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FAR > Governmental Reporting - Fund Accounting > Flashcards

Governmental Reporting - Fund Accounting Flashcards

1
Q

What are the types of accounting in fund accounting?

A

Budgetary: ensure budget compliance
Activity: account for transactions
Encumbrance: account for purchase orders

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2
Q

What are the types fund balances?

A

Reserved or Unreserved

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3
Q

What are the types of reserved fund balances?

A

1) non-spendable: cannot be spent b/c not in spendable form (inventory, prepaids)
2) restricted: externally restricted for specific use
3) committed: reserved for specific purpose by formal action of the govt
4) assigned: intended for specific purpose

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4
Q

When are entries are made in budgetary accounting?

budgetary accting

A

Twice a year; beginning (to open) and ending (to close)
- only exception is if there is an amendment for add’l rev/exp

These are estimated accounts which serve as control accounts.

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5
Q

What are budget revenue sources?

budgetary accting

A

Estimated revenues: revenues expected to be available for spending in the period

Estimated other financing sources: proceeds from issuance of long-term debt & transfers from other govt funds

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6
Q

What are budget revenue uses?

budgetary accting

A

Appropriations: expenditures expected to occur in the period

Estimated other financing uses: transfers to other govt funds

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7
Q

What is a balanced budget?

budgetary accting

A

estimated revenues + estimated other financing sources

appropriations + estimated other financing uses

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8
Q

What is a budget surplus?

budgetary accting

A

reported as “Increase in Fund Balance - Unreserved”

estimated revenues + estimated other financing sources > appropriations + estimated other financing uses

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9
Q

What is a budget deficit?

budgetary accting

A

reported as “Dencrease in Fund Balance - Unreserved”

estimated revenues + estimated other financing sources < appropriations + estimated other financing uses

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10
Q

Budgetary accounting - example opening journal entries

A

Budgeted revenues DR 1600
Estimated other financing sources DR 600
Budgetary fund balance DR -0-
Appropriations CR 1400
Estimated other financing uses CR 500
Budgetary fund balance - unreserved CR 300

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11
Q

Budgetary accounting - example closing journal entries

A

Appropriations DR 1400
Estimated other fin uses DR 500
Budgetary fund bal - unreserved DR 300
Budgetary fund bal - unreserved CR -0-
Budget revenues CR 1600
Estimated other fin sources CR 600

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12
Q

What are items are accounted for in activity accounting?

activity accting

A

Revenue, expenses, assets, debts

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13
Q

What are the revenue types in activity accounting?

activity accting

A

Exchange revenue and non-exchange revenue

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14
Q

What is exchange revenue?

activity accting

A

Revenue from provision of goods & services; recognized when earned.

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15
Q

What is non-exchange revenue?

activity accting

A

Derived revenue
Imposed revenue
Grants

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16
Q

What are types of derived revenue?

activity accting

A

income taxes & sales taxes (the tax income is derived from the taxpayers income and the sales made)

revenue is recognized when received (b/c the govt doesn’t know in advance how much it will be)

17
Q

What are the types of imposed revenue?

activity accting

A

property tax; recog when billed (govt knows how much it will be before rec’d)
fines/penalties; recog when billed
license fees; recog when received (govt doesn’t know how much in advance)

the revenue is imposed on the payer

18
Q

What are the types of grant revenue?

activity accting

A

government mandated; recog when eligible

voluntary; recog when eligible

19
Q

When are non-measurable revenues recognized?

activity accting

A

Treated as available to spend once collected

20
Q

What is deferred revenue in activity accounting?

activity accting

A

Revenue billed or collected in advance is treated as deferred revenue (liability) until the future period to which it applies.

Gov’t can’t spend this revenue because it does not relate to this period.

