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CGFM Study Guide 2, Govt Accg, Fin Rprtg: Section 2/3
2008 Edition

Additional Accounting Flashcards




2.1.1 What reporting dimensions did GASB Statement No. 34 add to government accountability?
GASB Statement No 34 continued the focus on accountability and introduced the focus on operational accountability. the need for stewards of public resources to be accountable for safekeeping of all resources, capital and financial, and complying with the requirements for their use.
2.1.2 Describe how financial reporting can assist in fulfilling a government's duty to be publicly accountable.
Financial reporting assists users in assessing accountability and assist in making economic, social, and political decisions.
2.1.3 According to GASB, which of the following is not a primary user of external financial reports?

a) the media
b) investors
c) department managers
d) city council
c) Department managers are internal users of reports. GASB only considers external users of reports in the standard-setting process.
2.1.4 Describe the hierarchy of governmental accounting principles.

(GASB, FASB, FASAB, Technical Bulletins, Implementation Guides, Practice Bulletins, Statements and Interpretations)
1. GASB Statements and Interpretations; AICPA and FASB Pronouncements specifically made applicable to government entities

2. GASB Technical Bulletins and if cleared by GASB, AICPA Industry Audit and Accounting Guides and AICPA Statements of Position

3. AICPA AcSEC Practice Bulletins that have been cleared by GASB

4. GASB Implementation Guides, and practices that are widely recognized and prevalent in state and local governments
2.1.5 Describe the financial reporting entity for state and local governments. What does it consist of?
The financial reporting entity consists of:
1) the primary government
2)organizations for which the primary government is financially accountable, and
3) other organizations for which the nature and significance are such that their exclusion would cause the reporting entity's financial statements to be misleading or incomplete.
2.1.6 What does "primary government" refer to? What are the factors in determining if a government is part of a primary government and which is the most important?
A primary government can be a state government, a general-purpose local government such as a city or county, or a special purpose government such as a school district.
1) misleading to exclude
2) services provided
3) financial accountability *most important
4) relation to the primary government
2.1.7 When discussing units of a primary government, what does financial accountability consider?
The criteria for financial accountability considers such things as legal standing, appointment of a voting majority of the governing body of an entity, the ability to impose will, the potential for financial burden or benefits, and fiscal dependency.
2.1.8 What is a component unit?Describe at least three of the five ways that a primary government can impose its will over a component unit.
Component units are legally separate organizations for which the elected officials of the primary government are *financially accountable*.

A primary government can impose its will on component units with its:
- Ability to remove appointed memebers of the governing body at will
- Ability to modify or approve the budget
- Ability to modify or approve rate or fee changes
- Ability to veto, overrule, or modify decisions of the unit
- Ability to apoint, hire, reassign, or dismiss personnel
2.1.9 Describe the two methods to display component units in financial statements.
- Blended Presentation: blanded organizations are reported as though they were funds of the primary government. Blending may be applicable if the two entitie's governing boards are identical or if the component unit provides services solely to the primary government.
Discrete Presentation: More commonly,component units are reported discretely in a column in the government-wide FS, apart from the primary government and not included in the totals reported for the priamry government.
*Related organizations are merely disclosed in the notes to the financial statements. Component units are never consolidated.
2.1.10 What is included in the basis financial statements?
- Government-wide financial statements
- Fund financial statements
-Notes to the financial statements

The basic financial statements shoudl distinguish between the primary government and its discretely presented component units.
2.1.11 Name the three sections of the CAFR.
1. Introductory - org chart, Letter of Transmittal, etc.
2. Financial Statements - Auditor's report, MD&A, Basic Financial Statements, RSI, etc.
3. Statistics - Financial trends, revenue capacity information, debt capacity information, demographic and economic information, operating information
2.1.12 Describe popular reports.
"Summary financial information" is the technical term for popular reporting in the state and local environment.

