Governmental Accounting - Accy 407 Final Exam

Fund Definition

A fiscal and accounting entity with its own self-balancing account

Three fund categories

Governmental, Proprietary, Fiduciary

Governmental Funds

General, Special Revenue, Capital Projects, Debt Service

Accountability Defintion

Governments obligation to justify raising and using public resources

Interperiod equity definition

Whether current-year revenues are sufficient to pay current-year services

Who sets GAAP for state and local governments

GASB

Who sets GAAP for federal government

FASAB

Who sets GAAP for nongovernmental NFPs

FASB

Operational accountability measures

How efficiently and effectively a government operates using all economic resources

Fiscal accountability measures

Whether the government adhered to budget and legally raised / spent funds

Government - wide statements measure

Operational accountability (economic resources, accrual)

Fund statements measure

Fiscal accountability (current resources, modified accrual for governmental funds

Government - wide statements require

Statement of Net Position and Statement of Activities

Government fund statements require

Balance sheet and statement of R,E, and Changes in fund balance

Proprietary fund statements required

Statement of Net Position, Statement of Revenues Expenses and Changes in Net Position, Statement of Cash Flows.

Fiduciary fund statements required

Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position.

Purpose of ACFR

Full disclosure of a governments financial condition and operations

Three ACFR sections

Introductory, Financial, Statistical

Minimal external reporting package

MD&A, basic financial statements, notes, RSI

Program revenues categories

Charges for services, operating grants/contributions, capital grants/contributions.

General revenues definition

Revenues not directly linked to a program (usually taxes).

General purpose government definition

Government providing a wide range of services (cities, counties).

Special purpose government definition

Government providing limited services (school districts).

Why governments use fund accounting

Ensure legal compliance and separate restricted resources.

Proprietary funds list

Enterprise, Internal Service.

Fiduciary funds list

Custodial, Pension Trust, Investment Trust, Private-Purpose Trust.

Measurement focus of governmental funds

Current financial resources

Basis of accounting of governmental funds

Modified accrual

Measurement focus of proprietary and fiduciary funds

economic resources

Basis of accounting of proprietary and fiduciary funds

Accrual

Which funds record capital assets and long-term liabilities

Proprietary funds and government-wide activities only.

Do fiduciary activities appear in government-wide statements

No

General Fund purpose

primary operating fund of the government

Special Revenue Fund purpose

Accounts for specific revenues legally restricted for particular purposes

Capital Projects Fund Purpose

Accounts for resources used to build or acquire major capital assets

Debt service fund purpose

Accounts for resources used to pay principal and interest on general long-term debt

Permanent Fund purpose

Only earnings are used; principal remains intact

Enterprise Fund Purpose

Accounts for services provides to the public for a fee

Internal Service Fund Purpose

Accounts for services provided internally within the government

Custodial Fund purpose

Accounts for assets held temporarily for owners

Pension Trust Fund

Accounts for retirement plans

Investment Trust fund purpose

Accounts for external investment pools

Private - Purpose Trust fund purpose

Accounts for resources held for specific individuals or organizations

Major fund 10% test

Fund >/= 10% of category total assets, liabilities,revenues, or expenditures

Major fund 5% test

Fund >/= 5% of total governmental + enterprise funds combined

Internal service and governmental fund in gov wide

Reported in Governmental Activities

Enterprise fund in gov wide

Reported on Business type

Statement of cash flows required for

proprietary funds only

required method for proprietary cash flows

direct method

General revenues meaning

Revenues not assigned to a specific function, usually taxes

Difference between program and general revenues

Program revenues relate to a specific service; general revenues support government as a whole

Derived tax revenue definition

Revenue from underlying exchange transactions (e

Imposed tax revenue definition

Taxes not based on exchange (property tax, fines)

Government-mandated nonexchange revenue

Higher-level government requires a program and provides resources

Voluntary nonexchange revenue

Grants and donations with eligibility requirements

When to recognize property tax revenue in governmental funds

When measurable and available (usually within 60 days)

Expenditure definition

Use of current financial resources in governmental funds

Expense definition

Cost of goods or services used, measured on accrual basis

Fund balance categories

Nonspendable, Restricted, Committed, Assigned, Unassigned

Only fund that may report positive unassigned fund balance

General Fund

Restricted fund balance meaning

Externally restricted by creditors, law, or grantors

Committed fund balance meaning

Government's highest authority imposes constraints (ordinance)

Assigned fund balance meaning

Intended for a purpose by governing body or designee

Nonspendable fund balance meaning

Cannot be spent ( inventory, prepaid items)

When to recognize revenues under modified accrual

When measurable and available

When expenditures are recorded in governmental funds

When liability incurred and payable from current resources

Difference between availability and eligibility

Availability: collectible soon; eligibility: conditions must be met for recognition

Purpose of the Statement of Activities

Show net cost of government functions

Format of Statement of Activities

Expenses minus program revenues equals net expense/revenue

General revenue examples

Property taxes, sales taxes, unrestricted grants

Program revenue examples

User fees, restricted grants, special assessments

What “net expense” indicates

Amount of general revenue needed to support a function

Dual-track accounting meaning

Transactions recorded in both fund-level (modified accrual) and government-wide (accrual) accounting

Governmental funds do NOT record

Capital assets or long-term liabilities

Government-wide governmental activities DO record

Capital assets, depreciation, long-term liabilities

Purpose of budgetary accounting

Ensure legal compliance and spending control

Budgetary entry at beginning of year

Dr Estimated Revenues and Cr Appropriations (plus fund balance)

Encumbrance meaning

Commitment to purchase goods/services; not a liability

Encumbrance journal entry

Dr Encumbrances and Cr Encumbrances Outstanding

When encumbrances are reversed

When goods/services are received

Expenditure recognition timing

When liability incurred and payable from current resources

Payroll in governmental funds

Recorded as expenditures when due

Why capital outlays are expenditures in governmental funds

They use current financial resources and no capital assets are recorded at fund level

Government-wide treatment of capital outlay

Recorded as capital assets and depreciated

Interfund transfers meaning

Flows of resources without repayment expectation

Interfund transfers in governmental funds

Reported as Other Financing Uses or Sources

Short-term interfund loans

Reported as Due To/Due From

Long-term interfund loans

Reported as Advances To/From

Property tax levy entry in fund statements

Dr Taxes Receivable, Cr Allowance and Revenues

Why modified accrual does not record interest until due

Interest not payable from current resources until due

Budgetary control cycle steps

Appropriation, Encumbrance, Expenditure, Disbursement

Purpose of Allotments (if referenced)

Internal administrative allocations of appropriations

Why depreciation is not recorded in governmental funds

Because capital assets are not reported in governmental funds

General Fund treatment of supplies inventory

May use purchases or consumption method

Effect of using purchases method

Entire purchase recorded as expenditure

Effect of using consumption method

Only amount used is expenditure; inventory recorded

Purpose of subsidiary ledgers in gov accounting

Track detailed balances for taxes, grants, etc

Government-wide effect of issuing short-term notes

Liability recognized; not recorded in governmental funds unless payable from current resources

Program revenues types

Charges for services, operating grants, and capital grants.

Program revenues meaning

Revenues that reduce the net cost of government functions.