Homework answers / question archive /   Chapter 3 Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority   True/False Questions   The term, Fund Balance, is used to indicate the residual net assets of a proprietary fund

  Chapter 3 Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority   True/False Questions   The term, Fund Balance, is used to indicate the residual net assets of a proprietary fund

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  Chapter 3 Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority

 

True/False Questions

 

1. The term, Fund Balance, is used to indicate the residual net assets of a proprietary fund.

 

 

2. Net resources of a governmental fund represented by currently due taxes receivable is an example of a nonspendable fund balance

 

 

3. Net resources of a governmental fund represented by prepaid insurance is an example of a nonspendable fund balance

 

4. $200,000 to be used to fund government operations in the future from the General Fund is an example of an unassigned fund balance.

 

 

5. Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures is an example of a restricted fund balance.
6. Rainy day funds are classified as committed if they are created by a resolution or ordinance that identifies the specific circumstances under which the resources may be expended. 

 

7. If “rainy day” funds are available “in emergencies” or periods of “revenue shortfalls” they are not ordinarily classified as committed.

 

8. Rainy day funds that are available “in emergencies” or “revenue shortfalls” may still be classified as committed if the emergency or shortfall condition is specified and is of such a magnitude as to distinguish it from events that are routine.
9. An exchange transaction is one where each party is given and receives essentially equal value. 

 

 

10. A nonexchange transaction is one where a government receives resources without giving equal value in return.

 

 

11. When using modified accrual accounting, revenues should be recognized when measurable and available to finance expenditures of the current period. 

 

 

12. Property tax revenue is considered available if it is received no more than 30 days after the fiscal year end. 
13. Expenditures under modified accrual accounting are recognized when current fund liabilities are incurred.

 

 

14. Modified accrual accounting is essentially the same as cash basis except that long term assets are not recorded.
15. The modified accrual basis is a distinct system of accounting that contains financial statement elements that appear nowhere else

 

16. There are no expenses in modified accrual funds

 

17. Revenues, but not expense are recorded the same under accrual and modified accrual accounting.

 

 

18. Budgets are not legally binding upon administrators
19. Real estate property taxes are an example of imposed tax revenue.

 

20. Sales taxes, income taxes, and motor fuel taxes are examples of exchange transactions.

 

 

21. Sales taxes, income taxes, and motor fuel taxes are examples of government-mandated nonexchange transactions

 

 

22. A Non-exchange transaction is one in which a government receives value without directly giving equal value in exchange.

 

23.  Fair Exchange transaction is one in which a government gives or receives value without directly receiving or giving equal value in exchange.

 

 

 

24. Modified accrual accounting is essentially equivalent to cash basis accounting

 

 

 

25. The only difference between modified accrual accounting and accrual accounting is the difference in the recognition of long-term assets and liabilities.

 

 

26.  With respect to Governmental Funds, Fund Balance must be broken down into assigned and unassigned.

 

 

27. The GASB has categorized nonexchange transactions into two categories:  (1) imposed nonexchange revenues and (2) voluntary nonexchange transactions.

 

 

28. An example of an imposed nonexchange revenue is the property tax.

 

 

29. A donation received is considered a voluntary nonexchange transaction only if it is unrestricted.

 

 

30. The GASB has created four “eligibility requirements” that must be met before revenue can be recognized: (1) required characteristics of recipients, (2) timing, (3) reimbursements, and (4) contingencies.

 

 

31. Under GASB Statement 33 requirements for accrual accounting, property tax revenue should be recognized in the period that the tax is collected.

 

 

32. Under modified accrual accounting, property tax revenue should be recognized when measurable and available; available means collected no more than 60 days after year-end.

 

 

33. When recording the budget, an excess of estimated revenues over appropriations would be credited to Budgetary Fund Balance.

