Lecture 8

Question 1

use of fund accounting by a governmental organization

Answer 1

Fund accounting enables service and mission-driven organizations to easily monitor compliance with spending purpose (legal restrictions), spending limits (budget and financial control), and other fiscal accountability objectives.

Question 2

fund financial statements

Answer 2

Fund financial statements are displayed to report additional and detailed information about the primary government.

Question 3

Governmental funds

Answer 3

Governmental funds use the current financial resources measurement focus and modified accrual basis of accounting in their fund financial statements. Proprietary and fiduciary funds use the economic resources measurement focus and accrual basis of accounting.

Question 4

dunds

Answer 4

the internal service fund’s fund financial statement would be prepared using an economic resources measurement focus and the accrual basis of accounting. The governmental funds, which include the general fund, permanent fund and capital projects fund, would be prepared using the current financial resources measurement focus and the modified accrual basis of accounting.

Question 5

Most difficult to report

Answer 5

Relevance means the information must bear a logical relationship with the needs for its purpose. It must also be reliable. The achievement of this reporting objective is more difficult to establish than it is to demonstrate consistency (adherence to the consistent application of GAAP from year to year) or comparability (the use of GAAP in a manner comparable to other governments). The timeliness objective requires that reports be issued early enough to facilitate timely decisions. The timeliness of reporting is relatively easy to demonstrate.

Question 6

Measurement focus

Answer 6

Measurement focus for a governmental fund contemplates measurement of the flow of current financial resources and resulting financial position. A fund’s measurement focus identifies what transactions should be recorded and how they should be reported. For governmental funds, the statement of revenues and expenditures should report resources received and consumed during the current period (current financial resources focus). The balance sheet shows available resources and current obligations (financial position focus).

Question 7

Economic measurement focus

Answer 7

Neither the general fund nor the permanent fund will use the economic resources measurement focus. Both funds are governmental funds that use the financial resources measurement focus. The measurement focus of governmental funds is on the determination of current financial position and changes in current financial position (sources, uses, and balances of financial resources) rather than on capital maintenance or net income determination. Proprietary and fiduciary funds use the economic resources measurement focus.

Question 8

funds

Answer 8

A fund is a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein. Fund resources are segregated for the purpose of carrying out specific activities (e.g., water and sewer operations) or attaining certain objectives (e.g., providing drinking water and wastewater management services to customers).

Question 9

Primary measurement focus

Answer 9

The governmental fund measurement focus is on current financial resources, the determination of financial position and changes in financial position (sources, uses, and balances of current financial resources), rather than on such proprietary objectives as net income determination, capitial maintenance or cash flows.

Question 10

Measurement focus is used for the determination of:

Answer 10

Measurement focus for a governmental fund contemplates measurement of the flow of current financial resources and resulting financial postion. Income determination is a focus of the proprietary and fiduciary funds. A fund’s measurement focus identifies what transactions should be recorded and how they should be reported. For governmental funds, the statement of revenues and expenditures should report resources received and consumed during the current period (current financial resources focus). The balance sheet shows available resources and current obligations (financial position focus).

Question 11

The orientation of accounting and reporting for all proprietary funds of governmental units is:

Answer 11

Accounting and reporting for proprietary funds is similar to accounting and reporting for a business enterprise. Thus, the full accrual basis is used and the measurement focus is on net income and capital maintenance.

Question 12

The primary emphasis in accounting and reporting for governmental funds is on:

Answer 12

The measurement focus prescribed by GASB standards for all governmental funds is the “flow of current financial resources” focus which measures sources, uses, and balances of current financial resources.

Question 13

Modified accrual

Answer 13

Special revenue funds are governmental funds, which use the modified accrual basis of accounting.

Question 14

full accrual

Answer 14

Choice “a” is incorrect. Internal service funds are proprietary funds, which use the full accrual basis of accounting.
Choice “c” is incorrect. Enterprise funds are proprietary funds, which use the full accrual basis of accounting.
Choice “b” is incorrect. Private purpose trust funds are fiduciary funds, which use the full accrual basis of accounting.