Popular reports allow governments to present information in a user-friendly format that focuses on a specific area of interest. GASB has not issued guidance for the preparation of popular reports.
2.2.1 What is a fund?
- Fiscal and accounting entity
- intended to stand alone
- self-balancing A=L+NP
-used for carrying on specfic activities or attaining certain objectives
2.2.2 Name and describe the three major categories of funds used by state and local governments.
- Governmental: supported through non-exchange revenues such as taxes, fines, grants, and shared revenues. CFRM focus and modified accrual basis. Ex: public safety, health, transportation, social services, recreation, administration)

- Proprietary: match revenues to expenses. ERM focus and accrual basis. Ex: water services

-Fiduciary: holds assets as a trustee or agent. ERM focus and accrual basis. Ex: pension. Not reported in government-wide financial statements
2.2.3 What are the five governmental fund types?
1) General Fund: police, economic development, recreation, etc.)
2) Special Revenue Fund: legally restricted (gas tax is only for highway contruction, etc.)

- Capital Project Fund: acquisition or construction of major facilities

-Debt Service Fund: long-term debt prinicipal and interest

Permanent Fund: only the interest earned is used
2.2.4 What are the two proprietary fund types?
-Enterprise fund: a user fee is charged for the good/service. Ex: sewage, solid waste, public electric, etc.

-Internal Serivce Fund: cost-reimbursement between agencies. Operating results of internal service funds are eliminated in financial reporting
2.2.5 What are hte four fiduciary fund types?
Fiduciary funds are only reported in the fund financial statements, and not in the government-wide financial statements.

-Pension and Other Employee Benefits) Fund: pensions, health care benefits, disability benefits, etc.

-investment Trust Fund:

-Private-Purpose Trust Fund: bequests where the money is restricted and the beneficiaries are outside of the government.

-Agency Fund: purely custodial. Ex: government employee payroll deductions, pass-through grants
2.2.6 What does it take to be a major fund?
- For governmental and enterprise funds, there exists the general fund and several major funds

-10% of assets, liabilities, revenues, expenses, or expenditures of the category or type and
-5% of the total for all governmental and enterprise funds combined
2.2.7 What financial statements are required for the governmental funds?
Governmental Funds

-Balance Sheet: Assets = Liabilities + Fund Balances
-Statement of Revenues, Expenditures, and Changes in Fund Balances (Operating Statement)
2.2.8 What financial statements are required for proprietary funds?
Proprietary funds:

- Balance Sheet/Statement of Net Assets: Assets = Liabilities + Net Assets
- Statement of Revenues, Expenses, and Changes in Fund Net Assets (or Fund Equity) (Operating Statement)
- Statement of Cash Flows: uses the direct method
2.2.9 What financial statements are required for fiduciary funds?
Fiduciary Funds:

-Statement of Fiduciary Net Assets
-Statement of Changes in Ficuciary Net Assets
2.2.10 At the start of the fiscal year, estimated revenues and appropriations are entered into the accounting system. If estimated revenues are *greater* than appropriations, what would be the journal entry?
Dr. Estimated Revenues

Cr. Appropriations
Cr. Budgetary Fund Balance
2.2.11 At the start of the fiscal year, estimated revenues and appropriations are entered into the accounting system. If estimated revenues are *less* than appropriations, what would be the journal entry?
Dr. Estimated Revenues
Dr. Budgetary Fund Balance

Cr. Appropriations
2.2.12 During the year, as revenues are received, what is the journal entry?
Dr. Cash

Cr. Revenue
2.2.13 Interim budgetary reporting for revenues would show the difference between estimated revenues and actual revenue. The difference is sometimes called "unrealized revenues." Based on actual results, a government may modify estimated revenues. What two budgetary accounts would be affected by the journal entry, whether estimated revenues increased or decreased?
Estimated Revenues and Budgetary Fund Balance
2.2.14 If supplemental appropriations were made during the year, what would be the journal entry?
Dr. Budgetary Fund Balance

Cr. Appropriations
2.2.15 An encumbrance allows a government to control the use of appropriations. An encumbrance sets aside a portion of the appropriation so that funds are available to pay for the goods or services that had been ordered. Since the funds have been earmarked, a journal entry must occur.

