30 Questions
What should the government do in terms of establishing funds?
Establish and maintain only the minimum number of funds consistent with legal and operating requirements.
How should the government treat capital assets of proprietary funds in financial statements?
Report them in both the government-wide and fund financial statements.
Where should capital assets of fiduciary funds be reported?
In only the statement of fiduciary net assets.
How should general capital assets of a governmental unit be reported in financial statements?
In the Governmental Activities column in the government-wide statement of net assets.
What is the principle for reporting capital (fixed) assets?
A clear distinction should be made between General Capital Assets and Capital Assets Of Proprietary And Fiduciary Funds.
How should capital assets be valued for reporting?
Reported at historical cost or estimated cost if the cost is not practically determinable.
What are the two conditions that must be met for a fund to exist in a technical sense?
- Fiscal entity assets set aside for a specific purpose, and 2. Double-entry accounting entity created to account for the fiscal entity
How is a single fund accounting entity similar to a business accounting entity?
Each entity has a self-balancing set of accounts sufficient to capture all the reported attributes for the whole business or government fund
Explain the key difference between a business accounting entity and a fund accounting entity.
A business accounting entity accounts for all activities and resources of a business, while a fund accounting entity accounts for only a certain subset of a government's activities and resources
What does a fund's self-balancing set of accounts aim to achieve?
To record cash, financial resources, liabilities, residual equities, balances, and changes related to specific activities or objectives
Why is it important for a fund to have special regulations, restrictions, or limitations?
To ensure that the fund's resources are used for specific purposes and that proper accounting practices are followed
How does a fund differ from a general financial account?
A fund is segregated and used for specific activities or objectives, while a general financial account may cover a broader range of transactions
What is the purpose of using accrual accounting in governmental proprietary funds?
To determine the full cost of providing business-type services and to report on the extent to which each activity is covering its full cost of operation.
How do enterprise funds differ from internal service funds in terms of objectives?
Enterprise funds are for operations that are financed and operated like private business enterprises, while internal service funds are for goods or services provided within the governmental unit.
Explain why user charges are primary sources of revenue for enterprise funds.
User charges are the primary sources of revenue for enterprise funds because the costs of providing goods or services to the general public are intended to be continuously financed or recovered through these charges.
What are some reasons for which a governing body might decide to use enterprise funds?
Periodic determination of revenues earned, expenses incurred, and/or net income for capital maintenance, public policy, management control, accountability, or other purposes.
How do internal service funds differ from enterprise funds in terms of the services they provide?
Internal service funds provide goods or services within the governmental unit, while enterprise funds provide goods or services to the general public.
Explain the difference in the way financial information of enterprise funds and internal service funds is reported.
The difference lies in the objectives of the funds; enterprise funds focus on operating like private businesses, while internal service funds focus on providing services within the governmental unit.
What is the main difference between agency funds and trust funds?
Agency funds have total assets always equal to total liabilities, while trust funds may have investments whose earnings add to the net assets of the fund.
Provide an example of a trust fund.
Pension trust funds, which hold assets in trust to provide retirement benefits for employees.
Explain the purpose of investment trust funds.
Investment trust funds are used to report the equity of external participants in a sponsoring government's investment pool.
What are private-purpose trust funds created for?
Private-purpose trust funds are created to benefit private individuals, such as providing scholarships for specific groups like children of firefighters and police officers killed in the line of duty.
How do trust funds differ from agency funds in terms of managing resources?
Trust funds manage resources that include investments whose earnings add to the net assets of the fund, while agency funds do not have such investment earning mechanisms.
Why do agency funds have no net assets?
Agency funds have no net assets because for every dollar of assets held, there is a dollar of liability to the private party, resulting in total assets always equaling total liabilities.
What is the essence of the accrual basis in governmental accounting?
Revenues are recorded when earned and expenditures are recorded as soon as they result in liabilities for benefits received.
Under the modified accrual basis of accounting, when are revenues recognized?
Revenues are recognized in the period in which they become available and measurable.
What conditions must revenues meet to be recognized under the modified accrual basis?
Revenues must be 'available' and collectible within the period or soon enough thereafter to pay liabilities incurred.
How are expenditures for operations, capital outlays, and debt service recognized under the modified accrual basis?
Expenditures are recognized when liabilities are incurred for operations, capital outlays, and when debt service payments on long-term debt are due.
Explain the difference in recognizing revenues between governmental-type funds and proprietary-type funds.
Revenues may be recognized later in governmental-type funds than in proprietary-type funds.
What is the significance of the term 'available' in the context of revenue recognition?
Revenues must be collectible within the period or soon enough thereafter to pay liabilities incurred for expenditures.
Learn the differences between agency funds and trust funds, including how assets and liabilities are managed, the purpose of funds, and how resources are held. Understand how trust fund assets can include investments to grow the net assets of the fund for specific purposes.
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