21
Q

Deferred revenue journal entries

activity accting

A

In the year received:
receivable DR
deferred rev CR

In the year earned:
deferred rev DR
revenue CR

22
Q

Allowance for doubtful revenue - sample journal entries

activity accting

A

Create an allowance for the revenue not expected to be collected

In year billed/earned/eligible:
receivable DR 1000
allowance for uncollectible CR 100
revenue CR 900

Write off receivable:
allowance DR 100
receivable CR 100

Allowance is received:
allowance DR 100
revenue CR 100

Receivable delinquent & allowance increased:
revenue DR 150
allowance CR 150

23
Q

Delinquent receivable - sample journal entries

activity accting

A

Receivable is classified as delinquent if it is overdue and not received

In year billed/earned/eligible:
receivable - current DR 1000
allowance for uncoll - current CR 100
revenue CR 900

In year delinquent: (900 cash rec’d)
receivable - delinquent DR 100
receivable - current CR 100

allowance - current DR 100
allowance - delinquent CR 100

If delinquent is less than allowance: (925 cash recd)
allowance - current DR 100
revenue CR 25
allowance - delinquent CR 75

If delinquent more than allowance: (800 cash recd)
allowance - current DR 100
revenue DR 100
allowance - delinquent CR 200

24
Q

How are expenditures treated?

activity accting

A

All expenditures are current period expenses. No capitalization.

25
Q

Inventory expenditures, purchase method - sample journal entries

activity accting

A

Purchase:
expenditure DR
vouchers payable CR

Use of inventory:
no entry

Year-end:
inventory DR
non-spendable fund balance CR

26
Q

Inventory expenditures, consumption method - sample journal entries

activity accting

A

Purchase:
expenditure DR
vouchers payable CR

Use of inventory:
expenditure DR
inventory CR

Year-end:
no entry

27
Q

How are expenditures classified/organized under activity accounting?

activity accting

A

While budgetary accounting reports expenditures by object class, activity accounting reports expenditures by their function within different classifications.

28
Q

What are the expenditure character classifications in activity accounting?

activity accting

A

Function/program - classification based on the overall purpose/objective of the expenditure. E.g., public safety, health & welfare, education

Organizational unit - classification based on the govt’s organizational structure. E.g., police dept, fire dept

Activity - classification based on the activity it is used for within the org unit. E.g., administration in the police dept, crime control & investigation in the police dept

Object - classification of the expenditure based on nature. E.g., salaries, rent, utilities

Character - classification based on the fiscal period of expected benefits. E.g., expenditure, capital outlay

29
Q

Fixed assets - journal entries

activity accting

A

expenditure DR

vouchers payable CR

30
Q

Debt - journal entries

activity accting

A

cash DR

other financing sources CR

31
Q

Closing entries (end of year) - journal entries

activity accting

A

Revenues DR
Other financing sources DR
fund balance unreserved CR
other financing use CR
expenditures CR

32
Q

What is an encumbrance?

encumbrance accting

A

When an open purchase order is placed with a vendor. This creates a legal commitment and requires that a portion of the fund balance be reserved.

33
Q

Purchase orders - sample journal entries

encumbrance accting

A

When order is placed:
encumbrances DR 5000
budgetary fd bal-reserved for encumbr CR 5000

When order is received:
budgetary fd bal-reserved for encumbr DR 5000
encumbrances CR 5000

What you actually receive may be different amounts. But that does not impact the encumbrance accting. You are simply placing and removing holds on the funds.

34
Q

Year-end outstanding encumbrances

encumbrance accting

A

Close out all oustanding encumbrances at the end of the year. They will be reopened with the next year.

budgetary fd bal-reserved for encumbr DR
encumbrances CR

35
Q

Funds available for use calculation

A

Appropriations (budget - target spending)
less; encumbrances (encumbrance - $ planned spend)
less: expenditures (activity - $ already spent)
= funds available for use

36
Q

Which government funds use encumbrance accounting?

encumbrance accting

A

Encumbrance accounting only applies to general fund, special revenue fund, and capital fund.
It does not apply to debt service fund and permanent fund which do not issue purchase orders.

FAR (25 decks)

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