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G & NP Chapter 4
Chapter 4 questions Gov and NP Accounting
16
Accounting
03/07/2013

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Term
what are budgetary control points?
Definition
Budgetary control points are those levels of specificity at which the legislative branch controls the chief executive's expenditure authority through appropriations, or the chief executive controls the expenditure authority of the department heads. Simply stated, they are the expenditure items or categories and amounts for which the chief executive is accountable to the legislature, and for which executive agency heads are accountable to the chief executive.
Term
why are encumbrances not considered expenditures under th emodified accrual basis of accounting?
Definition
Encumbrances are the expected costs of expenditures to be incurred if goods and services on order are delivered by the vendors. But the vendors have not delivered—so encumbrances represent the expected costs of unperformed executory contracts—and the government thus has neither received the goods and services nor incurred governmental fund expenditures and liabilities.
Term
why might a local government not prepare and adopt its general fund annual operating budget on the modified accrual basis
Definition
Non-accountants tend to think of revenues in terms of cash received and expenditures in terms of cash paid and, perhaps, encumbrances incurred. Thus, they tend to plan, budget, control, and evaluate in those terms.

2. Encumbrances are not considered equivalent to expenditures under the modified accrual basis but, as noted above, are so considered by many non-accountants (and some accountants).

3. Most accounting systems are essentially cash-driven during the year; most accruals and deferrals of revenues and expenditures are recorded at year end.
Term
explain how the budgetary fund balance is used. what effect does recording the budget have on gaap based financial statements? how is budgetary fund balance reported in the general fund balance seet
Definition
Many governments use a Budgetary Fund Balance account to record the budgeted increase or decrease in fund balance for the year. When budget revisions are made, their effect is recorded in this account as well so that its balance always equals the budgeted change in total fund balance for the year. At year end, the initial entry – adjusted for the effects of any budget revisions – is reversed. This action closes the budgetary accounts for the year and has no effect on amounts to be reported in the GAAP-based financial statements.
Term
which of the following statements is true?
A) encumbrances are equivalent to expenditures and encumbrances outstanding at the end of the year should be reported as liabilities
B) no expenditure can be reported without first being encumbered
C) encumbrances are recordedat the estimated cost of goods ordered or services contracted. the subsequent amount recognized as expenditures upon receipt must equal the encumbered amount
D) Encumbrances are recorded at the estimated cost of goods ordered. The amount recognized as expenditures upon receipt equals the actual cost
Definition
D) Encumbrances are recorded at the estimated cost of goods ordered. The amount recognized as expenditures upon receipt equals the actual cost
Term
Define alotments
Definition
legislativeappropriations subdivided by time periods
Term
what is the meaning of the term available as used in governmental fund revenue recognition
Definition
The term "available" means the revenue item is both

1. earned by year end and/or legally available to finance current period expenditures, that is, not restricted for use in the following year(s), and

2. collected within the current year or soon enough thereafter (not more than 60 days) to be used to pay the liabilities incurred for current year expenditures.

If a revenue item that is objectively measurable meets the "available" criterion, it is recognized as "revenue"; if not, it is recorded as "deferred revenue" until it becomes "available."
Term
define deferred revenues
Definition
The term "deferred revenues"—as used in governmental fund accounting—refers to the nonrecognition of revenue items as revenue currently because they are (1) legally restricted to financing future year expenditures, such as taxes levied for next year that are collected or must be recorded as receivables currently; (2) unearned, as in the case of expenditure-driven grants, though grant cash has been received; or (3) not "available," that is, the related financial resources are not expected to be collected during the fiscal year or soon enough thereafter (within not more than 60 days) to be used to pay the liabilities incurred for current year expenditures. When these revenue items meet the revenue recognition criteria, they are reported as revenues and the deferred revenues accounts are reduced accordingly.
Term
govts collect cash or record receivables before revenues are to be recognized. What determines whether a liability or deferred inflow is reported in these situations?
Definition
When revenue recognition must be delayed to a future period, a government must report either a liability or a deferred inflow. Deferred inflows are reported when revenue recognition is delayed because the revenue is:
• not available – not collected by year end or soon enough thereafter.
• an imposed tax revenue levied to finance operations of a future year.
• collected in advance, and there is no performance obligation to earn the revenue.

In other cases delaying revenue recognition beyond the time that is cash is collected or a legal claim to resources is established results in reporting a liability – unearned revenues.
Term
distinguish between unearned rev and deferred rev.
Definition
The term deferred revenues may be used appropriately to refer to any resource inflows that ultimately will be recognized as revenues but have not yet met the criteria for revenue recognition. The inflows may not meet the criteria because they were not collected within the appropriate time period, because they are not legally available, because they have not been earned, etc.

The term unearned revenues is used by some governments to refer to that subset of deferred revenues that can not be recognized as revenues because they have not been earned
Term
which is least likely to be reported as gov fund rev

pilots
taxes
fines
special assesments
Definition
pilots
Term
each of the following criteria is a factor when determining special revenue fund property tax revenue recognition except
A) whether the taxes collected were for future fiscal years taxes
B)whether the taxes werecollected no later than 60 days following the fiscal year being reported
C) whether the property taxes receivable are current or delinquent
Definition
C) whether the property taxes receivable are current or delinquent
Term
both the periodic and perpetual inventory systems may be used with
Definition
the consumption method
Term
distinguish between an expenditure in gov and an expense in commercial accounting
Definition
Governmental funds are comprised primarily of financial assets and related liabilities that are claims against those assets. The fund balance (total) is essentially net expendable financial assets and often approximates working capital. The operating measure thus is expenditures—decreases in fund balance except through transfers—rather than expenses. Stated differently, expenditures measure net financial resources used for costs incurred—whether for current operations, capital outlay, debt service, or intergovernmental purposes—whereas expenses measure costs expired during a time period.
Term
when should general fund expenditures be recognized and what are the major exceptions
Definition
Expenditures may be defined in a governmental fund accounting context as all decreases in fund net assets—for current operations, capital outlay, debt service, or intergovernmental purposes—except those arising from transfers to other funds. Thus, General Fund expenditures should be recognized when goods or services have been acquired, and either cash has been paid or a fund liability has been incurred. The major exceptions to the governmental fund expenditure recognition criteria are:

1. Inventory may be considered an expenditure either when acquired (purchases basis) or when used (consumption basis).

2. Expenditures for insurance and similar prepayals can be recognized when the prepayal is made (purchases basis) or allocated over the periods covered by the prepayal, i.e., when used (consumption basis).

3. Expenditures for claims and judgments, compensated absences, and unfunded actuarially required pension plan or other postemployment benefit contributions are recognized when objectively measurable and the liability becomes "current" in the sense that it would normally be expected to be liquidated with expendable available financial resources of the governmental fund. To state it differently, such expenditures are recognized when due.

4. Debt service expenditures for general long-term debt and related interest are ordinarily not accrued until payment is due (though debt service payments due in the first month of the next year may be accrued at year end if resources dedicated to use for that payment are available in a Debt Service Fund at year end).
Term
under what conditions is a gov required or permitted to accrue debt service expenditures on general long term liabilities?
Definition
Governments are never required to accrue unmatured principal or interest on general long-term liabilities. They are permitted to accrue unmatured debt service costs on these liabilities only if both of the following conditions are met:

• The debt service payment is due within not more than one month into the next fiscal year.
• Resources dedicated for payment of the debt service payment early in the next fiscal year have been accumulated in the Debt Service Fund by the end of the current year.