHEN) - debt service-past, current services-present salaries & supplies, capital outlay-future (police car, fire trucks, etc.)
e) Object (WHAT) - personnel services, salaries, rent, utilities, supplies
How are expenditures reported on the Statement of Revenues, Expenditures and Changes in Fund Balance?
By Function (why - purpose) within character (when) classifications (function must be presented in either the statement or footnotes)
What is an encumbrance? What are the journal entries used to record them? To close them out?
An open order that is a form of estimated expenditure.
To record (place an order):
Dr. Encumbrances Outstanding
Cr. Reserve for Encumbrances
To close out (order has been filled):
Dr. Reserve for Encumbrances
Cr. Encumbrances Outstanding
What is the general hierarchy for governmental GAAP publications? (Most authoritative to least)
1) GASB Statements
2) GASB Interpretations
3) GASB Technical Bulletins
4) AICPA publications
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?
Accounts for revenues restricted for a specific purpose such as a gas tax that finances road repair. Revenue sources are often specific taxes, fees, or other earmarked revenue sources.
What is a Permanent Fund?
Legally restricted "nonexpendable" fund, whose principal must remain intact and not be spent. Only its investment earnings can be used to fund programs. Think of an endowment for a university or for a public library.
What is a Capital Projects Fund?
Used to acquire and build facilities. Revenue sources include special tax revenues, transfers, or proceeds from bonds (or governmental grants).
What is a Debt Service Fund?
Handles principal and interest payments on the tax supported debts of the governmental funds. Property taxes and transfers from other funds are the usual revenue sources.
What is an Internal Service Fund?
Fund that renders services or provides goods to other governmental fund units, such as a maintenance, IT, or supply department.
What is an Enterprise Fund?
Fund financed largely by exchange transactions, such as water utilities, public universities, public recreation centers, or transit systems.