 

 

 

34. When a purchase order or contract is issued as authorized by an appropriation, it is known as an expenditure.

 

35. The budgetary account used to record budgeted revenues is called “Estimated Revenues Control."

 

 

36. The category “other financing sources” includes transfers from other funds and bond issue proceeds.

 

 

37. Examples of budgetary accounts include Estimated Revenues, Appropriations, and Estimated Other Financing Uses.

 

 

38. GASB requires that the budgetary basis of accounting for the General Fund used in the Budget-Actual Comparison Schedule be on the same modified accrual basis as the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balance.

 

 

39. Under the modified accrual basis, property taxes are recognized in the period in which cash is received, regardless of when the taxes were levied.

 

              When liabilities authorized by an appropriation have been incurred, the appropriation is said to be expended.

 

 

40. The Budgetary Comparison Schedule is considered a part of Required Supplementary Information in the Comprehensive Annual Financial Report.

 

 

41. Encumbrances are recorded when a purchase order is filled or a contract is executed.

 

 

42. Encumbrances are often deemed unnecessary for recurring expenditures such as payroll.

 

 

43. The Budgetary Comparison Schedule requires a column for the original budget, a column for the final revised budget, and a column for actual figures, computed on the accrual basis.

 

        

44. Budgetary accounts begin each year with a zero balance and are closed at the end of each year.

 

 

45. “Unexpended Appropriations Balance” may be interpreted as how much a government may continue to spend and remain within its budget.

 

 

46. Expenditure classification by character includes current, capital outlay, and debt service.

 

 

47. The journal entry to record a purchase order in the General Fund would be a debit to encumbrances control account and credit Accounts Payable

 

 

48. An appropriation is authorization for administrators to incur specified amounts of liabilities on behalf of the government for specified purposes.

 

 

 

 

49. Transfers from one fund to another are classified as expenditures in the fund making the transfer. 

 

 

50. Encumbrance is the legal authorization for administrators of governmental unit to incur liabilities for purposes specified and to not exceed the amount specified.

 

 

51. Expenditure is a decrease in fund financial resources (net of liabilities) other than through interfund transfers.

 

 

52. Modified accrual accounting records encumbrances when goods are ordered and accrual accounting only records a liability only when goods are received.

 

 

53. Revenues for governmental funds should be recognized when measurable and available for expenditure in the current period.

 

54. When purchase orders are filled and the invoice amount differs from the estimated amount, the amount recorded as an expenditure corresponds to the invoice amount.

 

 

55. When purchase orders are filled and the invoice amount differs from the estimated amount, the amount reversed from the encumbrance account equals the invoice amount.

 

 

56. Governments may create special revenue funds whenever a tax or other revenue source is legislated to be used for a specific purpose, other than capital assets or debt service.

 

 

 

57. GASB requires a reconciliation between the amount shown as GAAP expenditures in the basic financial statements and the amount shown in the budgetary comparison schedule.

 

 

 

Multiple Choice Questions

 

58.   The modified accrual basis is a distinct system of accounting that:

1. Differs from accrual accounting only in its failure to recognize long term assets and liabilities.
2. Records expenditures and fund balances.
3. Records expenses and revenues the same as accrual accounting
4. Is equivalent to cash basis accounting

 

 

 

The Township of Thomasville’s General Fund has the following net resources at year end:

           

• $66,000 of prepaid insurance
• $375,000 rainy day fund approved by the township governing board with specific conditions for its use
• $2,500 of supplies  inventory
• $61,000 state grant for snow removal
• $150,000 contractual obligations for the purchase of equipment
• $200,000 to be used to fund government operations in the future
• Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures

 

 

59. What would be the total Nonspendable fund balance?

1.  $   2,500
2. $  66,000
3. $  68,500
4. $148,500

 

 

 

60. What would be the total Restricted fund balance?

1. $291,000
2. $211,000
3. $150,000
4. $  61,000

 

 

61. What would be the total Committed fund balance?

1. $375,000
2. $290,000
3. $525,000
4. $455,000

 

 

62. What would be the total Assigned fund balance?

1. $105,000
2. $455,000
3. $  67,500
4. $  80,000

 

 

63. What would be the total Unassigned fund balance?

1. $200,000
2. $280,000
3. $  80,000
4. $377,500

 

 

64. Which of the following is true with respect to rainy day funds?

 

1. 1. 1. Rainy day funds are classified as committed if they are created by a resolution or ordinance that identifies the specific circumstances under which the resources may be expended. 
      2. If rainy day funds are available “in emergencies” or periods of “revenue shortfalls” they are classified as committed.
      3. Both A and B.
      4. Neither A nor B.

