Governmental Accounting

Question 1

What are the three major types of funds in governmental accounting?

Answer 1

Governmental, Proprietary, Fiduciary

Question 2

Which two accounting bases are used in governmental accounting?

Answer 2

Accrual basis - current economic resources focus (revenues recognized when earned)

Modified accrual basis - current financial resources focus (revenues recognized when available and measurable)

Question 3

What is a budget appropriation?

Answer 3

The highest amount allowed for a particular expenditure under a budget.

Question 4

What is an encumbrance?

Answer 4

Records purchase and reserves it for the encumbrance.

Question 5

What is the opening budgetary entry?

Answer 5

Dr Estimated Revenues Control
Cr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)

Question 6

What is the closing budgetary entry?

Answer 6

Dr Appropriations Control
Dr/Cr Budgetary Fund Balance (plug)
Cr Estimated Revenues Control

Question 7

What are the types of governmental funds?
What method of accounting is used?
What is their focus?

Answer 7

General Fund
Special Revenue Fund
Permanent Fund
Capital Projects Fund
Debt Service Fund
Modified basis of accounting ( revenues recognized when available and measurable)

Current financial focus

Question 8

What is a General Fund?

Answer 8

The operating fund of the governmental unit

Records Significant Revenues: Taxes; Tickets; Fines; Licenses

Records Significant Expenditures: Police; Education; Fire Dept

Question 9

What is a Special Revenue Fund?

Answer 9

Restricted for a specific purpose such as street repair.

Question 10

What is a Permanent Fund?

Answer 10

Legally restricted fund; where only earnings can be used to fund programs.

Principal remains intact.

Question 11

What is a Capital Projects Fund?

Answer 11

Used to acquire and build facilities.

Question 12

What is a Debt Service Fund?

Answer 12

Handles repayment of long-term debt and related interest.

Question 13

Which fund statements are issued in Governmental Accounting?

Answer 13

Balance Sheet

Statement of Revenues; Expenditures; and Changes in Fund Balance

Question 14

When is Revenue recorded in Governmental Accounting?

Answer 14

When it is BOTH available and measurable; regardless of when it is spent.

Question 15

What is Derived Tax Revenue?

Answer 15

Money collected from people doing things:

Sales tax (buying cars) or income tax (people working)

Question 16

What is Imposed Tax Revenue?

Answer 16

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.

Question 17

What are the types of Proprietary Funds?

What accounting method is used?

What is the focus?

Answer 17

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)

Uses the accrual basis of accounting ( revenues recognized when earned and measurable)

Has an economic focus with an income orientation

Question 18

What are the Fund Balance Types?

Answer 18

Restricted - Restricted by Contributor
Committed - Restricted by Government
Assigned - Intended for a purpose
Unassigned - Available to be spent
Non-spendable - Not in a spendable state

Question 19

What are the types of Fiduciary Funds?

Answer 19

Agency Fund - government acts as an agent or custodian

Pension Trust Fund - Government is a trustee for a pension plan

Investment Trust Fund - Government is a trustee over a series of investments

Private Purpose Trust - Trust that benefits various individuals and entities

Question 20

How are Assets & Liabilities presented on the Statement of Net Position?

Answer 20

Assets (Current & Non-Current)
Deferred Outflows of Resources
Liabilities (Current & Non-Current)
Deferred Inflows of Resources

Question 21

How are Capital Assets shown on a governmental Statement of Net Position?

Answer 21

They are shown net of debt

Asset Cost - Accumulated Depreciation - Asset Liabilities : Net Assets

Question 22

How is infrastructure reported on a governmental Statement of Net Position?

Answer 22

Modified approach:

Reported at cost; no accumulated depreciation

Question 23

How is a Statement of Net Position divided?

Answer 23

Into Governmental Activities and Business Activities

Question 24

How are activities presented in a Statement of Activities?

Answer 24

They are divided by functionIf the activities of a component are distinguishable from the rest of the governmental entity; then discreet presentation is requiredIf 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.

Question 25

What is the primary objective of governmental accounting?

Answer 25

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

Question 26

What Financial Statements are required for Defined Benefit Pension plans?

Answer 26

Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position

Question 27

What are the components of the Statement of Fiduciary Net Position for Defined Benefit Pension Plans?

Answer 27

Assets; Deferred Outfows; Liabilities; Deferred Inflows; Fiduciary Net Position

Question 28

What are the components of the Statement of Changes in Fiduciary Net Position for Defined Benefit Pension plans?

Answer 28

Additions (Contributions and Net Investment Income) Deductions (Benefits Payments and Admin Expense) Change in fair value of each significant type of investment =Net Change in Fiduciary Net Position

Question 29

What should be included in the Financial Statement notes for Defined Benefit Pension Plans?

Answer 29

Types of Benefits; Plan Member Classes; Board Information; Investment Policies and FV Determination

Question 30

in the statement of activities how are revenues separated?

Answer 30

They are separated into general and program revenues

Question 31

Which financial statements are issued for Proprietary funds?

Answer 31

Statement of net position Statement of revenues, expenditures, and changes in net asset Statement of cash flows

Question 32

Which financial statements are issued for Fiduciary funds?

Answer 32

Statement of net position Statement of changes in net position

Question 33

List the 3 types of fair value valuation approaches:

Answer 33

Market approach - price of similar transactions Cost approach - price to replace similar asset Income approach - converts future cash flows to current amounts

Question 34

Fair value hierarchy

Answer 34

Level 1 Quoted prices for same asset Level 2 Quoted prices for similar assets Level 3 Best data available

Question 35

What is acquisition value ?

Answer 35

Price paid if purchased instead of donated | Donated assets and art

Question 36

Investment and liability disclosures

Answer 36

Organized by asset and liability type Fair value measurement - valuation technique - level of FV hierarchy used

Question 37

Government wide financial statements

Answer 37

Statement of net position Statement of activities Purpose is to provide operational accountability

Question 38

Defined benefit pension plans statements are: Notes are:

Answer 38

Statement of fiduciary net position Statement of changes in fiduciary net position ``` Notes: Types of benefits used Plan member classes Board of directors information Investment (policies and fair value determination) ```