Part IV and V: Not-for-Profit and Governmental Accounting Flashcards Preview

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Flashcards in Part IV and V: Not-for-Profit and Governmental Accounting Deck (152):
1

Who sets the standards for non-govt. non-profits?

FASB.

2

voluntary health & welfare organizations

These provide free or low-cost services that run from contributions and/or grants.

3

other non-profits

Non-profits that benefit their members- museums, private schools, religious orgs., political parties.

4

healthcare

Govt.-run healthcare follow GASB standards.

5

colleges and universities

Govt.-run colleges and universities follow GASB standards.

6

purpose of non-profit reporting

Allows external users to assess:
1. stewardship and performance.
2. services and sustainability.

7

stewardship and performance

how the non-profit is fulfilling the mission and how managers are fulfilling their responsibilities

8

services and sustainability

services provided and the ability of the org. to keep providing those services.

9

net assets model

Non-profits report on 3 categories of net assets.
1. Unrestricted.
2. Temporarily restricted.
3. Permanently restricted.

10

required F/S for non-profits

1. Statement of financial position (B/S)
2. Statement of activities (I/S)
3. Statement of Cash Flows
4. Statement of Functional Expenses

11

Statement of financial position (B/S)

This will show assets, liabilities, and then net assets instead of equity.

12

Statement of activities (I/S)

a. Revenues.
b. Expenses are always reported as a decrease in unrestricted net assets.

13

Statement of Cash Flows

Operating, investing, and financing activities.

14

Statement of Functional Expenses

This one is only required for voluntary health & welfare organizations.
a. The statement shows expenses for each major program of the non-profit and support service.
b. Program services.
c. Supporting services.

15

program expenses

related to the primary mission of the non-profit

16

supporting services expenses

costs for management/ administration, fundraising, and general expenses.

17

endowment

When an external party donates money w/stipulation that the endowment amount has to remain intact forever. This makes it a "permanently restricted net asset."

18

restricted net assets

When the donor wants the earnings of the endowment used for a specific purpose.

19

unrestricted net assets

No restriction on the earnings.

20

term endowment

endowment made to a non-profit w/stipulation that it is invested for a specific period of time and can then be spent.
1. These are temporarily restricted net assets.

21

quasi endowment

An amount set aside by the governing body of the non-profit b/c it could also be spent by the governing body.
1. These endowments are still considered unrestricted net assets.

22

split interest agreement

when a non-profit shares benefits in a trust w/donor or some other 3rd party.
1. These can be revocable or irrevocable.

23

Non-profits account for all investments at...

FV.

24

How are G/L reported in non-profits.

G/Ls are reported as changes to unrestricted net assets unless there is a donor imposed restricted.

25

What kind of investment classifications do nonprofits use?

None.

26

conditional contributions

1. Contributions can be conditional on some event or some other stipulation.
2. If a contribution is conditional, the nonprofit has to wait until the condition has been met.
3. If a conditional contribution is received before the condition is met, then it is a liability until the condition is met.

27

endowment

The donor gets to place restrictions on the donation.
1. These can be temporary or permanent restrictions.

28

intermediary

A nonprofit can receive a donation as an intermediary, meaning that the nonprofit will then transfer the donation to another beneficiary.

29

unilateral right to redirect

If the nonprofit has this, they get to pick the beneficiary of the donation, then the nonprofit will recognize the donation as contribution revenue.

30

no right to redirect

If the nonprofit is NOT granted unilateral variance power, then the contribution is recorded as a liability, b/c the nonprofit is simply transferring it to some other beneficiary.

31

Collections do not have to be capitalized if:

1. The items are held for public exhibition, education, or research
2. AND they are protected and preserved
3. AND they are subject to a policy that required proceeds of items sold to be used to purchase other items for the collection.

32

Donated services must be reported at FV as both an expense and revenue if:

1. The services donated require specialized skills that would have otherwise been purchased.
2. AND the person possesses those skills.
3. AND the value of the services can be measured.
4. AND the entity controls the employment and duties of the service donor.

33

conditional pledges

the nonprofit has to wait until the condition has been met to record the revenue.

34

unconditional pledges

the nonprofit can recognize the revenue in the period the pledge is made.
1. Caveat to pledges is that the amount of revenue recorded is the net amount of the pledge expected to be collected w/in one year.
2. Revenue for collections to be made in 1+ years are recognized at PV as temporarily restricted support.

35

fundraisers

revenues made from fundraising events is recorded at the gross amount.

36

memberships

can include both a contribution and service element
1. If nonprofit provides service in return for membership fees, the membership revenue is recognized over the period that benefits are provided.
2. Any contributions made by members are simply recognized as contribution revenues in the period received.

