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21 Cards in this Set
- Front
- Back
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2–1. Identify and briefly describe the three broad categories of service activities that most general purpose governments perform. |
governmental, business-type, and fiduciary. Governmental activities -administrative support, core government services. Business-type activities - self-supporting, such as public utilities. Fiduciary activities - government acts as a trustee or agent for parties outside the government. |
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2–2. Describe how the reporting objectives for government-wide and governmental fund financial statements are different. |
government-wide financial reporting - report on government’s operational accountability so that users can evaluate whether the government is covering the cost of its services over the long run. operational accountability relates to how efficiently and effectively the government is using resources to meet objectives. The objective of governmental fund financial reporting is to report on the government’s fiscal accountability. helps users evaluate the short run objective of whether financial resources were raised and spent in accordance with legal and budgetary restrictions. the focus of the government-wide statements tendsto be more long run and related to cost of services; whereas, the governmental fund financial statements tends to be short run and related to whether costs for services were incurred in accordance with restrictions. |
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2–3. Explain the modified accrual basis of accounting. Why is it used for govern- mental fund f i nancial statements? |
2-3. The modified accrual basis of accountingrecords revenues when they are measurable and available for use in payingcurrent period obligations, while expenditures are recorded when an obligationhas been incurred that will be paid from current financial resources. Because governmental fund financialstatements focus on fiscal accountability, this basis of accounting allows fora focus on current sources and uses of financial resources as opposed to themore long-term view provided by accrual accounting.pJA)2 |
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2–4. What are the three categories of funds prescribed by GASB standards and which fund types are i n cluded in each? Which basis of accounting is used by each category? |
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2–5. What is the primary reason that governmental entities need to use funds for financial r e porting? How are funds established? |
2-5. Governmental accounting systems mustprovide both reporting in accordance with GAAP and reporting to determine anddemonstrate compliance with finance-related legal and contractual requirements.To ensure that both GAAP and compliance reporting requirements are met, aseparate accounting mechanism is used. The mechanism that is used is fundaccounting, which makes it possible to ensure that the compliance reportingrequirement is met. A fund is a separate reporting entitythat may be established by imposition of grant or contract provisions byexternal parties, by constitutional provisions or legislation, or bydiscretionary action of the reporting government. |
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2–6. What is meant by the terms deferred outflows of resources and deferred inflows of r e sources ? When are these accounts used? |
Deferredoutflows of resources are resources that have been consumed but are applicableto a future reporting period (e.g., costs related to a debt refunding). Deferred outflows increase net position.Deferred inflows of resources are resources that have been acquired but areapplicable to a future period (e.g. resources received but unavailable for useuntil a future period). Deferred inflows decrease net position. These accounts,used only when required by a GASB standard, represent timing differencesbetween the actual outflow or inflow of cash and the time period to which theyapply. N_}3 |
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2–7. How do expenses and expenditures differ? |
Expendituresreport actual outlays of funds, whether for an operating cost or the purchaseof an asset. Expenses focus on costs necessary to generate revenues or fundoperations, and may be a result of the using up or expiration of an asset, evenif no cash was paid out. 'NdN7F32 |
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2–8. Proprietary fund accounting is more like for-profit accounting than the accounting for any other category of fund. Explain why you think this is the case, using the two types of proprietary funds as exa m ples. |
2-8. Both enterprise funds and internal servicefunds are classified as proprietary funds. These two types of funds are operatedin a manner similar to for-profit businesses. The reasons they are operatedsimilar to for-profit businesses is because of the types of customers theyserve and the fact that they are largely self-supporting. Enterprise funds are used for activitieswhere services are provided to and paid for by the public. Internal servicefunds are used for centralized types of activities, where services are providedto and reimbursed by other governmental units. p>&JS?2 |
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2–9. Identify the fund balance classifications and give an example of what might be included in each cla s sification identified. |
2-8. Thefund balance classifications and an example for each are provided below. Thereare numerous examples of what could be included in each classification;therefore, consideration should be given to whether the student’s answerappropriately fits the definition for the fund balance classification. Nonspendable: Thiswould include items such as endowments and prepaids (including inventory). Spendable-restricted: This would include items restricted by thoseoutside of government, such as operating and capital grants that can be usedonly for specific purposes, resources restricted by contractual arrangementssuch as debt proceeds. Spendable-committed: Thiswould include items that the governing body has set aside as a result of formalaction, such as items related to capital acquisition/construction or operations(specific activities). Spendable-assigned: Theseare items that the government intends to use for specific purposes, and couldinclude items similar to those found under committed fund balances. Additionally, it would include any fundbalances in special revenue, capital projects, debt service or permanent fundsthat have not been identified as nonspendable, restricted or committed. Spendable-unassigned: Thiswould be the balance in the General Fund that has not been identified asnonspendable, restricted, committed or assigned. |
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2–10. Identify the criteria for determining if a governmental or enterprise fund must be reported as a major fund . What other funds should or may be reported as major funds? |
