Accountability for general capital asset expenditures funded by tax receipts of a government should be established in
a. The appropriate governmental funds.
b. The capital projects fund
c. The governmental activities accounts at the government-wide level.
d. Both b. and c.
e. a. and b. and c. are all correct answers
b. The capital projects fund
Which of the following funds of a government uses the modified accrual basis of accounting?
C. Capital projects.
The city of Columbus issued bonds at par for the construction of a new city office building. Receipt of the bond proceeds would result in journal entries in which funds? Select the best answer.
D. Capital Projects Fund: Yes; Debt Service Fund: No
With regard to depreciation of general capital assets
A. No depreciation can be recorded in any governmental fund, but depreciation expense must be reported in the governmental activities accounts.
Interfund transfers from the General Fund to a capital projects fund to provide partial financing of a capital project would be reported by the capital projects fund as a (an)
D. Other financing source.
For which of the following assets can the "modified approach" be elected in lieu of depreciation?
E. Eligible infrastructure assets
A debt service fund is a (an)
D. Governmental fund.
Which of the following resource inflows would be recorded as a revenue of a debt service fund?
A. Property taxes levied by the debt service
Transactions related to capital assets such as acquisitions and disposals are reported in:
C. both the government-wide and fund financial statements
Interest expenditures on bonds payable should be recorded in a debt service fund
D. When legally payable.
Debt service funds are used to account for which of the following
A. Payment of principal and interest on general long-term debt.
When bonds are issued there will be
a: a. credit to a bonds payable account on the capital projects funds accounts
b. credit to a bonds payable account on the general funds accounts
c. credit to other financing sources account
d. a. and c. are both correct e. b. and c. are both correct
c. credit to other financing sources account
When the budget is recorded for City of Caitlin for the sale of the bonds
C. no entries are required on the debt service fund
When the bonds were sold, there was a (an):
B. a debit to cash in the general fund accounts
Since the bond repayment are managed by the debt service fund, when debt repayment transaction occurs:
C. there will be a credit to other financing uses
Overlapping debt refers to:
D. debt from differing taxing authorities
Generally speaking, "interest payable" could be found in:
C. the government-wide financial statements
Accountability for capital assets used by departments accounted for by the governmental funds of a government should be established in:
C. the governmental activities accounts at the government-wide level
The following items were included in the City of Lone Pine's General Fund expenditures for the year ended June:
Personal computer for the city treasurer $9,000
Furniture for the mayor's office $16,000
How much should be classified as capital assets in Lone Pine's General Fund balance sheet at June 30?
A. $0 - capital assets are not in the fund statements
Which of the following is one of the requirements that must be met to elect not to depreciate certain eligible infrastructure assets?
A. the government manages the assets using an asset management system that meets specific criteria
Which of the following are properly accounted for in the governmental fund accounts?
E. none of the above
On the due date for bond interest, the debt service fund journal entry (or entries) will include (there may be other entries as well, but will include):
E. a debit to Expenditures - Bond Interest
The liability for general obligation bonds should be recorded in:
B. governmental activities journal
Proceeds from general obligation bonds should be recorded in the:
C. capital projects fund
Which of the following assets would notbe found in the balance sheet of a debt service fund?
C. equipment
Which of the following is a difference between enterprise funds and internal service funds?
C. the identity of those who benefit from the fund's service
Depreciation on capital assets used by an enterprise fund of a government:
B. should be recorded in the enterprise fund by a debit to an expense account
An internal service fund normally uses which of the following budgetary accounts?
E. none of the above
Which of the following accounts is least likely to be used by a tax agency fund?
B. revenues
A difference between the accounting for agency funds and governmental funds is:
A. b. and c. are correct
Which of the following is the appropriate measurement focus for agency funds?
A. economic resources
Which of the following would not be included within the financial section of the comprehensive annual financial report (CAFR)?
D. management's letter of transmittal
What constitutes the basic financial statements of a government?
