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130 Cards in this Set
- Front
- Back
Objective of governmental accounting and reporting
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accountability
provide useful information benefit wide range of users |
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3 primary users of external state and local governmental financial reports
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Citizens
Legislative and oversight bodies Investors and creditors. |
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Governmental financial info should
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Demonstrate operations with legal restraints imposed by citizens
Communicate compliance with laws & regulations related to raising & spending money Demonstrate interperiod equity - current period expenditures financed with current revenues |
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To demonstrate full accountability for all activities, information must include
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Cost of services
Sufficiency of revenues for services provided Financial position |
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What is SEA reporting?
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Service Efforts and Accomplishments
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3 categories of self-balancing sets of accounts
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Governmental
Proprietary Fiduciary |
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Funds of a governmental unit use two methods of accounting
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Most use modified accrual accounting
Some use accrual accounting |
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Characteristics of modified accrual accounting
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Focus of financial reporting is financial position & flow of available resources
Revenues recognized when available and measureable Expenditures recorded when goods/services obtained Expenditures classified by object, function, or character |
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What are the 5 components of the Comprehensive Annual Financial Report (CAFR)? - general purpose financial statements
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1) MD&A - presented before FS
2) Gvt wide FS 3) Fund FS 4) Notes to FS 5) Rew. supplemetary info - presented after FS and notes |
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What is a component unit?
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A legally separate organization for which the elected officials of a primary government are financially accountable
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Criteria for identifying a component unit
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the primary government can impose its will on the unit
or the unit is financially dependent on the primary government AND there is a potential for the unit to provide specific benefits to/burdens on the government. |
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Users should be able to distinguish between ____ & ____
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primary government and component units
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Component units may be blended when either
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Governing body of component is essentially the primary government.
The component provides services almost exclusively for the primary government. The component unit's total dent outstanding is expected to be repaid by the primary government. |
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Most components will be ___ presented
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discretely
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What does the MD&A include?
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1. Condensed comparison of CY to PY
2. Analysis of overall fin position & results of ops 3. Analysis of balances and transactions indiv. funds 4. Analysis of significant budget variances 5. Descr. op capital assets and LT debt activity in the period 6. Currently known elements which could/will affect fin. position or results of ops. |
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What two statements do the Government Wide FS consist of?
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Statement of Net Position
Statement of Activities |
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Characteristics of government wide/overall government reports
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1. Do not display info on indiv. funds
2. Exclude fiduciary activities/fiduciary components 3. Distinguish b/w primary gov. and discretely presented components 4. Distinguish b/w gvt type and business type activities of primary gov. ---Gvt type activities = gvnt funds & internal service funds ---Business type activities include enterprise funds only |
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What measurement focus do government wide FS use?
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Economic measurement focus
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What basis of accounting do government wide FS use?
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accrual
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Revenues from exchanges or exchange like transactions are recognized when?
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In the period of exchange
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Revenues from nonexchange transactions
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Derived tax revenues
Imposed nonexchange revenues Government-mandated nonexchange transactions Voluntary exchange transactions |
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Derived tax revenues
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imposed on large exchange transactions
recognized as asset & revenue when exchange occurs ex: retail sales tax ex: personal income taxes |
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Imposed nonexchange revenues
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Taxes and other assessments by governments that are not derived from underlying transactions.
imposed on nongovernment agencies recognized as asset when gvt has enforceable claim recognized as revenues when use of resources are required or permitted ex: property taxes, special assessments, fines, forfiets |
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Government mandated nonexchange transactions
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provided by one level of government for another
recognized as asset & revenue (or liability & expense) when all eligibility requirements are met similar treatment for voluntary non exchange transactions |
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Voluntary exchange transactions
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Ex: Federal grant money
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What does the statement of net position present?
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Assets, liabilities, deferred outflows of resources, and deferred inflows of resources
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Net position calculation
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Assets + deferred outflows of resources - liabilities - deferred inflows of resources = net position
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What are the three categories of net position?
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Net assets invested in capital assets, net of related debt
Restricted net position Unrestricted net position |
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Net assets invested in capital assets, net of related debt
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All capital assets, including restricted assets, net of depreciation & reduced by related debt
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Restricted net position
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Items with externally imposed restrictions on use
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Unrestricted net position
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Remainder
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Format of Statement of Net Position
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All items reported for primary government & component units
For primary government --separate columns for government-type activities & business type activities --amts combined in total column For component units: --Column is not combined with totals for primary government |
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What activities are distinguished from eachother on the Statement of Activities?