2-10. The GASBrequires that any fund that meets the following relative size criteria bedesignated as major: a. Total assets, liabilities, revenues orexpenditures/expenses of that governmental or enterprise fund are at least 10percent of the corresponding element total (assets, liabilities, and so forth)for all funds of that category or type (that is, total governmental or totalenterprise funds), and (emphasisadded) b. The same element that met the 10 percent criterion in(a) is at least 5 percent of the corresponding element total for allgovernmental and enterprise funds combined. In addition to funds that meet these two criteria, theGeneral Fund of a state or local government must always be reported as a majorfund. Finally, at its discretionmanagement can report as a major fund any other governmental or enterprise fundthat it considers of significant importance to financial statement users. |
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1. Which of the following statements is true regarding the definition of a fund? a. A fund is a fiscal entity that is designed to provide reporting that demon- strates conformance with finance-related legal and contractual provisions separately from GAAP reporting. b. A fund is an accounting entity that is designed to enable reporting in conformity with GAAP without being restricted by legal or contractual provisions. c. A fund is a mechanism developed to provide accounting for revenues and expenditures that are subject to certain restrictions separate from reve- nues and expenditures that are not subject to restrictions. d. A fund exists to assist in carrying on activities and attaining objectives where there are no specific rules or restrictions. |
a. A fund is a fiscal entity that is designed to provide reporting that demon- strates conformance with finance-related legal and contractual provisions separately from GAAP reporting. |
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Which of the following statements is true regarding the basic financial state- ments of a state or l o cal government? a. Separate columns should be provided in the government-wide financial statements for governmental activities and business-type activities. b. Governmental fund and proprietary fund financial statements should provide a separate column for each major fund. c. Aggregate information about all nonmajor governmental funds or nonmajor enterprise funds should be reported in a single column of the governmental fund or proprietary fund financial statements. d. All of the above. |
d. All of the above. |
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3. Which of the following sets of elements are common to both governmental financial statements and for-profit financial statements? a. Assets and net position. b. Deferred outflows of resources and liabilities. c. Assets and liabilities. d. Net position and liabilities. |
c. Assets and liabilities. |
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4. The measurement focus and basis of accounting that should be used for the governmental fund f i nancial statements are: Measurement Focus Basis of Accounting a . Current financial resources Modified accrual b . Current financial resources Accrual c. Economic resources Modified accrual d . Economic resources Accrual |
a . Current financial resources Modified accrual |
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5. Which of the following amounts that are identified at the end of the fiscal year would be classified as a restricted fund balance?
a. Resources the city manager has set aside for a major street repair. b. A federal grant that is to be used for playground equipment. c. Significant amounts of inventory. d. Endowment resources that the city must maintain in perpetuity. |
b. A federal grant that is to be used for playground equipment. |
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6. Separate reporting for major funds is needed because a. Users of governmental financial statements are usually interested in the details of every fund used by a government. b. It is illegal to aggregate funds where the elements of the fund represent at least 5 percent of the corresponding element for all funds of the same type. c. Users of governmental financial statements need to be able to examine the activities and resources of fiduciary funds. d. Users of governmental financial statements need to be able to examine funds that represent large dollar amounts of a government’s resources and activities. |
d. Users of governmental financial statements need to be able to examine funds that represent large dollar amounts of a government’s resources and activities. |
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7. Assets and liabilities of activities for which the government is acting in ei- ther an agency or trustee capacity for individuals, organizations, or other governments should be r e ported in: a . The fiduciary column of the government-wide financial statements. b . The fiduciary fund financial statements.
c . Both government-wide and fiduciary fund statements. d . Neither government-wide nor fiduciary fund statements. |
b . The fiduciary fund financial statements. |
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8. Under the modified accrual basis of accounting: a. Revenues are recognized at the time an exchange transaction occurs. b. Expenditures are recognized as the cost of an asset expires or is used up in providing governmental services. c. Revenues are recognized when current financial resources become mea- surable and available to pay current-period obligations. d. Expenses are recognized when an obligation occurs for costs incurred in providing services. |
c. Revenues are recognized when current financial resources become mea- surable and available to pay current-period obligations. |
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9. Financial information about an internal service fund should be reported in the proprietary fund fina n cial statements and the: a. Governmental Activities column of the government-wide financial statements. b. Business-type Activities column of the government-wide financial statements. c. Either a or b , depending on whether the internal service fund predomi- nantly serves governmental activities or business-type activities. d. None of the above. |
c. Either a or b , depending on whether the internal service fund predomi- nantly serves governmental activities or business-type activities. |
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10. A certain city reports the following year-end total assets: General Fund $18,400,000 Library Fund (a special revenue fund) 2,900,000 Debt Service Fund 2,600,000 Total governmental funds 26,300,000 Total governmental and enterprise funds combined 51,250,000 Based on this information, which funds should be reported as major funds ? a. General Fund only. b. General Fund and Library Fund. c. General Fund and Debt Service Fund. d. All three funds should be reported as major funds. |
b. General Fund and Library Fund. |
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2–16 Matching Fund Types with Fund Categories. For each of the following fund types, ind i cate its fund category by placing either “GF” for governmental funds, “PF” for proprietary funds, or “FF” for fid u ciary funds in the space provided before each item.
Fund Type Agency fund ______ Permanent fund ______ Debt service fund ______ Internal service fund ______ Pension (and other employee benefit) trust fund ______ Special revenue fund |
Agencyfund FF Permanent fund GF Debt service fund GF Internal service fund PF Pension (and other employee benefit) trust fund FF Special revenue fund GF Enterprise fund PF General Fund GF Investment trust fund FF Capital projects fund GF Private-purpose trust fund FF |