A. government-wide financial statements plus fund financial statements plus notes
The term that is defined as determining whether current-year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided is:
A. interperiod equity
The term that is closely related to the concept of liquidity is:
D. financial position
Which of the following finical concepts has been defined by the GASB as "the probability that a government will meet both its financial obligations to creditors, consumers, employees, taxpayers, suppliers, constituents, and others as they become due and its service obligation to constituents, both currently and in the future?"
D. financial condition
A term that describes a government's ongoing ability and willingness to raise revenues, incur debt, and meet its finical obligations as they become due is:
B. fiscal capacity
When bonds are sold, there will be a:
B. a debit to cash in the General Fund account
One of the accounting entries made at the start of the year is to:
B. #2 reestablish the unexpended encumbrances with a debit entry
Transactions for encumbrances capital assets can be found in:
government-wide financial statements
C. both the fund financial statements and the government-wide statements
Transactions for capital assets can be found in:
B. the government-wide financial statements
Transactions for the fiduciary funds can be found in:
government-wide financial statements
A. the fund financial statements
If a capital projects fund starts construction of a building in one year and finishes it in a subsequent year no entry need be made in the governmental activities accounts until the building is completed, inspected, and accepted.
a. true
b. false
b. false
If a general capital asset is disposed of without revenue or expenditure to the governmental unit, the event need be recorded only in the governmental activities accounts.
a. true
b. false
a. true
a governmental unit must capitalize the cost of improvements such as roads, bridges, sidewalks, and so forth, because the GASB required disclosure of the cost of such assets in the basic financial statements.
a. true
b. false
a. true
A certified public accountant should issue a qualified audit opinion on financial statements in which general capital assets are recorded at estimated cost.
a. true
b. false
b. false
Property, plant and equipment constructed or acquired by use of special assessment financing is notrecorded in the governmental activities accounts because the assets belong to the property owners who paid for them and are not assets of the reporting entity.
a. true
b. false
b. false
In addition to required disclosures about general capital assets, a governmental unit must allocate the depreciation expense on those capital assets to the functional categories in which the assets are used.
a. true
b. false
a. true
Another required disclosure about general capital assets is the additions to, and deductions from, general capital assets during the course of a fiscal year.
a. true
b. false
a. true
A capital projects fund might be used to account for which of the following activities?
C. building a park or addition to the city council building
The budgetary account recommended for use by a capital projects fund is:
D. encumbrances
Both general capital assets acquired or constructed from the proceeds of special assessment debt, and the long-term liability, are accounted for in the governmental activities accounts.
a. true
b. false
a. true
Debt backed by both special assessments and full faith and credit of a governmental unit should be reported in the CAFR in the business-type activities accounts.
a. true
b. false
b. false
Issuance of tax supported debt having a maturity of more than one year from date of issue must be recorded only in the governmental activities accounts.
a. true
b. false
b. false
Notes to the financial statements of a state or local government should include a schedule, or summary, of annual debt service requirements (principal and interest payments) for the year following the balance sheet date and for all subsequent years until the final maturity of debt outstanding on balance sheet date.
a. true
b. false
a. true
Debt service funds exist to accumulate resources to pay tax supported bond issues at maturity. Interest on such bonds is paid from General Fund appropriations, not from debt service fund appropriations.
a. true
b. false
b. false
All long-term debt, including bonds, notes, or warrants, and various other long-term obligations, intended to be repaid from tax levies or special assessments are accounted for in debt service funds.
a. true
b. false
b. false
At year-end, budgetary and operating statement accounts of a debt service fund are closed in the same manner as is true for a General Fund or for special revenue funds.
a. true
b. false
a. true
Expenditures for interest on tax supported long-term debt are not accrued, even though debt service funds are accounted for on the modified accrual basis.
a. true
b. false
a. true
Which of the following are properly accounted for in the governmental activities accounts?
D. all of the above
The liability for special assessment bonds that carry a secondary pledge of a city's general credit, if reported in conformity with GAAP, should be reported in the balance sheet(s) of:
C. the governmental activities accounts
General obligation bonds issued for the benefit of enterprise funds, with the intent of paying bond principal and interest from revenues of the enterprise fund, should be reported as a liability in the balance sheet of the:
D. enterprise fund and a note to the financial statements explaining the contingent liability of the general government if enterprise funds are insufficient to pay principal and interest
General Capital Asset (GCA)
Those capital assets of a government that are NOT RECOGNIZED by a proprietary or fiduciary fund.
