Section 2, Chapter 2 Flashcards
(113 cards)
1
Q
What is the definition of a fund?
A
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 - which are segregated for the purpose of carrying on specific activities.
2
Q
Why do governments have a number of funds?
A
Each fund is a fiscal and accounting entity that is intended to stand alone. Fund financial statements do not provide information about the entity as a whole.
3
Q
What are the three fund categories?
A
- ) Governmental
- ) Proprietary
- ) Fiduciary
4
Q
What are governmental funds used for?
A
To account for the general services provided to the public - public safety, public services, administration of government.
5
Q
What are examples of non-exchange revenues?
A
- ) taxes
- ) fines
- ) grants
6
Q
What is an important characteristic of a governmental fund?
A
the lack of a match between resources and their uses - annual budgets identify the resources availible and the appropriations to be used for specific programs and services.
7
Q
What measurement focus do governmental funds use?
A
current financial resource management
8
Q
What basis of accounting do governmental funds use?
A
modified accrual basis
9
Q
What does it mean for governmental funds to use the modified accrual basis of accounting?
A
Inflows of resources are recorded as revenues when they are measurable and availible. (see page II-42)
10
Q
What is a proprietary fund?
A
A fee or charge is required because it is required to match revenues to expenses.
11
Q
Whicy major category of fund is similar to the private sector?
A
Proprietary Fund
12
Q
Proprietary funds use which measurement focus?
A
economic resources measurement focus
13
Q
Proprietary funds use which basis of accounting?
A
accrual basis
14
Q
When is a fiduciary fund required?
A
When a government holds assets as a trustee or agent.
15
Q
What is an example of a fiduciary fund?
A
Pension Fund
16
Q
Why are budgets not required for a fiduciary fund?
A
Funds cannot be used to support a governments programs.
17
Q
What does fiduciary fund reporting focus on?
A
net assets and changes in net assets
18
Q
Why is reporting required for fiduciary funds?
A
To demonstrate the governments accountability over the assets held.
19
Q
What measurement focues do fiduciary funds use?
A
economic resources
20
Q
What basis of accounting do fiduciary funds use?
A
accrual basis of accounting
21
Q
What are the 5 Governmental Funds?
A
- ) General Fund
- ) Special Revenue Fund
- ) Capital Project Fund
- ) Debt Service Fund
- ) Permanent Fund
22
Q
What is the most important Governmental Fund?
A
General Fund, it is the default fund type
23
Q
How many general funds can there be?
A
only one
24
Q
What are the three criteria that provide a basis for using funds other than the general fund?
A
- ) GAAP Requirements
- ) Legal Requirements
- ) Demands of sound financial administration
25
What are common revenue sources reported in the general fund?
1. ) Taxes - property tax, sales tax, and income tax
2. ) License Fees
3. ) Intergovernmental Grants
4. ) Fines and Forfeitures
6. ) Investment earnings
26
What are special revenue funds?
used to account for proceeds of specific revenue sources (other than capital projects) that are legally restricted to expenditure for specified purposes.
27
What are special revenue funds frequently used to asscount for?
1. ) Federal and State grants
2. ) Special Assessments
3. ) Component Units
4. ) Related nonprofit organizatoins
28
What revenue sources do special revenue funds typically include?
1. ) Tax assessments
2. ) earmarked property and other taxes
3. ) intergovernmental revenues
4. ) license and permit fees
5. ) charges for services
29
What are capital projects funds used for?
to account for financial resources to be used for the acquisition and construction of major capital facilities other than those financed by proprietary and trust funds.
30
What revenue sources are recorded in a capital project fund?
1. ) bonds
2. ) intergovernmental revenues
3. ) interest income
4. ) earmarked taxes
5. ) transfers from other funds
31
For bonds, what is reported as other financing souces on the operating statement?
Face Value of the Bond
32
How are bond premiums, discounts, and the cost to issue bonds reported?
seperate from the face value on the operating statement
33
How are fund balances of capital projects normally reported?
as restricted net assets on the statement of net assets
34
What are debt service funds used for?
to account for the accumulation of resources for, and the payment of, general long term debt principal and interest
35
What 2 situations does GASB require the use of a debt service fund?
1. ) when legal requirements mandate the use of a debt service fund
2. ) when financial resources are being accumulated for principal and interest payments.
36
What types of revenue are reported in a debt service fund?
1. ) earmarked taxes
2. ) grants
3. ) investment earnings on balances
37
How are fund balances reported in a debt service fund?
restricted net assets at government wide level
38
What are term bonds?
do not require the payment of principal until the completion of the term, although they may require the annual payment of interest.
39
What are sinking funds?
A type of debt service fund that facilitates the retirement of long term debt where financial resources are set aside and the expenditure if not recorded in the debt service fund until the payment is due.
40
What are serial bonds?
require annual payment of principal and interest.