 

 

 

65. A transaction in which a government gives or receives value without directly receiving or giving equal value in exchange is known as a(n):

A)  Non-exchange Transaction.

B)  Fair Exchange.

C)  Equity Transaction.

D)  Not Fair Market Exchange transaction.

 

 

66. Which of the following is not one of the four classes into which nonexchange transactions apply in accordance with GASB Statement No. 33?

            A)  Voluntary nonexchange transactions.

            B)   Imposed nonexchange revenues.

            C)   Derived Tax Revenues.

            D)  Mandatory exchange transactions.

 

 

67. Property Taxes, special assessments, and fines and forfeits are types of nonexchange transactions.  These are examples of:

            A)  Government-mandated nonexchange transactions.

            B)   Imposed nonexchange transactions.

            C)   Deferred tax revenues.

            D)  Voluntary nonexchange transactions.

 

 

68. Which of the following would not be a nonexchange transaction for a state government?

            A)  Fines and forfeits.

            B)   Property taxes.

            C)   Sales of lottery tickets.

            D)  Income taxes.

 

 

 

69. Sales taxes, income taxes, and motor fuel taxes are examples of which class of nonexchange transactions?

A)  Imposed nonexchange transactions.

B)  Derived tax revenues.

C)  government-mandated nonexchange transactions.

D)  Voluntary nonexchange transactions.

 

 

70. Fines and Forfeits are typically recognized:

A) When cash is deposited.

B) When cash is received.

C) When the transaction is finalized.

D) None of the above.

 

 

 

71. The four classes of nonexchange transactions include all of the following except:

A) Imposed nonexchange revenues.

B) Derived tax revenues.

C) Sales of Services.

D) Voluntary nonexchange transactions.

 

 

 

 

72. With respect to budgetary reporting by governments, which of the following is not true?

1. While GASB standards guide the format of the comparison, it does not require governments to maintain budgetary accounts. 
2.   The basis of accounting used to report the “Actual” column in the budgetary comparison schedule is prepared according to legal requirements for budget preparation; even if it is a departure from GASB standards.
3.   Budgetary accounts are required to appear in the general purpose financial statements.
4. GASB standards require governments to present a comparison of budgeted and actual results for the General Fund and special revenue funds with legally adopted budgets.

 

 

 

73. The general ledger journal entry in the General Fund to record the adoption of a budget would include:

1. A debit to Estimated Revenues Control
2. A credit to Estimated Other Financing Sources Control
3. A debit to Budgetary Fund Balance-Reserve for Encumbrances
4. A debit to Appropriations Control

 

 

74. The general ledger journal entry in the General Fund to record encumbrances for the issuance of purchase orders would include:

1. A credit to Encumbrance Control
2. A debit to Expenditures Control
3. A credit to Accounts Payable
4. A credit to Budgetary Fund Balance-Reserve for Encumbrances

 

 

75. The general ledger journal entry in the General Fund to record actual expenditures and reversal of the associated encumbrance would include:

1.  A debit to Encumbrance Control
2. A credit to Encumbrance Control
3. A debit to Accounts payable
4. A credit to Budgetary Fund Balance-Reserve for Encumbrances

 

 

 

76. Governmental Funds Fund Balance is displayed in which of the following categories?

1. Nonspendable, Spendable, Assigned, Unassigned
2. Nonspendable, Restricted, Unrestricted
3. Restricted, Unrestricted, Assigned, Unassigned
4. Nonspendable, Restricted, Committed, Assigned, Unassigned