Agency Funds
Funds consisting of resources received and held by the governmentas an agent for others;
exampletaxes collected and held by a municipality for a school district.
Note: Sometimes resources held by a government for other organizations are handled through an agency fund known as a pass-through agency fund.
Basic financial statements
Term used in GASB standards to describe required government-wide and fund financial statement.
Certificates of participation (COP)
A long-term debt instrumentauthorized for construction of municipal facilities, typically issued by a quasi-independentauthority but secured by a long-term lease with a general-purpose local government.
Component units
Separate governments, agencies, or not-for-profit corporations that, pursuant to the criteria in the GASB codification, Section 2100, are combined with other component units to constitute the reporting entity.
Debt capacity
(General definition; not from book) Ability to borrow. The amount a firm can borrow up to the point where the firm value no longer increases.
Debt service fund (DSF)
Funds used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Debt service funds should be used to report resources if legally mandated. Financial resources that are being accumulated for principal and interest maturing in future years also should be reported in debt service funds.
Economic condition
A composite of a government's financial health and its ability and willingness to meet its financial obligations and its commitments to provide services.
Enterprise fund (EF)
A fund established to finance and account for the acquisition, operation, and maintenance of governmental facilities and servicesthat are entirely or predominantly self-supporting by user charges; or for when the governing body of the government has decided periodic determination of revenues earned, expenses incurred, and/or net income is appropriate.
Example: Governmentally owned utilities and hospitals are ordinarily accounted for by enterprise funds.
Fiduciary funds
Any fundheld by a government in a fiduciary capacity for an external party, ordinarily as agent or trustee.
Example: Also called trust and agency funds.
Financial condition
The probabilitythat a government will meet its financial obligations as they become due and its service obligations to constituencies, both currently and in the future.
Financial position
The adequacy of cash and short-term claimsto cash to meet current obligations and those expected in the near future.
Fiscal capacity
A governments ongoing ability and willingness to raise revenues,incur debt, and meet its financial obligations as they become due.
General capital asset (GCA)
Those capital assets of a government that are not recognized by a proprietary or fiduciary fund.
Infrastructure assets
Roads, bridges, curbs and gutters, streets, sidewalks, drainage systems, and lighting systems installed for the common good.
Interfund transfers
Amount transferred from one fund to another
Internal service funds (ISF)
Funds established to finance and account for services and commodities furnished by a designated department or to other governments. Amounts expended by the fund are restored thereto either from other funds, so that the original fund capital is kept intact.
Formally called working capital fund or intragovernmental service fund.
Investment trust funds
Funds used to account for the assets, liabilities, net position, and changes in net position corresponding to the equity of the external participants.
Modified approach
An approach that allows the government to elect not to depreciate certain eligible infrastructure assets provided certain requirements are met.
Pension trust funds (PTA) or Public Employee Retirement Systems (PERS)
The organizations that collect retirement and other employee benefit contributions from government employers and employees, manage assets, and make payments to qualified retirants, beneficiaries, and disabled employees.
Permanent fund (PF)
Funds used to account for and report resources that are restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government's programs- that is, for the benefit of the government or its citizenry. Permanent funds do not include private-purpose trust funds, which should be used t report situations in which the government is required to use the principal or earning for the benefit of individuals, private organizations, or other governments.
Popular reports
Highly condensed financial information, including budgets, summaries, and narrative descriptions.
Private-purpose trust fund
Funds that account for contributions received under a trust agreement in which the investment income of an endowment is intended to benefit an external individual, organization, or government.
Proprietary funds
Sometimes referred to as income determination, business-like, or commercial-type funds of a state or local government.
Examples: enterprise funds and internal service funds
RAP - regulatory accounting principles
The accounting principles prescribed by deferral or state regulatory commissions for investor-owned and some governmentally owned utilities.