41
What is level debt service?
the amount paid each year is about the same - similar to a mortgage.
42
What is a special assessment?
governemnt issues debt to undertake a project and use debt service fund to make principal and interest payments.
43
What is debt refunding?
Where a government issues new debt that carries a lower interest rate than the older issue - similar to refinancing.
44
What is a permanant fund?
when a government recieves bequests from individuals stipulating that donated resources are to be invested by the government. The bequest reqtricts the use of resources so that only the earnings from the investments can be used for activities that benefit the government.
45
How are expenditures from a permanant fund recorded?
It is common to transfer these earnings to a special revenue fund to account for the expenditures.
46
When is a permanant fund used as opposed to a private purpose trust fund?
If the government benefits from the bequest, then a permanant fund is used. If the government is a trustee for the benefit of others, a trust fund is used.
47
What are the two types of proprietary funds?
1. ) Enterprise
| 2. ) Internal Services
48
What are enterprise funds used for?
to report any activity for which a user fee is charged to external users for goods and services.
49
What is an internal service fund used for?
used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the governmental unit or to other government units on a cost reimbursement basis.
50
What are enterprise funds used for?
to record business type activities of governmental entities, such as utilities or transit operations.
51
If any of what 3 criteria are met, a fund has to be reported as an enterprise fund?
1. ) The activity is financed with debt that is secured solely by a pledge of the net revenues from fees and charges of the activity.
2. ) Laws or regulations require that the activity's cost of providing services be recovered with fees and charges rather than taxes or similar revenue.
3. ) The pricing policies of the activity establish fees and charges designed to cover its costs.
52
What accounting board, other than GASB, may issue standards for an enterprise fund?
FASB - Financial Accounting Standards Board
53
What is an internal service fund?
Fund used to report any activity that provides goods or services to other funds, departments, or agencies of the primary government ad its component units on a cost reimbursement basis.
54
What are fiduciary funds?
used to account for assets held by a government unit in a trustee capacity or as an agent for individuals, private organizations, or other governmental units or funds.
55
What are the 4 types of fiduciary funds?
1. ) Pension & employee benefit trust
2. ) Investment trust
3. ) Private purpose trust
4. ) agency funds
56
Which measurement focus do fiduciary funds use?
economic resources measurement focus
57
What basis of accounting do fiduciary funds use?
accrual basis of accounting
58
Statement 31 states that assets held in an incestment trust fund should be reported how?
at fair market value in the balance sheet
59
What is fair market value?
the amount at which an investment could be exchanged in a current transaction between willing parties, other than a forced liquidation or sale.
60
What is a private purpose trust fund?
used to report arrangements for bequests where the use of earnings is restricted and the beneficiaries are outside the government.
61
What is an exmple of a private purpose trust fund?
a school may establish a trust fund to provide scholarships to students. The donation are invested and the scholarships are paid from the earnings on the investments.
62
What are agency funds?
used to report resources held by the reporting government in purely custodial capacity.
63
What is an example of an agency fund?
Agency funds typically only involve the receipt, temporary custody and remittance of resources to specific individuals, private organizations, or governments.
payroll deductions from employees are placed in an agency fund, and distributions are made from the fund.
64
What type of balance will an agency fund have?
no equity balance - all assets in the fund are offset by a like amount of liabiliites.
65
What is a common use for agency funds in respect to grants?
They can be used for pass through grants.
66
What is a pass through?
a recipient government serves only as a cash conduit if it merely transmits grantor supplied moneys without having administrative or direct financial involvement in the program.
67
What are three things that cannot be done by a pass though agency?
1. ) determine eligible secondary recipients or projects
2. ) exercise discretion in how the funds are allocated
3. ) monitor secondary recipients for compliance with program specific requirements.
68
Which funds can never be a major fund?
Internal Service fund, fiduciary fund
69
Which fund is always reported as a major fund?
general fund
70
What 2 criteria must be met for a governmental fund or enterprise fund to be reported as a major fund?
1. ) total assets, liabilities, revenues or expenditures of the fund are at least 10% of the corresponding total for all funds of the category.
2. ) The total assets, liabiliites, revenues or expenditures of the fund are at least 5% of the corresponding total for all governmental and enterprise funds combined.
71
A goverment can report any fund as major if it believes that it is particularly important, even if it does not meet the criteria - True or False?
True
72
What are the required financial statements for Governmental Funds?
1. ) Balance Sheet
| 2. ) Operating Statement
73
What does the balance sheet report?
Reports information on current assets, liabilities and fund balances.
74
What is the format of the balance sheet?
assets = liabilities + fund balance
75
What are the two ways that fund balance can be reported?
1. ) reserved
| 2. ) unreserved
76
What are the 2 reasons a fund balance may be reported as reserved?
1. ) to set aside resources that are not available for spending.