 

 

 

77. According to GASB Statement No. 54 which of the following is an example of a nonspendable fund balance?

1. Resources (such as supplies) that are used in operations rather than converted to cash
2. The corpus of a permanent fund that may not be spent
3.  Prepaid insurance
4. All of the above

 

 

78. According to GASB Statement No. 54, spendable fund balances are displayed in which of the following categories?

1. Restricted, Unrestricted, Assigned, Unassigned
2. Restricted, Committed, Assigned, Unassigned
3. Spendable, Assigned, Unassigned
4. Restricted, Unrestricted

 

 

79. Which of the following statements is not true with respect to GASB Statement No. 54 regarding restricted fund balances?

1. Restricted funds are those that are subject to constraints imposed by external parties or by law. 
2. Restricted fund balance can result from legally enforceable requirements that resources be used only for specific purpose.
3. Restricted funds are the result of a self-imposed constraint by a government upon itself.
4. All of the above are correct

 

 

80. Which of the following statements is correct with respect to GASB Statement No. 54 regarding committed funds?

1.  Committed funds are those that are designated as committed through ordinance or resolution by the government’s highest level of authority.
2.  These constraints are easily changed by administrators. 
3. This is constraint is imposed by law and may not be changed without amendment of the law.
4. Committed funds may be redesignated to uncommitted in the event of a budget shortfall.

 

 

 

81. According to GASB Statement No. 54 which of the following statements is not true regarding assigned funds?

1. Assigned fund balances represent governmental resources that the government intends to use for a specific purpose such as a debt service fund. 
2. Constraints on assigned resources are more easily changed than committed funds.
3. For governmental funds other than the General Fund, this is the category for all positive residual fund balances.
4. This is the only fund balance that can be negative

 

 

82. According to GASB Statement No. 54 an unassigned fund balance is
    1. 1. The residual category for the General Fund. 
       2. The only category of Fund balance that may not be reported as a negative number.
       3. The designation given for rainy day funds.
       4. None of the above

 

           

83. GASB standards ____________ that each governmental reporting entity display ___________ General Fund in its general-purpose financial statements.

            A)  recommend, one or more

            B)   recommend, only one

            C)   require, only one

            D)  require, one or more

 

 

84. Where is tax-supported long term debt reported?

            A)  General Fund Balance Sheet

            B)   Special Revenue Funds Balance Sheet

            C)   Debt Service Funds Balance Sheet

            D)  Government-wide Statement of Net Assets

 

 

 

85. Which of the following expenditure classification schemes may be used by governmental funds

            A)  Activity

            B)   Character

            C)   Function

            D) All of the above

86. Assume estimated revenues exceed appropriations.  When the budget for the General Fund is recorded, the journal entry will include:

            A)  a credit to Budgetary Fund Balance.

            B)   a credit to Estimated Revenues Control.

            C)   a debit to Appropriations Control.

            D)  a credit to Budgetary Fund Balance -- Reserve for Encumbrances.

 

 

87. All of the following are commonly used major revenue source classes except for

            A)  Taxes

            B)   Intergovernmental revenues

            C)   Fines and Forfeits

            D)  Transfers from other funds

 

 

88. What is the first step a government takes in acquiring goods or services through the General Fund?

            A)  Appropriation

            B)   Expenditure

            C)   Requisition order

            D)  Encumbrance

 

 

 

89. Assume encumbrances do not expire at year-end.  $16,000 was encumbered during the prior year for a computer and the actual cost of the computer in the current year is $14,000.  How does this affect unassigned fund balance?

            A)  Previous Year: increase $16,000; Current Year: decrease $14,000

            B)   Previous Year: decrease $16,000; Current Year: increase $2,000

            C)   Previous Year: no effect; Current Year: decrease $14,000

            D)  Previous Year: decrease $16,000; Current Year: decrease 14,000

 

 

90. Which of the following items would typically not need an encumbrance?

            A)  New Building

            B)   Regular Salaries

            C)   New Computer

            D)  Office Equipment

 

 

91.  Revenues of governmental fund types should be recognized when:

            A)  collected in cash.