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Self-financing activities vs. those drawing from general revenues
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Governmental activities are presented by
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function
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Business type activities are presented by
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business segment
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For each government function we report
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net expense/revenue
relative burden |
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items reported separately after net expenses of government's functions:
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general revenues
contributions to term & permanent endowments contributions to permanent fund principal special items (unusual or infrequent) extraordinary items (unusual and infrequent) transfers |
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Depreciation
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indirect expense charged to a function with asset
allocated among functions for shared assets not required to be allocated to functions for general capital assets not allocated to functions for eligible general nfrastructure assets |
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Revenues classified into categories:
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1. Amts received from users/beneficiaries of a program - program revenues
2. Amts received from parties outside citizenry - general revenues if unrestricted. program revenues if restricted to specific programs 3. Amts received from taxpayers - general revenues. 4. Amts generated by the government - general revenues 5. Reported separately: contributions to term/permanent endowments contributions to permanent fund principal special & extraordinary items transfers |
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Format of Statement of Activities
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Internal amounts on gvnt wide FS
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eliminated to avoid doubling up
interfund receivables & payables eliminated amts due between gvt type & business type activities presented as offsetting internal balances |
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Capital assets include the following
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land, land improvements, & easements
bldgs & bldg improvements vehicles, machinery & equipment works of art & historical treasures infrastructure |
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Internally generated intangibles begin to be capitalized if
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Objective and capacity identified
Feasible intent to complete |
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Pension plans
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Single employer defined benefit plan
or Agent defined benefit plan Reports a net pension liability: portion of actuarial PV of projected benefit payments attributable to past service - pension plan's fiduciary net position |
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Capital assets are reported at ___. This includes
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historical cost
Includes: capitalized interest & costs of getting asset ready for intended use |
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How are capital assets depreciated?
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Over useful lives
Inexhaustible assets are not depreciated Infrastructure assets may be depreciated under the modified approach |
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What does infrastructure include?
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Capital assets with longer lives than most capital assets that are normally stationary
Roads, bridges, tunnels, drainage systems, water & sewer, dams, lighting systems |
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Governmental funds include:
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General fund
Special revenue funds Capital projects funds Debt service funds Permanent funds |
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Proprietary funds include:
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Enterprise funds
Internal service funds |
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Fiduciary funds include:
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Pension & other employee benefit trust funds
Investment trust funds Private purpose trust funds Agency funds |
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Statements of Governmental Funds
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Balance sheet
Statement of revenues, expenditures, and cahnges in fund balances Apply modified accrual accounting Capital assets & long-term debt not reported as assets or liabilities |
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Reports include separate columns for each ____ fund and a single column for total of all ____ funds.
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major governmental fund; nonmajor funds
General fund is always major Others can be major if assets, liabilities, revenues, and expenditures meet the 5% and 10% tests -- Fund atleast 5% of total column in gvt wide FS -- Fund atleast 10% of government type column in gvnt wide FS |
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Governmental funds - Balance Sheet
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Reports assets, liabilities, and fund balances
Reported separately for each major gvnt fund Fund balances segregated into reserved & unreserved Total fund balances reconciled to net position of gvnt activities in gvt wide FS |
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Governmental funds - statement of revenues, expenditures, & changes in fund balances
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Reports inflows, outflows, and balances of current financial resources
Reported separately for each major gvt fund Revenues classified by major source Expenditures classified by function. |
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Governmental funds - statement of revenues, expenditures, and changes in fund balances - format of statement
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Revenues
- Expenditures = Excess (deficiency) of revenues over expenditures +/- Other financing sources and uses +/- Special and extraordinary items = Net change in fund balances + Fund balances (beg) = Fund balances (end) |
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Statements of Proprietary Funds
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Statement of net position
Statement of Revenues, Expenses, and Changes in Fund Net Position Statement of Cash Flows Use accrual basis Include separate column for each enterprise fund meeting 5% and 10% tests --Fund atleast 5% of "total" column in gvt wide FS --Fund at least 10% of "business-type" coulmn in gvt wide FS --Total of all nonmajor enterprise funds in a single column --Total of all internal service funds in a single column |
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Four categories of activity for proprietary FS
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Operating
Noncapital financing Capital financing Investing |
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Proprietary Funds - Statement of Net Position
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Prepared in classified format
Dist. b/w current and noncurrent A/L Net postion reported in same categories as used in gvt wide fs |
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Proprietary Funds - Statement of Revenues, Expenses & Changes in Fund Net Position
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Amts should eb the same as net position & chages in net position shown for business-type activities in gvt wide FS
Revenues reported by major source Operating & nonoperating revenues & expenses distinguished Nonoperating revenues & expenses reported after operating income. |
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Proprietary Funds - Statement of Revenues, Expenses & Changes in Fund Net Position - Format of statement