Question 15

Abbreviations

Answer 15

Proprietary funds (SE) and fiduciary funds (PAPI). SE internral SERVICE and ENTERPRICE. PAPI:

Question 16

GRSPP

Answer 16

General,Special revenue,Debt service,Capital projects and permanent. Pension, agency,Private purpose and investment trust

Question 17

Which of the following funds of a governmental unit recognizes revenues only in the accounting period in which they become available and measurable in their fund financial statements?

Answer 17

he general fund uses the modified accrual basis of accounting which recognizes revenues in the accounting period in which they become available and measurable. The enterprise fund uses the full accrual basis of accounting, which recognizes revenues in the accounting period in which they are earned.

Question 18

Restricted funds

Answer 18

Restricted fund balances represent resources whose use has been limited by external sources such as creditors (e.g., debt covenants), contributors, other governments, laws, constitutional provisions or enabling legislation.

Question 19

Non-spendable

Answer 19

Non-spendable fund balances represent resources in a form that cannot be spent (e.g., inventories or prepaid expenditures) or are legally or contractually required to remain whole (e.g., permanent fund principal).

Question 20

Committed

Answer 20

Committed fund balances represent resources that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority.Committed funds are internally limited by formal action of the government’s highest level of decision-making authority.

Question 21

Assigned

Answer 21

Assigned fund balances are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed.

Question 22

Positive amount in unassigned

Answer 22

Unassigned fund balance is the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and has not been restricted, committed or assigned to specific purposes within the general fund.

Question 23

overspent its available resources

Answer 23

If expenditures incurred for specific purposes exceed the amounts restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance.

Question 24

Invested in perpetuity

Answer 24

Permanent funds are used to report resources that are legally restricted to the extent income, and not principal, may be used for purposes supporting the reporting government’s programs for the benefit of the public. The library is to be supported by a gift endowment and the library is intended to support the needs of the general community, not a specifically identified individual.

Question 25

Investment trust

Answer 25

Investment trust funds are used to account for external investment pools.

Question 26

Special revenue

Answer 26

Special revenue funds account for revenues from specific taxes or other earmarked sources that (by law) are restricted or committed to finance particular activities of a government. Roy City is accounting for income from a gift that is not appropriate for accounting within a special revenue fund.

Question 27

Private purpose

Answer 27

Private purpose trust funds are fiduciary relationships that do not meet the definition of a pension, agency or investment trust fund and are intended for the benefit of specific individuals, private organizations or other governments. The library to be benefitted by the endowment is for the general public, not specific private individuals.

Question 28

paramount objective of financial reporting by state and local governments

Answer 28

Governmental (and not-for-profit) organization reporting is designed to demonstrate the accountability of each organization for the stewardship of the resources in their care. Governments do not measure net income or increase in wealth as businesses do, but are focused on providing efficient and effective delivery of services with public resources. Both operational and fiscal accountability are important to the financial reporting.

Question 29

Not difference between government fund and goverment wide

Answer 29

The government-wide financial statements are presented using the economic resources measurement focus using the accrual basis of accounting, similar to commercial enterprises

Question 30

How many funds should the accountant establish for the city?

Answer 30

the fund structure of a governmental entity and the number of funds used is a matter of judgment. The city accountant would set up the number of funds consistent with the legal requirements of the government to properly segregate funds and to ensure sound financial administration to properly safeguard assets.

Question 31

Derived tax - get nothing in return paying for something and getting a service

Answer 31

Rule: Derived (non-exchange) tax revenues represent taxes imposed on or derived from exchange transactions such as commercial sales (sales taxes).

Question 32

Imposed non-exchange

Answer 32

Imposed non-exchange revenues represent taxes imposed on non-exchange transactions (such as fines) or wealth (such as property taxes).

Question 33

Under modified accrual accounting, the issuing of a purchase order (commitment to purchase) is recorded for

Answer 33

Encumbrance | Budgetary control

Question 34

Expenditures

Answer 34

Expenditure accounts are adjusted when obligations are incurred or paid and when accounts are closed at the end of a fiscal period. ``` Expenditures Vouchers payable or Expenditures Cash ```

Question 35

Which event(s) is(are) supportive of interperiod equity as a financial reporting objective of a governmental unit?