            B)   authorized by the budget ordinance.

            C)   taxes become delinquent.

            D)  measurable and available.

 

 

92. Wages that have been earned by the employees of a governmental unit, but not paid at year-end, should be recorded in the General Fund by a debit to which of the following accounts?

            A)  Appropriations.

            B)   Encumbrances.

            C)   Expenses.

            D)  Expenditures.

 

 

93. The Revenues account of a government is credited when:

            A)  property taxes are recorded.

            B)   property taxes are collected.

            C)   the budget is recorded in the accounts.

            D)  budgetary accounts are closed at the end of the year.

 

 

94. The Fire Department of a given city received an appropriation in the amount of $14,000,000 for the fiscal year ended June 30, 2014.  During the month ended July 31, 2013, the following transactions occurred:  (a) purchase orders were issued in the amount of $650,000; (b) purchase orders, related to (a) above, were filled in the amount of $610,000; the related invoice amount was $595,000; invoices were paid in the amount of $550,000; (c) salaries were accrued and paid in the amount of $600,000.  The balance available for the fire department as of July 31, 2013 is:

            A)  $12,740,000.

            B)   $12,800,000.

            C)   $12,765,000.

            D)  $12,840,000.

 

 

95. The Police Department of a given city received an appropriation in the amount of $8,000,000 for the fiscal year ended June 30, 2014. During the month ended July 31, 2013, the following transactions occurred:  (a) purchase orders were issued in the amount of $500,000; (b) purchase orders, related to (a) above, were filled in the amount of $460,000; the related invoice amount was $463,000; invoices were paid in the amount of $450,000; (c) salaries were accrued and paid in the amount of $480,000.  The balance available for the police department as of July 31, 2013 is:

A)  $7,010,000.

B)  $7,017,000.

C)  $7,000,000.

D)  $7,007,000.

 

 

96. An example of expenditure classification by object would be:

            A)   Current.

            B)   Public safety.

            C)   Police department.

            D)  Salaries.

 

 

 

97. In a budgetary entry (combining entry), if Estimated Revenues Control exceeds Appropriations Control, the excess would be:

            A)  credited to Fund Balance-Unreserved.

            B)   debited to Fund Balance-Unreserved.

            C)   debited to Budgetary Fund Balance.

            D)  credited to Budgetary Fund Balance.

 

 

98. A Budgetary Comparison Schedule is:

            A)  optional under GASB standards for all funds.

            B)   required by GASB for internal management reports only; not permitted for external financial reporting.

            C)   required for all governmental fund types.

            D)  required for the General Fund, and for special revenue funds, for which an annual budget has been adopted.

 

 

99. When a computer which is to be used by an activity accounted for by the General Fund of a governmental unit is received, it should be recorded in the General Fund as a(an):

            A)  Expenditure.

            B)   Appropriation.

            C)   Encumbrance.

            D)  Capital asset.

 

 

100. In a budgetary entry, if Appropriations Control exceeds Estimated Revenues Control, the excess would be:

A)  debited to Budgetary Fund Balance.

B)  credited to Budgetary Fund Balance.

C)  credited to Fund Balance-Unassigned.

            D)  credited to Fund Balance-Reserved for Encumbrances.

 

 

 

101. When supplies ordered for use in an activity accounted for in the General Fund of a government are received at an actual price which is less than the estimated price on the purchase order, the Encumbrance Control account is:

            A)  debited for the estimated price on the purchase order.

            B)   credited for the estimated price on the purchase order.

            C)   debited for the actual price for the supplies received.

            D)  credited for the actual price of the supplies received.

 

 

102. If Budgetary Fund Balance was debited in the process of recording a budget for the General Fund of a governmental unit, it can be assumed that:

            A)  Estimated Revenues exceed Appropriations.

            B)   Estimated Expenses exceed Actual Revenues.