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Operating revenues (listed by source)
- Operating expenses (listed by categories) = Operating income or loss +/- Nonoperating revenues & expenses = Income before other revenues, expenses, gains, losses and transfers +/- Capital controbutions, additions to permanent & term endowments, special &extraordinary items, & transfers = Increase/decrease in net position + Net position (beg) = Net position (end) |
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Proprietary Funds - Statement of Cash Flows
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Shows sources and uses of cash by major classification
Operating Noncapital financing Capital financing Investing Operating income reconciled to cash flows from operating activities (indirect method) |
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Statements of Fiduciary Funds
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Statement of Net Position
Statement of Changes in Fiduciary Net Position Use accrual basis Separate column for each major fiduciary fund and column for total of all nonmajor fiduciary funds --Major fund selection based on judgment of entity mgt -No 5% and 10% tests since fiduciary funds werent included in gvt wide FS |
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Notes to Government FS include:
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Summary of significant acct policies
Disclosures on: -- capital assets & LT liabilities -- major classes of capital assets -- donor-restricted endowments -- segment information |
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Required supplementary info in addition to MD&A consists of:
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1. Schedule of Funding Progress for all Pension Trust Funds
2. Schedule of Employer Contributions to all Pension Trust Funds 3. Budgetary comparison schedules for governmental and special revenue funds 4. Info on infrastructure reported under modified approach 5. Claims to development info for any public entity risk pools |
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A governmental unit maintains 5 types of governmental funds:
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General Fund
Special Revenue Funds Capital Projects Funds Debt Service Fund Permanent Funds |
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General fund
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All activities not accounted for in another fund
Only fund that reports positive unassigned fund balance |
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Capital projects funds
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construction of fixed assets
fund opened when project commences & closed when project complete Differences in accounting for capital projects fund: 1. budgetary entries generally not made 2. expenditures generally made under contract proceeds received for project should be accounted for in period received, regardless of when money is spent |
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Debt Service Fund
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Amts used for interest payments are separated from amts used for principal payments
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Permanent funds
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resources that are legally restricted
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___ and ___ are not reported in governmental funds. Instead, they are reported in government wide FS
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Fixed Assets and LT debt
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Fund balance classifications
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Nonspendable (in form (inventory) or legally)
Restricted (by contributor or law) Committed to specific Purposes (by highest gvnt authority) Assigned (intended for purpose but not bound to it) Unassigned (residual of general fund) |
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A governmental unit will have one general fund. Activities are as follows:
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Annual budget recorded at beg of yr
Revenues/expenses are recorded during yr Adjustments made at BS date Budgetary accounts closed at YE |
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J/E for governmental unit adopting annual budget for their general fund
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Revenue cycle consists of
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Billing revenues (property taxes, collecting billed/unbilled revenues, writing off uncollectible billings)
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J/E for billing of revenues
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Revenues control = portion of billed taxes expected to be collected during the current year or w/in 60 days of close
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J/E for collecting billed revenues, writing off uncollectible amounts, collecting unbilled revenues
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Spending cycle consists of
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Ordering goods & services
Receiving goods & services Paying for goods & services |
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J/E for spending cycle
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Adjusting J/E at the BS date
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J/E at the end of the year to close accts
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Proprietary Funds:
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Account for governmental activities conducted similarly to business enterprises
Enterprise fund Internal service fund |
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Enterprise fund
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Used to account for business-type activities
Uses accrual basis Earned income recognized as operating revenues Shares taxes reported as nonoperating revenues |
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Internal service fund:
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Used to account for services provided to other gvnt departments on a fee or cost-reimbursement basis
Resources come from billings to other funds Reported as operating revenues |
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Fiduciary Funds:
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Pension Trust Fund
Investment Trust Fund Private Purpose Trust Fund Agency Fund |
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Pension Trust Fund
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Accounts for contributions made by gvnt & employees using accural accounting
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Investment Trust Fund
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Accounts for assets received from other gvnts units to be invested on their behalf
Uses accrual accounting |
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Private Purpose Trust Fund
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Accounts for resources held on behalf of private persons or organizations
Uses accrual accounting |
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Agency Fund
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Accounts for money collected for fairous funds, other gvnts, or outsiders
Includes only BS accounts Assets always = Liabilities Uses modified accrual accounting |
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Interfund Transactions can include
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Nonreciprocal Transfers
Reciprocal Transfers Reimbursements Loans |
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Nonreciprocal Transfers
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Reciprocal transfers
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Reimbursements
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Loans
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EPA required procedures for closure/postclosure care of solid waste landfills represent long term obligations accounted for as
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LT Debt.
