Governmental and Not-for-Profit Accounting Lecture Notes Review

Flashcards covering the foundational concepts of governmental and not-for-profit accounting, including regulatory bodies, fund types, measurement focuses, and dual-track reporting as presented in Chapters 1-4.

What are the three primary characteristics that distinguish governmental and NFP entities from for-profit businesses according to FASB Concepts Statement No. 4?

(1) Non-proportional benefits (resource providers do not expect proportional return), (2) Non-profit operating purpose (objectives other than providing goods/services at a profit), and (3) Absence of ownership interests (no sellable or transferable equity).

What is the 'cornerstone' of governmental financial reporting according to the GASB?

Accountability, which requires governments to justify the raising and spending of public resources.

Explain the concept of 'Interperiod Equity'.

The concept of whether current-year revenues are sufficient to pay for current-year services, ensuring that current citizens do not shift the financial burden of services to future generations.

Who are the primary standard-setting bodies for different types of entities in the governmental/NFP sector?

GASB (State and Local Governments), FASB (Nongovernmental Not-for-Profits), and FASAB (Federal Government).

What are the components of the 'Minimum Requirements for General Purpose External Financial Reporting' under the GASB model?

(1) Management’s Discussion and Analysis (MD&A), (2) Basic Financial Statements (Government-wide and Fund), (3) Notes to the Financial Statements, and (4) Other Required Supplementary Information (RSI).

Contrast 'Operational Accountability' and 'Fiscal Accountability'.

Operational Accountability focuses on the flow of economic resources using the accrual basis (long-term), while Fiscal Accountability focuses on the flow of current financial resources using the modified accrual basis (short-term budgetary compliance).

What are the three sections of a Comprehensive Annual Financial Report (CAFR)?

Introductory Section, Financial Section, and Statistical Section.

Which basis of accounting and measurement focus are used by Governmental Funds?

Current financial resources measurement focus and the modified accrual basis of accounting.

Under the modified accrual basis, when are revenues recognized?

When they are both 'measurable and available' to pay for expenditures of the current period.

List the five types of Governmental Funds.

(1) General Fund, (2) Special Revenue Funds, (3) Debt Service Funds, (4) Capital Projects Funds, and (5) Permanent Funds.

What is the criteria for a fund (other than the General Fund) to be considered a 'Major Fund'?

It must meet the 10 Percent Criterion (element is $\ge 10\%$ of its fund category total) AND the 5 Percent Criterion (the same element is $\ge 5\%$ of the combined total of all governmental and enterprise funds).

Name the seven elements of financial statements identified in GASB Concepts Statement No. 4.

(1) Assets, (2) Deferred Outflows of Resources, (3) Liabilities, (4) Deferred Inflows of Resources, (5) Net Position, (6) Inflow of Resources, and (7) Outflow of Resources.

How is the 'Net Cost' of a government function calculated on the Statement of Activities?

Expenses minus Program Revenues (Charges for services, Operating grants/contributions, and Capital grants/contributions).

In budgetary accounting, what is an 'Encumbrance'?

A formal commitment or 'earmarking' of an appropriation, such as a purchase order, to prevent overspending before an actual expenditure occurs.

Identify the normal balances for the following budgetary accounts: Estimated Revenues, Appropriations, and Encumbrances.

Estimated Revenues: Debit; Appropriations: Credit; Encumbrances: Debit.

Explain the '60-Day Rule' regarding property tax revenue in governmental funds.

To be considered 'available' and recognized as revenue in the current period, property taxes must be collected within 60 days of the fiscal year-end.

What is the mathematical formula for calculating the Tax Rate for property taxes?

Tax Rate = $\frac{\text{Gross Levy}}{\text{Net Assessed Valuation}}$.

Describe the 'Dual-Track' accounting approach.

A system where a single transaction is recorded twice: once in the funds to show fiscal accountability (modified accrual) and once at the government-wide level to show operational accountability (accrual).

How are internal exchange transactions between the General Fund and an Internal Service Fund (ISF) handled at the government-wide level?

The internal 'profit' or markup charged by the ISF is eliminated to reflect only the actual cost to the government as a whole.

What are the five fund balance classifications used in governmental funds?

(1) Nonspendable, (2) Restricted, (3) Committed, (4) Assigned, and (5) Unassigned.

What is the difference between 'Derived Tax Revenues' and 'Imposed Nonexchange Revenues'?

Derived tax revenues result from assessments on exchange transactions (e.g., sales or income tax), whereas imposed nonexchange revenues result from assessments on non-government entities (e.g., property taxes or fines).

What are 'Service Efforts and Accomplishments' (SEA) measures?

Performance metrics beyond traditional financial statements comprising Inputs (resources used), Outputs (quantity of work done), and Outcomes (actual impact on objectives).