Answer 35

A balanced budget demonstrates interperiod equity. Interperiod equity is a significant part of accountability on behalf of a governmental entity. It helps users assess whether current year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided. Residual equity transfers is an obsolete term included as a distracter

Question 36

budgetary comparisons

Answer 36

Budgetary comparisons must be presented on the same basis of accounting as the adopted budget. In this instance, the preparation of the budget is on the cash basis so budgetary comparisons will be prepared on the cash basis. Budgetary comparison schedules should be accompanied by information (either in a separate schedule or in notes to RSI) that reconciles budgetary information to GAAP information.

Question 37

Appropriations

Answer 37

budgetary control | appropriations

Question 38

When the budget is recorded, the following entry is made:

Answer 38

Estimated revenues Appropriations Budgetary controls

Question 39

Expenditures of governmental resources classification

Answer 39

Wages and salaries is an example of an object classification. This is the most specific classification in the hierarchy and represents the chart of accounts title. Expenditures of governmental resources should be classified by object classes, according to the type of items purchased or services obtained.

Question 40

Program classification

Answer 40

Program classification groups activities, operations, or organizational units that are directed to the attainment of specific purposes or objectives.

Question 41

function classification

Answer 41

Function classification groups related activities that are aimed at accomplishing a major service or regulatory responsibility.

Question 42

activity classification

Answer 42

Activity classification provides data for calculating expenditures per unit of activity. An activity is a specific and distinguishable line of work performed by an organizational unit.

Question 43

Expenditure allocation

Answer 43

Expenditures extending over more than one period may be allocated between or among accounting periods. Non spendable current resources such as inventory or prepaid may be recorded using either the consumption or the purchases method. Current assets of this character serve as the basis for classification of fund balance as non spendable.

Question 44

estimated revenues

Answer 44

nly the $9,000,000 property taxes, licenses and fines are classified as Estimated Revenues. The $5,000,000 proceeds of debt issue and the $1,000,000 interfund transfer would be classified as Estimated Other Financing Sources in the budgetary entry.

Question 45

encumbrances

Answer 45

The encumbrances outstanding at year-end are the $500,000 of remaining goods ordered but not yet received at year end. If the encumbrances do not lapse at year-end and are considered material, the aggregate amount is disclosed in the notes to the financial statements.

Question 46

What amount of Cliff's encumbrances were outstanding at June 30, Year 1?

Answer 46

he encumbrances outstanding at year-end are the $500,000 of remaining goods ordered but not yet received at year end. If the encumbrances do not lapse at year-end and are considered material, the aggregate amount is disclosed in the notes to the financial statements.

Question 47

journal entries

Answer 47

When the purchase order was issued: Debit (Dr) Credit (Cr) Encumbrances (estimated) $ 5,000 Budgetary control $ 5,000 ``` When the supplies and invoice are received: Debit (Dr) Credit (Cr) Budgetary control $ 5,000 Encumbrances $ 5,000 Expenditures (actual) 4,950 Vouchers payable 4,950 ```

Question 48

Expenditures - paid increase in current liability means increase in expenditures.

Answer 48

the claims and judgments expenditures would be the sum of the claims paid ($800,000) and the increase in the current liability ($40,000). he noncurrent liability is not an expenditure of the governmental fund for Year 1.

Question 49

revenues

Answer 49

net property tax revenues would include the $500,000 collections during the year plus the $100,000 expected collections within 60 days of year-end, for a total of $600,000. The remaining expected collections of $90,000 yhreeear two and t ($60,000 + $30,000) would be recorded as deferred inflows of resources, not revenues, under the modified accrual basis of governmental accounting for revenues. The $10,000 estimated to be uncollectible would not be considered since revenues are accounted for net of the estimated uncollectible amount

Question 50

unassigned fund balance in its general fund balance sheet?

Answer 50

Total fund balance equals total assets of $1,000,000 less total liabilities of $600,000, or $400,000. Since appropriations do not lapse at year-end, the $100,000 budgetary control (open purchase orders), must be reported as part of the committed or assigned portion of fund balance. As a result, the unassigned fund balance is the difference, $400,000 - $100,000, or $300,000.