Accounted for during periods of operation |
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EPA - Cost to be incurred by governmental funds accounted for in ___
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general LT debt account group
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EPA - Expenditures in governmental funds reduce ___
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general long term debt account group balances
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EPA - Costs to be incurred by proprietary funds are ___
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accounted for directly in funds
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For enterprise funds, assets should be
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capitalized and depreciated
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If a state or local government files for bankruptcy, the A/P should be ___
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remeasured based on the Plan of Adjustment
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The accounting for special assessment of capital projects depends on the ___
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liability of the governmental unit for the special assessment debt
If the gvnt unit is not obligated, use the agency fund If the gvt unit is primarily or potentially liable, treated like any other capital improvement --construction activities recorded in capital projects fund and debt principal and interest recorded in debt service fund. |
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At year end, __ is closed, but not ___
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estimated revenues. not fund balance
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Donated assets to the gvt are recorded at
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FV
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Appropriations should be reported as
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nonoperating revenues (proprietary funds)
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Enterprise funds provide goods and services which are
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1. rendered primarily to the general public
2. financed substantially or entirely through user charges 3. Intended to be self-supporting |
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Governmental financial reports are used primarily to
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1. Compare actual results with budgets
2. Assist in evaluating effectiveness and efficiency 3. Assess financial condition and results of operations |
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In an exchange transaction...
In a non-exchange transaction... |
goods or services of equal value are exchanged
one party provides vale for no direct benefit |
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When an actual expenditure of an amount previously encumbered is known, we do 2 entries
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1. reverse the original encumbrance
2. record the expenditure by debiting expenditures and crediting vouchers payable. |
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J/E for grants
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Dr. Grants Receivable
--Cr. Revenues Dr. Cash --Cr. Grants Receivable |
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Under modified accrual accounting, principal and interest on general obligation LT debt are
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not recognized as expenditures until due
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Property taxes are generally recorded directly into the
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General fund
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How does an enterprise fund treat fixed assets?
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capitalized within the fund since fixed assets used for producttion of goods/services sold
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Fixed dollar budgets are not normally adopted for ___funds, therefore they do not incorporate ___.
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proprietary, encumbrances
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Elements of Service Effort Reporting
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Measures of service efforts
Measures of service accomplishments (output measures) Measures that relate to service effort to service accomplishments (efficiency and cost-outcome measures) Narrative or explanatory info |
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How are fixed assets treated in the general fund?
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Not recorded. Recorded as expenditures
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For public institutions engaged in only business-type activities, the basic FS include:
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1. Statement of Net Position
2. Statement of Revenues, Expenses and Changes in Net Position 3. Statement of Cash Flows |
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Single employer defined benefit plans should ___
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discount future benefits regardless of whether the plan is funded
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Government wide FS columns
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governmental activities
business type activities total primary governmen component units |
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Modified accrual accounting does not recognizes revenues when
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funds are transferred between governmental funds
Also, sale of bonds is not revenue. It is an other financing source |
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In the statement of activities for nongovernmental not for profit organization all expenses are recorded as
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decreases in unrestricted net position.
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Grants and subsidies to decrease operating deficits should be classified as
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noncapital financing activities
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Under modified accrual basis, sales tax held by the state which will soon be remitted to the local government
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can be accrued by the local government since it is measureable and available
same goes for other firm committments from the state |
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Sales tax collected by merchants are (accrued/not accrued) under modified accrual accounting
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not accrued. cannot be accrued until state holds them for remittance to local gvnt units.
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For government wide FS, sales tax revenues are ___
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a derived tax revenue and would be accrued
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Public colleges that choose to report both gvntal and business type activities should prepare
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both government wide and fund financial statements
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Business type units are accounted for in
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enterprise funds, which require presentation of enterprise fund statements and MD&A an RSE
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Routine employer contribution from the general fund to a pension trust fund is
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an expenditure from the general fund
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Items which are not expenditures from the general fund:
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Operating subsidy transfer to enterprise fund
Contribution of enterprise fund capital Transfer to capital projects fund. |
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Calculation of available funds
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Available funds = appropriations - encumbrances - expenditures
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Program revenues:
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o Charges for services
o Operating grants and contributions o Capital grants and contributions |
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- If a government is obligated in some manner to assume the payment of related debt service in the event of default by property owners, all transactions related to capital improvements financed by special assessments should be reported in the
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government wide statements.
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