37

If the healthcare org. (HCO) is nonprofit or private, it follows which reporting standards?

FASB.

38

If the HCO is governmental, it follows which reporting standards?

GASB.

39

govt. hospital funds

1. There will be a general unrestricted fund, and then there can be donor-restricted funds such as special purpose funds and endowments.

40

A govt. hospital's SCF is required to use which method?

Direct method.

41

net patient revenue formula

Gross patient service revenue
- Charity service
- Contractual adjustments
- Uncollectible accounts
= Net patient revenue

42

charity care

Services given to people that are unable to pay; never expected to be collected.

43

contractual adjustments

1. 3rd party payors like Medicare have reimbursement rates based on contractual rates, NOT the rate the hospital charges.
2. Contractual adjustments reduce A/R to arrive at the amount that the 3rd party payor is actually going to pay the hospital.
Contractual adjustments
A/R

44

Expenses are reported by...

function:
1. Nursing services.
2. Other professional services such as labs, radiology.
3. General services such as food.
4. Fiscal services.
5. Admin services.
6. Other services.

45

Nonprofit universities follow...

FASB.

46

Public universities follow...

GASB.

47

Tuition revenues are recorded at...

Gross revenues
- Tuition refunds
- Uncollectible accounts
- Scholarship accounts
= Tuition revenues

Tuition revenues are recorded at gross less tuition refunds, and are reported net of uncollectible accounts and scholarship allowances.

48

tuition scholarship

There is no intention of collection from the student.
1. Shown as a reduction of gross tuition income.
2. Not bad debt.

49

How is tuition recognized?

Proportionally. You'll see problems asking you how much should be recognized over certain time intervals so read the questions carefully and pay attention to dates.

50

Public universities are what type of govt?

A special purpose govt.

51

special purpose govt.

Money appropriated by the state to the university would be classified as non-operating revenue b/c the university is engaged in bus-type activities.

52

GASB

Governmental Accounting Standards Board; the primary authoritative body for determining accounting standards for govt. funds.

53

primary intended users of govt. F/S

1. Citizens/taxpayers, school boards, and investors and creditors.
2. Internal users are NOT considered primary users.

54

2 most important concepts of govt. F/R

Accountability and interperiod equity.

55

6 characteristics of effective F/R

1. Understandability
2. Reliability
3. Relevance
4. Timeliness
5. Consistency
6. Comparability

56

5 elements of the statement of financial position

1. Assets
2. Liabilities
3. Deferred inflow of resources
4. Deferred outflow of resources
5. Net position (not net assets or net equity)

57

4 F/R implications of legally adopted annual budget

1. Expression of public policy.
2. Expression of fin. intent.
3. Form of control.
4. May provide basis for evaluating performance.

58

A fund is which type of entity?

Both a fiscal and an accounting entity.

59

governmental funds

account for the sources and balances of general govt. fin. resources

60

proprietary funds

account for bus-type activities

61

fiduciary funds

account for resources held by a govt. as a trustee or agent for the benefit others

62

Governmental funds

1. general fund
2. special revenue funds
3. capital project funds
4. debt service funds
5. permanent funds

63

general fund

accounts for everything not tied to another type of fund

64

special revenue funds

account for restricted or committed revenue sources

65

capital project funds

funds that are restricted for construction or acquisition of capital facilities

66

debt service funds

funds restricted or committed for debt services principal and interest expenditures

67

permanent funds

accounts for endowments for which the earnings are restricted to support govt. programs dedicated for a public purpose

68

Proprietary funds

1. enterprise funds
2. internal service funds

69

enterprise funds

accounts for bus-type activities that the public is the primary user of

70

internal service funds

bus-type activities where other govt agencies are the primary user

71

Fiduciary funds

1. pension trust funds
2. private purpose trust funds
3. investment trust funds
4. agency funds

72

pension trust funds

assets held in trust to provide employee retirement benefits

73

private purpose trust funds

assets held in trust to benefit individuals

74

investment trust funds

assets held in trust for other govts.

75

agency funds

accounts for assets held in a custodial capacity

76

modified accrual accounting

cross btwn. cash basis and accrual basis of accounting

77

Revenue is recognized when:

1. It's measurable or can be reasonably estimated.
2. It's available.
3. When it's both measurable and available prior to cash receipt.

78

expenses in modified accrual

Not used- they're called expenditures.

79

Expenditures are recognized when...

they are incurred or due to be paid from currently available resources in the govt. fund.

80

Govt. accounts use which basis of accounting?

modified accrual basis.

81

Proprietary and fiduciary funds use which basis of accounting?

accrual basis, since they are more similar to regular business entities.

82

budgetary accounting

Used for certain types of govt. accounts- particularly the general fund and special revenue funds- that are budgeted.