Question 51

revenues

Answer 51

Revenues are credited and Property Taxes Receivable are debited when taxpayers are billed for property taxes. Note that the revenues are recorded net of estimated uncollectibles.

Question 52

estimated revenues

Answer 52

The estimated revenues control account is eliminated when the budgetary accounts are closed.

Question 53

Encumbrances outstanding at year-end

Answer 53

Encumbrances are commitments or assignments of fund balance representing the amount of unperformed contracts for goods or services. Encumbrances at year-end do not constitute expenditures or liabilities. Therefore, at year-end encumbrances are reclassified as a commitment of assignment of fund balance that is not appropriable for expenditure.

Question 54

revenues

Answer 54

Revenue from property taxes is recognized when the revenue is available and measurable.

Question 55

total reported expenditures

Answer 55

include payment of principal long term debt

Question 56

equipment purchases

Answer 56

quipment purchases would be classified as a capital outlay expenditure in governmental fund financial statements. The general fund is a governmental fund that uses the current financial resources measurement focus and the modified accrual basis of accounting. Under current financial resources measurement focus, all fixed asset acquisitions are

Question 57

which of the following has an effect on the excess of revenues over expenditures?

Answer 57

fixed assets are not expected to contribute to the generation of revenue and are therefore treated as an expenditure (capital outlay). This will serve to reduce the excess of revenue over expenditures.

Question 58

What is the major difference between an exchange transaction and a non-exchange transaction for governmental units?

Answer 58

An exchange transaction is a reciprocal transfer in which each party receives and sacrifices something of approximately equal value. A non-exchange transaction involves giving/receiving value without receiving/giving equal value in return. With an exchange transaction, there is a bargained value in the transaction, with a non exchange transaction there is no bargained value or arms length transaction.

Question 59

Encumbrances would not appear in which fund?

Answer 59

An enterprise fund would not use encumbrance accounting. Encumbrance accounting is used in the governmental (GRaSPP) funds but is not used in the proprietary (SE) or fiduciary (PAPI) funds. Enterprise is the "E" in "SE".

Question 60

The primary difference between the purchase method of accounting for inventory and the consumption method of accounting for inventory is that the purchase method:

Answer 60

The purchase method initially records additions to inventory as an expenditure and then establishes inventory balances and related non-spendable fund balance amounts based on physical counts and valuations at year end. Expenditures V/P initial purchase use of item no entry On hand at yea rend Supplies inventory non spendanble fund

Question 61

Consumption method

Answer 61

Supplies inventory Vouchers payable Expenditures supplies inventory use of item year end no entry

Question 62

Estimated revenues

Answer 62

Revenues include property taxes, licenses and intergovernmental revenues. Transfers would be considered estimated other financing sources.

Question 63

property tax levy journal entry

Answer 63

Choice "a" is correct. The journal entry to record property taxes receivable and revenue (imposed nonexchange revenues) occurs when the levy takes place and reduces the amount of revenue recognized to the amount measurable and available. An allowance is created, but no periodic bad debt amount is displayed.

Question 64

The format for the presentation of the statement of financial position for a fiduciary fund adheres to the following equation:

Answer 64

iduciary funds must present their statement of financial position in a net position format. The solution describes a net position format. Resources owned by the entity (assets and deferred outflows) minus resources owed by the entity (liabilities and deferred inflows) equals net position.

Question 65

deferred inflows

Answer 65

Assets associated with unavailable revenues should be recorded by crediting deferred inflows of resources as follows: Debit (Dr) Credit (Cr) Accounts receivable $ XXX Deferred inflows of resources $ XXX

Question 66

The prescribed format for the presentation of the statement of financial position of a governmental fund adheres to the following equation:

Answer 66

Governmental funds must present their statement of financial position in a balance sheet rather than net position format. A balance sheet format sets assets and deferred outflows of resources equal to Liabilities and deferred inflows of resources plus fund balance

Question 67

The format for the presentation of the statement of financial position for a fiduciary fund adheres to the following equation:

Answer 67

Fiduciary funds must present their statement of financial position in a net position format. The solution describes a net position format. Resources owned by the entity (assets and deferred outflows) minus resources owed by the entity (liabilities and deferred inflows) equals net position.