            C)   Actual Expenses exceed Estimated Expenses.

            D)  Appropriations exceed Estimated Revenues.

 

 

103. The Budgetary Fund Balance -- Reserve for Encumbrances account is properly considered to be a(an):

            A)  current liability.

            B)   expenditure.

            C)   long-term liability.

            D)  None of the above.

 

 

104. A certain government passed its budget for the fiscal year ended December 31, 2014.  Estimated Revenues amounted to $13,000,000; Appropriations amounted to

            $11,900,000; Estimated Other Financing Uses amounted to $700,000; and Estimated Other Financing Sources amounted to $200,000. In the budgetary entry (combining entry):

1. 1. Budgetary Fund Balance would be credited for $3,200,000.
   2. Budgetary Fund Balance would be credited for $600,000.
   3. Budgetary Fund Balance would be debited for $3,200,000.
   4. Budgetary Fund Balance would be credited for $1,600,000.

 

 

 

105. Budgetary Fund Balance -- Reserve for Encumbrances (current year) in excess of a balance of Encumbrances Control indicates:

            A)  An excess of Vouchers Payable over Encumbrances Control.

            B)   An excess of purchase orders released over invoices received.

            C)   An excess of invoices received over purchase orders released.

            D)  A recording error.

 

 

106. Which of the following results in an expenditure?

            A)  Place a purchase order.

            B)   Receive goods previously ordered.

            C)   Receive an invoice on goods previously received.

            D)  Payment of an invoice previously received.

 

 

107. Which of the following results in an encumbrance?

            A)  Place a purchase order.

            B)   Receive goods previously ordered.

            C)   Receive an invoice on goods previously received.

            D)  Payment of an invoice previously received.

 

 

108. The Fire Department of a certain city received an appropriation in the amount of   $13,000,000 for the fiscal year ended December 31, 2014. During the month ended January 31, 2014, the following transactions occurred: (a) purchase orders were issued in the amount of $400,000; (b) purchase orders, related to (a) above, were filled in the amount of $380,000; the related invoice amount was $368,000; invoices were paid in the amount of $350,000; (c) salaries were accrued and paid in the amount of $575,000; (d) the appropriation was increased in amount of $100,000.  The amount available for the Fire Department as of January 31, 2014 would be:

            A)  $11,787,000.

            B)   $12,077,000.

            C)   $12,057,000.

            D)  $12,137,000.

 

 

 

Use the following to answer the next two questions:

 

The City of Park Ridge reported appropriations in the amount of $17,000,000 for its General Fund for the fiscal year ended December 31, 2014.  During that year, expenditures amounted to $16,200,000 (related to current year purchase orders) and $900,000 (related to prior year purchase orders).  In addition, $700,000 in encumbrances had been issued this year, but not filled.  Park Ridge follows the budgetary procedure where encumbrances do not lapse.

 

109. In its 2014 Budgetary Comparison Schedule, the amount Park Ridge reports for expenditures (and encumbrances, if applicable) would be:

            A)  $17,700,000.

            B)   $17,100,000.

            C)   $16,200,000.

            D)  $16,900,000.

 

 

110. The amount that Park Ridge would report for expenditures (and encumbrances, if applicable) in its 2014 General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances (GAAP Basis) would be:

            A)  $17,100,000.

            B)   $16,200,000.

            C)   $17,700,000.

            D)  $16,900,000.

 

 

111. The General Fund of the City of X passed a budget, providing for $2,000,000 in anticipated revenues and $1,990,000 in anticipated expenditures.  The journal entry(s) to record the budget would result in a:

            A)  credit to Appropriations Control in the amount of $1,990,000.

            B)   debit to Estimated Revenues Control in the amount of $2,000,000.

            C)   credit to Budgetary Fund Balance in the amount of $10,000.

            D)  all of the above.