AKA: Statutory accounting principles (SAP)
Required supplementary information (RSI)
Information that is required by generally accepted principles to be included with the audited annual financial statement, usually directly following the notes to the general purpose external financial statements.
Restricted assets
Assets (usually of an enterprise fund) that may not be used for normal operating purposes because of the requirements of regulatory authorities, provisions in bond indentures, or other legal agreements, but that need not be accounted for in a separate fund.
Restricted net assets
A term used in accounting for not-for-profit organizations indicating the portion of the residual of assets and liabilities (i.e. net assets) that has been restricted in purpose or time by parties external to the organization.
Revenue capacity
(*definition from internet) In economics, the ability of groups, institutions, etc. to generate revenue. The fiscal capacity of governments depends on a variety of factors including industrial capacity, natural resource wealth and personal incomes
Service capacity
A government's ongoing ability and willingness to supply the capital and human resources needed to meet its commitments to provide services.
Solvency
the ability to meet maturing obligations as they come due
Special assessment districts
The official list showing the amount of special assessments levied against each property presumed to be benefited by an improvement or service.
Tax agency fund
Agency fund, usually maintained by a county official, to handle the collection of all property taxes within the county or other jurisdiction and the distribution of proceeds to all governments within the borders of that county or other jurisdiction.
Trust funds
Funds consisting of resources received and held by the government as trustee, to be expended or invested in accordance with the conditions of the trust.
In the ________ __________ basis of accounting, expenses are recognized as soon as they result in liabilities for benefits received for the particular accounting period.
full accrual
The _____________ accounts include estimated revenues, appropriations, and encumbrances.
budgetary
________________ ___________ is a GASB term indicating the extent to which current-period revenues are adequate to pay for current-period services
Interperiod equity
A fund is a ____________ and ___________________ entity.
fiscal and accounting
An ____________________ is an authorization, granted by a legislative body, to expend fund resources in compliance with an approved budget.
appropriation
The term ________________ accountability relates to information useful in assessing operating results and short- and long-term financial position of a primary governmental entity on a entity-wide basis.
operational
The term ________________accountability relates to budgetary compliance and the ability of the governmental entity to meet its short-term or current financial needs.
fiscal
An example of “other financing sources” would be ____________________________
proceeds from the sale of bonds
The _____________fund is used to account for all governmental transactions not accounted for in another fund.
general
____________revenue is usually is from an exchange-type transaction and can be associated with a specific function or program of the governmental entity.
Program
Examples of ______________revenues would be income taxes and sales taxes
general
________________________ accounting is used with the governmental funds but not the proprietary or fiduciary funds.
Modified accrual
Budgetary accounting works here too.
The proprietary funds use the _______________ ________________ measurement focus while the governmental funds use the ________________ _______________ resources focus.
economic resources
current financial
_____________ ______________ accounting is used with the governmental funds but not with the proprietary funds or the fiduciary funds.
Modified accrual
Budgetary accounting works here too.
The term _________________ is used to distinguish expenditures for the period they are presumed to benefit.
character
For governmental financial reporting we include both the _____________ government and the ________________ units.
primary
component
The ________________section of the______________ is a narrative provided by the management of the primary government that provides an easily readable analysis of the financial results for the year.
MD&A– Management Discussion and Analysis
CAFR– Comprehensive Annual Financial Report
The __________________ fund is used to account for gifts given to a city to support city functions.
permanent
A _______________ ____________ is a document that authorizes the acquisition of goods and services and can result in a accounting entry to the encumbrance account.
purchase order
The ___________ ____________ fund is used to account for tax revenue or other sources of funds that are legally restricted as to their specific use.
special revenue
What are the three broad classification of funds: ________________________ ___________________ and _______________________ .
governmental, proprietary, and trust-agency
Which broad classification of funds uses the modified accrual accounting method: _______________
governmental
Accountability focus: What are the two types: ______________________ and _________________
operational and fiscal
Measurement focus: What are the two types: ______________________ and __________________
economic resources and current financial resources
What is meant by interperiod equity:?