83

Budgetary Process- 1st Step

1. Estimated revenues account- Simply the amount of estimated revenue.
2. Debit balance.

84

Budgetary Process- 2nd Step

1. Appropriations account- estimate of how much revenue will be spent.
2. Credit balance.

85

Budgetary Process- 3rd Step

1. Estimated other financing sources account- includes expected inflows not categorized as revenues.
2. Debit balance.

86

Budgetary Process- 4th Step

1. Estimated other financing uses account- includes expected outflows not categorized as revenues.
2. Credit balance.

87

Budgetary Process- 5th Step

1. What's left over is the budgetary fund balance.
2. No normal debit or credit balance, just debited or credited to make the budgetary fund balance.

88

First 5 Steps of Budgetary Process

Used to setup the budget. There are normally no changes to this during the year unless the governing body meets and amends the budget or if revenues are much different than predicted.

89

Budgetary Process- 6th Step

1. In general, the closing entry for the budget is to simply reverse the opening entry:
Appropriations
Estimated revenues

90

encumbrance accounting

a. Appropriations are amounts set aside for certain purposes.
--Encumbrance is like an appropriation inside an appropriation.
b. When the goods are actually received, you reverse the encumbrance and record an expenditure.

91

unencumbered, unexpected appropriation

Amount of an appropriation that is left over after expenditures and any expenditures.

92

unencumbered, unexpected appropriation formula

Appropriation
- Encumbrances
- Expenditures
= Unencumbered, Unexpected Appropriation

93

encumbrances and expenditures- basic info

1. When money from an appropriation is actually going to be spent, the first step is an encumbrance.
2. When the goods are actually received for that encumbrance, the encumbrance is reversed and then an expenditure is recorded.
--An encumbrance is turned into an expenditure when the goods are received.

94

encumbrances and expenditures- debit/credit balances

1. Appropriations are a credit balance.
2. Encumbrances debited when recorded (to lower appropriation).
3. Encumbrance credited when reversed.
4. Expenditure is a debit.

95

deferred inflow/outflow of resources

a. These are a timing issue- they are inflows/outflows of resources in the current period that are related to a future period.

96

deferred inflow/outflow of resources- modified accrual accounting rule

1. Recognizing revenue or expenditures when measurable and available.
2. If a govt. will receive $3 million over the next 3 years, only $1 million is revenue this year, and the remaining $2 million is a deferred inflow of resources.

97

net position

1. Equity section of the fund for proprietary and fiduciary fund types.
2. Replaced "net assets" after GASB 63.

98

3 categories of net position

1. Net investment in capital assets (net of acc. depr.)
2. Restricted
3. Unrestricted

99

fund balance

This is the equity section for govt. fund types.

100

5 categories of fund balance

1. non-spendable
2. restricted
3. committed
4. assigned
5. unassigned

101

non-spendable (fund balance)

not in a spendable form or legally required to remain unspent, such as permanent endowments

102

restricted (fund balance)

reserved for a specific purpose by external parties

103

committed (fund balance)

constrained by the govt's highest level of authority

104

assigned (fund balance)

intended to be used for a specific purpose but doesn't meet restricted or committed criteria

105

unassigned (fund balance)

resources available for any purpose

106

Comprehensive Annual Financial Report (CAFR)

a, This is the big report issued by a govt. entity.

107

3 main sections of CAFR

1. Introductory: org. chart, principal officers, etc.
2. Financial: ind. auditor's report, MD&A, basic F/S, combining F/S and fund F/S
3. Statistical: fin. trends, revenue & debt capacity, operating info.

108

basic F/S include:

1. Govt-wide F/S
2. Fund F/S
3. Notes to F/S

109

govt.-wide F/S

1. These report info. about the govt. as a whole.

110

F/S included in govt.-wide F/S:

1. Statement of net position
2. Statement of activities

111

statement of net position

1. This includes a govt-wide B/S (on accrual basis and it has two separate columns:
a. govt. activities
b. bus. activities
c. NO fiduciary funds
2. Net position is the last part of this statement.

112

statement of activities

1. Includes a govt-wide statement of operations.
2. It's on the accrual basis.
3. Sections include:
a. program expenses
b. program revenues
c. net program expense/revenue
d. general revenues
4. Govt. activities and bus-type activities are separated on the F/S.
5. NO fiduciary funds either.

113

fund F/S

1. govt-wide F/S are presented on the accrual basis.
2. fund F/S are presented in their native accounting basis.

114

Govt. fund category F/S are presented using which accounting basis?(fund F/S)

modified accrual

115

Proprietary fund category F/S are presented using which accounting basis? (fund F/S)

full accrual

116

Fiduciary fund F/S are presented using which accounting basis?(fund F/S)

full accrual

117

CAFR notes

Just like notes in reg. F/S in that they provide info and required disclosures, especially a summary of significant accounting policies.