 

 

112. All of the following are budgetary accounts except:

A)  Estimated Revenues

B)  Appropriations

C)  Expenditures

D)  All of the above

 

 

 

113. Estimated Revenues are $4,500,000, and Appropriations are $4,000,000, the journal entry for the budget includes a:

A)  Debit to Budgetary Fund balance for 500,000

B)  Debit to Encumbrances for 500,000

C)  Credit to Budgetary Fund balance for 500,000

D)  Credit to Budgetary Fund Balance -- Reserve for Encumbrances for 500,000

 

 

114. The legal authorization for the administrators of the governmental unit to incur liabilities during the budget period for purposes specified in the appropriations statute or ordinance and not to exceed the amount specified for each purpose is a (an):

A)  Appropriation

B)  Encumbrance

C)  Other financing source/use

D)  Expenditure

 

 

 

115. How would purchase orders and contracts be reported under modified accrual accounting and accrual accounting?

Modified Accrual                   Accrual

A)                       Expenditure                         Liability

B)                       Expenditure                         No entry

C)                       Encumbrance                       Liability

D)                       Encumbrance                       No entry

 

 

116. Revenues in governmental fund accounting…

A) include taxes, fees, resources provided by other governments, and interfund transfers

B) are recognized in the fiscal year they are available for expenditure

C) are recognized when earned

D) none of the above describes revenues in governmental accounting

 

 

 

117. The purpose of an encumbrance is to prevent governments from:

A) Overriding Unauthorized Contracts

B) Spending in Excess of the Amounts Authorized

C) Revising the Approved Budget

D) Misappropriating Tax Revenues

 

 

118. Under modified accrual accounting, budgetary authority expires at year end and the balances of Revenues and Expenditures are closed to

A)   Fund Balance

B)  Net Assets

C)  Other Financing Uses

D)  Other Financing Sources

 

 

119. Revenues are raised to finance governmental activities, but revenues may be expended only for purposes and in amounts approved by the legislative branch in compliance with laws of competent jurisdictions.  This process is known as the

A) Budgetary Fund

B) Encumbered Process

C) Expended Process

D) Appropriations Process

 

 

120. When liabilities authorized by an appropriation have been incurred, the appropriation is said to be…

A) Expensed

B) Encumbered

C) Expired

D) Expended

 

 

121. Expenditure classifications by function includes all of the following except

A) Debt Service

B) General Government

C) Public Safety

D) Highways & Streets

 

 

 

 

122. At what point would the General Fund account “Budgetary Fund Balance -- Reserve for Encumbrances” be debited?

A)  When an item is ordered by the government.

B)  When an authorized liability is incurred (the government receives the order).

C)  When cash is paid to the vendor.

D)  (A) or (B) depending on authorized appropriations.

 

 

123. The difference between an expenditure and an encumbrance is?

A)  An expenditure is the actual amount of an authorized liability and    

       encumbrances are estimates.

B)  An encumbrance is an expended expenditure.

C)  Enterprise funds record expenditures, but do not record encumbrances.

D)  Expenditures are estimates and encumbrances are not.

 

 

124. To record the budget for the General Fund

A) Estimated Revenue Control is Debited

B) Expenditure Control is Debited

C) Appropriations Control is Debited

D) Revenue Control is Debited

 

 

125. Which of the following is true regarding the final appropriations budget?

A)  Can be changed at any time by the accounting department

B)  Can be exceeded by actual appropriations

C)  Is legal and binding

D)  None of the above

 

 

126. Which of the following results in a decrease in fund balance on a governmental fund’s Balance Sheet?

A)  Expenditures

B)  Transfers Received

C)  Encumbrance

D)  Both A and B

 

 

 

 

127. At year-end, the balance of Expenditures, Revenues and Other Financing Sources and Uses accounts are closed to:

A) Budgetary Fund Balance

B) Expenses

C) Expenditure Control

D) Fund Balance

 

 

128. When a liability is incurred as authorized by an appropriation, the appropriation is said to be:

A) Encumbered

B) Appropriated

C) Expended

D) Expensed

 

 

           

 

 

Short answer Questions

 

129. What is the difference between an exchange and a nonexchange transaction? 

 

 

130.  Define and give an example of each of the following categories of Fund Balance outlined in GASB Statement No. 54:

 

Nonspendable

Restricted

Committed

Assigned

Unassigned

 

131. List the four eligibility requirements for a government to record revenue from a nonexchange transaction.  Provide a brief explanation for each.