Question 68

In order to qualify for hedge accounting treatment, a derivative must be:

Answer 68

Derivatives will qualify for hedge accounting treatment (changes in value are presented as either deferred outflows of resources or deferred inflows of resources) if they are effective. High effectiveness describes the high degree to which fluctuations in the fair value or cash flows of a hedge and a hedged item offset.

Question 69

revenues, deferred inflows and liability

Answer 69

Any payments received before eligibility requirements have been met must be matched by a liability (or, if only time requirements have not been met, a deferred inflow of resources). The total eligibility requirements met are $500,000. However, time requirements have only been met for a pro rata portion of the total grant equal to $300,000 ($900,000/3). Revenue will be recognized for the $300,000 for which both eligibility and time requirements have been met, deferred inflows will be recognized to the extent that eligibility requirements have been met although time requirements still apply.

Question 70

Imposed non exchange

Answer 70

Imposed nonexchange revenue transactions recorded as receivable prior to the period when resources are required to be used (such as occupational licenses ) should be reported as deferred inflows.

Question 71

Receipts from a special tax levy to retire and pay interest on general obligation bonds should be recorded in which fund?

Answer 71

he debt service fund accounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest. A special tax levy exclusively restricted for debt repayment would be most appropriately accounted for in a debt service fund.

Question 72

Donated capital assets

Answer 72

Capital assets donated to a governmental unit should be recorded at their estimated fair value at time of acquisition, plus ancillary charges, if any.

Question 73

When a capital lease of a governmental unit represents the acquisition of a general fixed asset, the acquisition should be reflected in fund financial statements as:

Answer 73

he journal entry in the acquiring fund is: Debit (Dr) Credit (Cr) Expenditure - Capital lease $ XXX Other financing source - Capital lease $ XXX

Question 74

Special assessment debt

Answer 74

When special assessment debt is to be repaid from general resources of the government, the debt should be recorded as general long-term liabilities in the governmental activities column of the government-wide statement of net position as is any debt that is to be repaid from general resources.

Question 75

interfund transfers

Answer 75

Governmental funds report interfund transfers as other financing sources (uses).

Question 76

bond premium

Answer 76

Since the measurement focus is sources and uses of financial resources, bond premium/discount is not amortized in its governmental funds

Question 77

revenues and other financing sources

Answer 77

The $400,000 state government grant would be considered revenue of the capital projects fund. The $500,000 proceeds from the general obligation bonds and the $100,000 transfer from general fund (total $600,000) would be other financing sources of the capital projects fund.

Question 78

property retained by govt

Answer 78

The property retained by the government becomes a general capital asset in the governmental activities column of the government-wide statement of net position and is capitalized at the lower of cost ($20,000) or market value ($60,000).

Question 79

becareful of the wording, examine all choices , sometimes that helps

Answer 79

Special revenue funds account for the proceeds of specific revenue sources (other than permanent funds or for major capital projects) that are legally restricted or committed to expenditures for specific purposes. The $8,000 is to be used for advances to private purpose trust funds and would be accounted for in private purpose trust funds. The $90,000 is for a major capital project, which would be accounted for in a capital projects fund.

Question 80

various funds

Answer 80

Choice "b" is correct. The debt service fund accounts for the accumulation of resources for, and the payment of, general long-term liability principal and interest. The restricted portion of the special tax is for the repayment of the long-term debt of Central's capital projects, which would be serviced from the debt service fund. The capital projects fund is a governmental fund for the acquisition or construction of capital assets. Choice "d" is incorrect. The internal service funds provide goods or services to other departments on a cost-reimbursement basis. General long-term debt would not be serviced from this fund. Choice "c" is incorrect. Enterprise funds provide goods or services to the general public similar to a for-profit enterprise. General long-term debt would not be serviced from this fund. Choice "a" is incorrect. Capital project funds account for the resources to be used for the acquisition or construction of major capital facilities. Long-term liabilities are not recorded in or serviced from this fund.

Question 81

permanent funds

Answer 81

Permanent funds are used to account for principal that is restricted and may not be expended. Earnings may be used for purposes that benefit the public. A museum would serve to benefit the public, so the investments must be accounted for in the permanent fund.