This is the concept that a governmental entity is able to fund its current activities from current resources: See page 722 in the text. It is essentially a nice way to say that governments should be cautious about operating with a deficit.
Which fund types used budgetary accounting: _________________________.
governmental funds only.
Which fund types use fund assets and fund liabilities: _____________________________________
governmental funds only
What are the names of the financial statements used in government-wide reporting: __________________________ and __________________________.
Statement of Net Assets and Statement of Activities.
Internal service funds of a governmental unit are not intended to provide goods or services, on a cost-reimbursement basis, to members of the general public.
True or False
True. A fund that sells goods to the general public is an enterprise fund, not an internal service fund.
Internal service funds should account for operating expenditures on the full accrual basis. True or False
False. Internal service funds account for expenses, not expenditures, and use the full accrual basis.
Internal service funds should not account for depreciation of capital assets used in their operations, since this would, in effect, charge the government twice for the same assets. True or False
False. As for a business enterprise, including a depreciation charge is necessary to determine the full cost of services.
Internal service funds are intended to operate on taxes or other financing sources authorized by the legally enacted revenue budget for each year; therefore, they are classified as "governmental funds."
True or False
False. Internal service funds and enterprise funds are intended to cover operating costs on a continuing basis and ordinarily obtain their revenues from user charges, not taxes or other financing sources provided for by an annual budget; therefore, these are both proprietary, not governmental, funds. However, under GASBS 34, internal service funds are reported as governmental activities, not business-like activities, on the government-wide statements as long as their “customers” are primarily other departments or functions of the government.
Proprietary funds are accounted for in a manner similar to investor-owned businesses: among other features, the full accrual basis is used and all of the capital assets used in fund operations is accounted for by the using fund.
True or False
TRue. The features described are characteristic of GAAP applicable to proprietary funds.
The Encumbrances account should be used by an internal service fund in the same manner as by the General Fund
True or false
False. Internal service funds do not use budgetary accounts
A statement of revenues, expenses, and changes in net assets for an internal service fund is similar in many respects to an income statement prepared for an investor-owned business.
True or False
True. The terminology differs somewhat, but otherwise, the statement is similar in format and display to income statements prepared for business organizations.
Enterprise funds are used by state and local governmental units to account for services that are provided to the general public on a user-charge basis, or to account for any services that the governing body of the governmental unit has decided should be accounted for on a "business basis."
True or False
True. Even if user charges are not the primary source of revenues, the enterprise fund approach may be used for any activities for which the governing body desires periodic determination of revenues earned, expenses incurred, and/or net income.
Enterprise funds and internal service funds are classified as "fiduciary funds." True or False
False. These are two types of funds GABS standards identify as proprietary funds not fiduciary funds.
Budgets for enterprise funds should be recorded in the accounts in the same manner as budgets for a General Fund or a special revenue fund.
True or False
False. Budgets for enterprise funds are prepared to assist management in the efficient use of resources and normally are not legally binding documents. Consequently, GAAP do not require that budgets be recorded in the accounts of an enterprise fund. (In jurisdictions in which enterprise funds are required by law to prepare budgets it may be desirable to integrate budgetary accounts with proprietary accounts. Only the proprietary account balances should be reported in general purpose financial statements, however.
Which of the following may properly be reported as a component of equity in the proprietary fund statement of net assets?
A) Restricted net assets.
41. What type of fund is recommended for municipal solid waste landfills?
B) Enterprise fund.
44. Revenue bonds sold by a water utility fund, upon sale, would be recorded
A) In an enterprise fund as a liability.
Which of the following funds of a governmental unit uses the same basis of accounting as an enterprise fund?
B) Investment trust fund.
How is an enterprise fund different than an internal service fund?
C) An enterprise fund provides services for outside users, while an internal service fund generally does not.
In which of the following funds is it appropriate to record depreciation of capital assets?
A) Enterprise fund.
Which of the following is a difference between enterprise funds and internal service funds?
D) The identity of those who benefit from the fund’s service.