 

 

132.  What are the four classes of nonexchange revenues?

 

133. What are the revenue and expenditure recognition criteria under modified accrual accounting?  Include in your answer specifically the recognition of property tax revenue.

 

 

 

134.  With respect to reporting for the General Fund, what is the difference between GAAP basis and budgetary basis reporting?

 

 

        

135. Briefly discuss how governmental budgeting differs from budgeting for businesses.

 

           

 

136. Distinguish between the Encumbrances Control account and the Budgetary Fund Balance -- Reserve for Encumbrances account

 

 

 

137. Define the term “Expenditure” and distinguish between that term and each of the following terms:

           

1. Expense
2. Disbursement
3. Encumbrance

 

 

138. Define the term “Revenue” and distinguish between that term and “Other Financing Sources.”

 

 

Exercises

 

139. The Village of Lake George’s General Fund has the following net resources at December 31, 2014

 

• $5,000 of prepaid insurance
• $ 25,000 of property taxes receivable – currently due and expected to be collected within 60 days
• $300,000 rainy day fund approved by the township governing board
• $82,500 of supplies  inventory
• $33,000 government grant for city park maintenance
• $10,000 contractual obligations for the purchase of park fixtures
• $200,000 to be used to fund government operations in the future

 

Required:  Prepare the fund balance section of the Balance Sheet

 

 

 

140. The City of Fairport adopted the following budget for fiscal year 2014:

           

Anticipated Revenues: Property Taxes Licenses and Permits Fines and Forfeits             Total	$4,050,000     510,000     402,000 $4,962,000
Approved spending levels: General Government Public Safety Public Works             Total	$1,560,000   2,300,000    1,085,000 $4,945,000

           

            In addition, the City reported the following actual amounts for the same fiscal year.

           

Revenues: Property Taxes Licenses and Permits Fines and Forfeits             Total	$4,065,000     492,000     411,000 $4,968,000
Expenditures – Current Year  General Government  Public Safety  Public Works                 Total   Encumbrances - Current Year  Public Safety   Expenditures related to 2013 encumbrances	$1,501,000   2,080,000      995,000 $4,576,000     $ 117,000   $ 10,000

           

            Required:  Prepare a budgetary comparison schedule for the City for the year ended December 31, 2014 assuming the fund balance of the General Fund (budgetary basis) was $627,000 at January 1, 2014.  No "original budget" column is required.  Include a "variance" column.

 

 

 

141. The City of Westboro passed an appropriations ordinance for the year ended June 30, 2014.  Included in the appropriations ordinance was an appropriation for public safety in the amount of $7,600,000.  During the month ended July 31, 2013 the following transactions took place:

1. Purchase orders were issued in the amount of $410,000.
2. Goods were received, related to purchase orders in the amount of $220,000, along with invoices amounting to $215,000.
3. Salaries were paid in the amount of $450,000
4. Because of an economic slowdown, a budget amendment was passed cutting all departments' (annual) appropriations by 4%.

 

            Required:

            Compute the amount of appropriations available at July 31, 2013.

 

 

 

 

 

142. Prepare the General Ledger journal entries for the General Fund for the Village of Bath for the year ended December 31, 2014

 

1.  The budget was formally adopted.  Estimated revenues are $3,250,000 and appropriations are estimated to be $3,204,500.
2. Revenues were received in the amount of $3,256,500.
3. Purchase orders were issued in the amount of $1,690,000.
4. Purchase orders were filled in the amount of $1,436,500.  The invoice amount was $1,443,000.
5. Expenditures, not encumbered, amounted to $1,352,000.  (not yet paid)
6. Amounts from d and e are paid