2. ) to comply with legal restrictions
77
What are the two ways that an unreserved fund balance can be classified?
1. ) Designated
| 2. ) Undesignated
78
What is a designated fund balance?
represents managements intent to use the resources for specific purposes. Since management can change their intentions, the amounts are not reserved.
79
What does the operating statement report?
information about inflows, outflows, and the balances of current financial resources.
80
What is the format of an operating statement?
Revenues (detailed by major rev source)
-Expenditures (detailed by function or character)
=Excess (deficiency) of revenues over expenditures
+other financing sources (including transfers)
-special and extraordinary items
= fund balance
81
What are examples of major revenue sources?
1. ) taxes
2. ) license and permits
3. ) intergovernmental revenues
4. ) charges for services
5. ) fines and forfeitures
82
What is included in "Other financing sources and uses"?
proceeds from the issuance of debt, transfers, capital leases, payments to escrow and proceeds from sale of assets.
83
What are the required statements for a proprietary fund?
1. ) Balance Sheet or Statement of Net Assets
2. ) Operating Statement
3. ) Statement of Cash Flows
84
What is the format for Statement of Net Assets?
assets - liabilities = net assets
85
What does the balance sheet report?
Reports information on current assets, liabilities and fund balances.
86
What is the format of the balance sheet?
assets = liabilities + fund balance
87
What are the two ways that fund balance can be reported?
1. ) reserved
| 2. ) unreserved
88
What are the 2 reasons a fund balance may be reported as reserved?
1. ) to set aside resources that are not available for spending.
2. ) to comply with legal restrictions
89
What are the two ways that an unreserved fund balance can be classified?
1. ) Designated
| 2. ) Undesignated
90
What is a designated fund balance?
represents managements intent to use the resources for specific purposes. Since management can change their intentions, the amounts are not reserved.
91
What does the operating statement report?
information about inflows, outflows, and the balances of current financial resources.
92
What is the format of an operating statement?
Revenues (detailed by major rev source)
-Expenditures (detailed by function or character)
=Excess (deficiency) of revenues over expenditures
+other financing sources (including transfers)
-special and extraordinary items
= fund balance
93
What are examples of major revenue sources?
1. ) taxes
2. ) license and permits
3. ) intergovernmental revenues
4. ) charges for services
5. ) fines and forfeitures
94
What is included in "Other financing sources and uses"?
proceeds from the issuance of debt, transfers, capital leases, payments to escrow and proceeds from sale of assets.
95
What are the required statements for a proprietary fund?
1. ) Balance Sheet or Statement of Net Assets
2. ) Operating Statement
3. ) Statement of Cash Flows
96
What is the format for Statement of Net Assets?
assets - liabilities = net assets
97
What are the required statements for a fiduciary fund?
1. ) Statement of Fiduciary Net Assets
| 2. ) Statement of Changes in Fiduciary Net Asset
98
What is not reported on the Statement of Changes in fiduciary net assets?
agency funds
99
What does the balance sheet report?
Reports information on current assets, liabilities and fund balances.
100
What is the format of the balance sheet?
assets = liabilities + fund balance
101
What are the two ways that fund balance can be reported?
1. ) reserved
| 2. ) unreserved
102
What are the 2 reasons a fund balance may be reported as reserved?
1. ) to set aside resources that are not available for spending.
2. ) to comply with legal restrictions
103
What are the two ways that an unreserved fund balance can be classified?
1. ) Designated
| 2. ) Undesignated
104
What is a designated fund balance?
represents managements intent to use the resources for specific purposes. Since management can change their intentions, the amounts are not reserved.
105
What does the operating statement report?
information about inflows, outflows, and the balances of current financial resources.
106
What is the format of an operating statement?
Revenues (detailed by major rev source)
-Expenditures (detailed by function or character)
=Excess (deficiency) of revenues over expenditures
+other financing sources (including transfers)
-special and extraordinary items
= fund balance
107
What are examples of major revenue sources?
1. ) taxes
2. ) license and permits
3. ) intergovernmental revenues
4. ) charges for services
5. ) fines and forfeitures
108
What is included in "Other financing sources and uses"?
proceeds from the issuance of debt, transfers, capital leases, payments to escrow and proceeds from sale of assets.
109
What are the required statements for a proprietary fund?
1. ) Balance Sheet or Statement of Net Assets
2. ) Operating Statement
3. ) Statement of Cash Flows
110
What is the format for Statement of Net Assets?
assets - liabilities = net assets
111
What are the required statements for a fiduciary fund?
1. ) Statement of Fiduciary Net Assets
| 2. ) Statement of Changes in Fiduciary Net Asset
112
What is not reported on the Statement of Changes in fiduciary net assets?
agency funds
113
What are the three budgetary accounts?
1. ) estimated revenues
2. ) appropriations
3. ) encumbrances