What is the journal entry to record an encumbrance? What is the journal entry to record that the goods have been received?
To record an encumbrance:
Dr. Encumbrances

Cr. Reserve for encumbrances

When the goods are received, to relieve the encumbrance:
Dr. Reserve for encumbrances
Cr. Encumbrances

Dr. Expenditures
Cr. Vouchers payable

Note: The amount of the expenditure/payable will not necessarily be equal to the amount of the encumbrance.
2.2.16 At the end of the budget period, appropriations are no longer available for spending.Further, all revenue has been realized. What is the resulting closing entry?
Dr. Appropriations
Dr. Budgetary fund balance

Cr. Estimated revenue
2.2.17 Define the budgetary comparison schedule and name the funds that are required to produce one.
The budgetary comparison schedule is RSI. It presents the original budget, the final budget, and actual revenues and expenditures on the budgetary basis of accounting. Any variances that are reported are optional.

The budgetary Comparison Schedule is required for the general fund and each major special revenue fund.
For each of the items below: identify which fund would be used to account for the item and provide a justification for your answer.

a) A city government issued general obligation bonds to finance the construction of a new jail.
b) A state government collected a tax of $1.00 per pack of cigarettes which is (by law) required to be used to fund health and fitness programs in public schools.
c) A county government expended $1 million to expand the water treatment plant.
d) A donor provided investments totaling $4 million to create an endowment, the earnings of which will be used to provide scholarships.
e) A donor provided $50,000 to be used to purchase newspaper and magazine subscriptions for the public library. There is no requirement that the original principal may not be spent. A city government sold surplus street maintenance trucks for $10,000.
a) governmental - debt service fund
b) fiduciary - agency fund
c) proprietary - enterprise fund
d) fiduciary - private fund
e) fiduciary - private fund
f) governmental - special revenue fund
According to the GASB, financial reports of state and local governments are used primarily to meet four objectives. These objectives are detailed in GASB Concepts Statement No 1. What are they?
1) to compare actual financial results with the legally adopted budget
2) to asses financial condition and results of operations
3) to assist in determining compliance with finance-related laws, rules, and regulations
4) to assist in evaluatin efficiency and effectiveness
2.3.1 Contrast the aim of the government-wide statements and the fund statements. What types of activities does each focus?
-Government-wide statements focus on the primary government and on governmental and business-type activites.

-Fund financial statements focus on all funds of the government, including internal service funds and fiduciary activites.
2.3.2 Which of the following is not required on the condensed financial information in the MD&A?

a) long-term liabilities
b) total expenses
c) cash flows
d) capital contributions
c) In the MD&A, condensed information is not required on cash flows.
2.3.3 Voters pass a special levy two days after the date of the auditor's report. Is the government required to report the impact in the MD&A?
No. The MD&A is supposed to provide information that takes place up to the date of the auditor's report. The information could, however, be included in the transmittal letter to the CAFR.
2.3.4 A government purchases a capital asset for $250,000 How should the capital asset be reported on the government-wide statements? (Asset? Expenditure? Liability? Which statement?
A capital assets purchased should be recorded as a capital asset on the statement of net assets. Remember that the government-wide statements are compiled using the economic resources measurment focus. However, in the governmental fund basis FS, the purchase of capital assets does not hit the Stmt of Net Assets.
CHALLENGE: GASB has identified a set of statements and disclosures that are required to be in compliance with GAAP. What are those minimum requirements? Bonus: Can you name the requirements in order of presentation?

Hint: What are the contents of the CAFR?
a) Government-wide Financial Statements
-- Government-wide Statement of Net Assets
-- Government-wide Statement of Activities
b) Fund Basis Financial Statements
-- Governmental Type Funds
---- Balance Sheet
---- Statement of Revenues, Expenditures and Changes in Fund Balances
---- Reconciliation of governmental statements to government-wide statements
-- Proprietary Funds
---- Statement of Net Assets
---- Statement of Revenues, Expenses and Changes in Fund Net Assets
---- Statement of Cash Flows
-- Fiduciary Funds
---- Statement of Fiduciary Net Assets
---- Statement of Changes in Fiduciary Net Assets
---- Notes to the Financial Statements
a) Information about infrastructure assets using the modified approach
b) Budgetary comparison schedule (General and major Special Revenue Funds)
c) Schedule of funding progress of pension plans
d) Schedule of employer contributions of pension plans
e) Schedules required for external financing pools
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