118

F/R entity

Questions on this concern determining a primary govt. and its component units.

119

component unit

legally separate org. that the primary govt. officials are financially accountable
OR
the relationship is such that leaving it out of the F/S would be misleading or incomplete

120

2 ways in which the component units are reported in the F/S

1. Blended.
2. Discretely.

121

blended presentation (component units)

If the component unit is part of the primary govt. in substance, then the balances are included w/similar funds in the primary govt.

122

discrete presentation (component units)

For non-blended units, a separate column is added to the right of the primary govt's data.

123

major funds

1. funds where total assets and deferred inflow/outflow of resources or liabilities revenues or expenditures at 10+% of the total corresponding amount for all funds in that category (govt, enterprise, or fiduciary).
2. OR 5% of the corresponding amount for that element for all govt. AND enterprise funds combined.

124

Is the general fund a major fund.

Always.

125

Major funds B/S

Each major fund has its own column, and all non-major govt. funds are aggregated into a single column.

126

operating statement

Major funds are in separate columns and non-major funds are combined in a single column.

127

budget comparison

1. Budget-to-actual comparison is required for the general fund and annually budgeted major special revenue fund.

128

required F/S for proprietary fund F/S

1. Statement of net position
2. Statement of revenues, expenses, and changes in net position
3. SCF
4. NO internal service funds reported here

129

required F/S for fiduciary fund F/S

1. Statement of net position
2. Statement of changes in net position

130

Are fiduciary funds major funds?

Never.

131

general fund

1. Required fund.
2. Uses modified accrual accounting.
3. Uses budgetary and encumbrance accounting.

132

characteristics of govt. revenue

Measurable and available.

133

Property tax revenues are recorded...

after they are levied at the estimated collectible amount.

134

Expenditures include...

salaries, op. exp., capital outlays for buildings and improvements, debt service such as principal and interest payments.

135

special revenue funds

1. for revenue sources committed to a specific purpose other than debt service or a capital project.
2. Modified accrual accounting.
3. Budget and encumbrance accounting.

136

debt service funds

1. for resources used to pay interest and principal on general LTD
2. Life of fund is tied to underlying debt.
3. Used the modified accrual basis of accounting.

137

capital project funds

1. for resources restricted for capital outlay for buildings, land, or improvements
2. modified accrual accounting

138

permanent funds

1. resources held in trust by the govt. for the benefit of the govt. or its citizens
2. Principal must remain intact.
3. Earnings transferred to the general fund or a special revenue fund.

139

types of governmental funds

1. special revenue funds
2. debt service funds
3. capital project funds
4. permanent funds

140

types of proprietary funds

1. Internal service fund.
2. Enterprise fund.

141

Proprietary funds...

are business-type funds and use accrual accounting.

142

internal service fund

1. Bus-type services provided to other entities inside the govt.
2. Ex) central data processing or govt. fleet.
3. Internal to govt.

143

enterprise funds

bus-type services provided to gen. public

144

proprietary fund SCF

4 sections:
1. Op. act.
2. Noncapital fin. (debt issued to finance ops.)
3. Capital and related fin. (debt issued to acquire capital assets)
4. Inv. act.

Fin. act. is split into 2 categories.

145

fiduciary funds

1. not included on the govt-wide F/S
2. same types of funds (w/same function) as in nonprofit accounting

146

4 types of interfund transactions

1. quasi-external transactions
2. reimbursements
3. transfers
4. loans

147

quasi-external transactions

1. bus-type transactions btwn. funds.
2. Recorded as revenue and expenditures or expenses.

148

reimbursements

1. one fund reimburses another fund
2. Recorded as an expenditure or expense in the fund giving reimbursement and a reduction in expenditure or expense in fund reimbursed (NOT revenue).

149

transfers

transfers btwn. funds w/no repayment required

150

loans

1. amounts btwn. funds that are expected to be repaid.
2. Receivable and payable are recorded.
3. Due and due from are used for ST loans.
4. Advance to and advance from are used for LT loans.

151

Accounting for construction projects usu. involves several entities, including:

1. Usu. cap. proj. fund.
2. Usu. debt service fund.
3. Usu. govt. activities.

152

infrastructure assets

1. Highways, bridges, streets, sewer systems, etc.
2. Before GASB 34, costs were not reported nor depr.
3. After GASB 34, costs are reported and assets are depr.
1. Govt. can elect not to depr. asset if they preserve it in a condition equal to or above the original condition.
2. Expenditures to preserve the asset are expensed in the period incurred- this substitutes for depr.