Question 82

Permanent funds

Answer 82

The fact pattern describes the circumstances required for a permanent fund. Permanent funds should be used to report resources that are restricted to the extent that only earnings, and not principal, may be used for the purposes that support the government (that benefit the public). The land received by Tang City is to be kept intact with income used for general government services.

Question 83

funds balance

Answer 83

The general fund is a governmental fund. When interest is paid using a governmental fund, interest expenditure is increased and cash is decreased. The interest expenditure decreases fund balance on the general fund balance sheet, just as interest expense decreases the retained earnings of a commercial enterprise.

Question 84

Other financing costs exclude

Answer 84

Japes City would account for proceeds from the issuance of general obligation bonds (both face amount and premium) as other financing sources. Debt related transaction costs would not be netted against debt proceeds. Other financing sources are computed as follows:

Question 85

major exception to the general rule of expenditure accrual for governmental funds under the modified accrual basis relates to unmatured:

Answer 85

Under the modified accrual basis of accounting, expenditures are generally recognized when incurred because that is when they become measurable. An exception to this general rule is the treatment of interest and principal payments for long-term debt. Interest and principal on long-term debt are recorded when they become due and payable, not when they accrue.

Question 86

Debt service funds

Answer 86

A special assessment is accounted for in the fund most appropriate for the transaction unless the government has no obligation relative to the assessment. In this case, the bonds are issued by the city and are payable from a pledge of special assessment proceeds specifically levied for debt repayment. The special assessment is accounted for in the debt service fund in order to account for the accumulation of resources to repay debt.

Question 87

general knowldege

Answer 87

he debt service fund would not display any activity under the named accounts. Debt proceeds, net of discount, are recorded in the capital projects fund. Principal and interest expenditures incurred are not accrued, an important difference between full accrual and modified accrual accounting, and the tourist development revenue is recorded in a special revenue fund since revenues are simply pledged to the debt repayment but were not specifically levied for that purpose.

Question 88

only government funds

Answer 88

Only the governmental funds (general, special revenue, debt service, capital projects, and permanent) report transfers to other funds as an “other financing use.”

Question 89

permanent

Answer 89

n a permanent fund, investments are typically required to be accounted for at fair value.

Question 90

Internal service

Answer 90

For purposes of government-wide financial statements, internal service funds are normally reported in the governmental activities column of the government-wide Statement of Net Position and the Statement of Activities since they are generally established to service the governmental funds

Question 91

proprietary fund

Answer 91

he term used to identify the equity section in proprietary funds is "net position." An enterprise fund is a proprietary fund and it will report net position as fund equity.

Question 92

Internal service

Answer 92

Billings for transportation services provided to other governmental units are considered quasi-external transactions and are treated as revenues by the internal service fund. The journal entry is as follows: Due from other funds $ XXX Operating revenues $ XXX

Question 93

cash flows enterprise funds

Answer 93

Cash flows from capital and related financing activities include contributions from subdividers and proceeds from sale of revenue bonds ($900,000 + $4,500,000 = $5,400,000). Cash received from customer households ($2,700,000) would be reported as cash flows from operating activities. Enterprise funds are required to present a statement of cash flows similar to that of a for-profit entity. The categories of cash flows are: cash flows from operating activities, cash flows from non-capital financing activities, cash flows from capital and related financing activities, and cash flows from investing activities.

Question 94

Enterprise fund

Answer 94

An enterprise fund may be used to account for the provision of goods and services that are financed mainly by user charges. Both a state-operated lottery and a state-operated hospital are financed mainly by user charges.

Question 95

Depreciation

Answer 95

Depreciation expense is not recorded in the governmental funds, but is recorded in the proprietary funds.

Question 96

Shared revenues

Answer 96

Shared revenues are revenues levied by one government but shared on a predetermined basis with another government. Shared revenues received by a proprietary fund should be recorded as non-operating revenue if received for operations or if received for either operations or capital expenditures at the discretion of the recipient governmental unit.

Question 97

due from other

Answer 97

Due from other funds appears on the balance sheet. They are not a component of changes in net position.

Question 98

Enterprise fund

Answer 98

The enterprise fund accounts for a government's for-profit type of operations, which provide goods or services to the general public. Municipal utilities fit this criteria and are therefore recorded in the enterprise fund.

Question 99

Internal service

Answer 99

The internal service fund accounts for the providing of goods or services by one department to other departments on a cost-reimbursement basis. Municipal motor pools are a good example of internal service funds.

Question 100

Enterprise funds

Answer 100

Enterprise funds record and depreciate their own fixed assets in a manner consistent with the economic resources measurement focus and accrual accounting.Operations of a government whose costs are primarily supported by outside user charges would normally be accounted for in an Enterprise Fund.

Question 101

Internal service

Answer 101

Internal service funds are proprietary funds that use the economic resources measurement focus that includes capitalization of assets and income determination. They used the accrual basis of accounting and recognize depreciation expense.This fund accounts for goods/services provided by designated departments on a fee basis to other departments and agencies within a single government unit or to other government units.

Question 102

following statements are required to be presented for special-purpose governments engaged only in business-type activities (such as utilities)?

Answer 102

Stand alone business-type activities are accounted for as an enterprise fund and would include both basic financial statements and required supplementary information consistent with GASB #34 guidance. Enterprise funds are often used for utilities, and the required financial statements will be a statement of net position (balance sheet), statement of revenues, expenses, and changes in net position (income statement), statement of cash flows, and footnotes. In addition, Management's Discussion and Analysis (MD&A) and Required Supplementary Information (RSI) must also be included. The fund financial statements and the "government-wide" financial statements would be identical so they would only be presented once.

Question 103

Enterprise

Answer 103

Kenn City should account for the landfill as an enterprise fund. Activities are required to be reported as enterprise funds if any one of the following criteria are met: The activity is financed with debt that is secured solely by a pledge of the net revenue from fees and charges Laws and regulations require that the cost of providing services be recovered through fees The pricing policies of the activity establish fees and charges designed to recover its costs

Question 104

enterprise fund designation

Answer 104

Designations of an enterprise fund's net position for future equipment replacement would be displayed as unrestricted net position. Net position will include classifications for investment in capital assets net of related debts, amounts restricted by external sources and unrestricted components. Internal designations are classified as unrestricted.

Question 105

Agency

Answer 105

The debt service transactions of a special assessment issue for which the government is not obligated in any manner should be reported in an agency fund, rather than a debt service fund, to reflect the fact that the government's duties are limited to acting as an agent for the assessed property owners and bondholders

Question 106

General fund

Answer 106

Since the general fund bears the cost of funding the pension plan, routine employer contributions from the general fund to a pension trust fund are expenditures of the general fund.

Question 107

Deferred compensation plan

Answer 107

RC SEC 457, deferred compensation plans for other than proprietary fund employees, should be reported in a pension (and other employee benefit) trust fund.

Question 108

Agency

Answer 108

Agency funds are used to account for assets (such as taxes collected) held by a governmental unit (such as a county) acting as an agent for another governmental unit (such as a school district).

Question 109

Investment trust fund

Answer 109

For an investment trust fund, the required financial statements are a statement of fiduciary net position (balance sheet) and a statement of changes in fiduciary net position (income statement). Of the choices available, the statement of changes in fiduciary net position is required.

Question 110

general fund

Answer 110

Routine employer contributions by the general fund to the pension trust fund would be accounted for as an expenditure in the general fund.

Question 111

Agency funds

Answer 111

The fact pattern describes a transaction in which Harland County is collecting and holding cash temporarily on behalf of the cities within its borders. Transactions of this type are handled in agency funds.

Question 112

interfund transfers

Answer 112

nterfund transfers are recorded as other financing sources (uses) rather than revenues (expenditures) for governmental funds. They are recorded simply as interfund transfers for proprietary funds. Although these transfers are not recorded as revenues or expenditures, they do affect both funds' expendable resources and, therefore, affect the results of operations for both funds.

Question 113

he City of Sequoia made contributions to the police pension fund during the year ended December 31, Year 1. The contribution would be recorded in the General Fund as a(an):

Answer 113

The correct choice is expenditure. Transactions between the fiduciary funds and governmental and proprietary funds are handled as if the fiduciary fund (in this case the pension fund) was administered by a separate trustee.