Question 1

Why is depreciation on fixed assets not recorded in the records of expendable fund entities?

Accepted Answer

Assets acquired with the resources of an expendable fund entity do not represent expendable financial resources but rather reflect the purposes for which the financial resources have been used.Thus, they are recorded and reported as expenditures of, rather than as assets of, the expendable fund entity.Depreciation is not accounted for in the records of an expendable fund entity for the same reasons that fixed assets are excluded from the records of such entities.Expenditures, not expenses, are measured in fund accounting.
Acquisitions of fixed assets require the use of financial resources and are accounted for as expenditures.Depreciation of such assets is not a use of the financial resources of an expendable fund entity and thus is not properly recorded in the accounts of such entities.Inclusion of depreciation expense in the operating statement of an expendable fund entity would confuse two fundamentally different measurements - expenditures and expenses.

Question 2

What columns would you suggest for a subsidiary ledger account in order that it might be a subsidiary not only to the "appropriations" control account but also the "encumbrances" and the "expenditures" control accounts?

Accepted Answer

There should be columns for the following balances: Appropriations, Encumbrances, Expenditures, Total Encumbrances and Expenditures, and Unencumbered Balance.

Question 3

The reserve for encumbrances account is properly considered to be a

Accepted Answer

A) current liability if payable within a year; otherwise, long-term debt. 
B) fixed liability. 
C) floating debt. 
D) reservation of the fund's equity. 
A) current liability if payable within a year; otherwise, long-term debt. 
B) fixed liability. 
C) floating debt. 
D) reservation of the fund's equity. D

Question 4

Which type of fund entities are used to account for the activities of nonbusiness organizations that are similar to those of business enterprises?

Accepted Answer

A) Expendable fund entities 
B) Proprietary fund entities 
C) Budgetary fund entities 
D) Restricted fund entities 
A) Expendable fund entities 
B) Proprietary fund entities 
C) Budgetary fund entities 
D) Restricted fund entities

Question 5

Under GASB Statement No.34, a government-wide financial statement should include a:

Accepted Answer

A) statement of revenues & and expenses. 
B) statement of activities. 
C) statement of financial position. 
D) notes to the financial statements. 
A) statement of revenues & and expenses. 
B) statement of activities. 
C) statement of financial position. 
D) notes to the financial statements.

Question 6

What is the significance of the "unreserved fund balance" of an expendable fund entity?

Accepted Answer

At any particular point in time the unre

Question 7

The GASB has the responsibility for establishing financial accounting standards for all of the following entities except:

Accepted Answer

A) state and local government entities. 
B) veterans hospitals. 
C) school districts. 
D) civic organizations. 
A) state and local government entities. 
B) veterans hospitals. 
C) school districts. 
D) civic organizations.

Question 8

If a credit was made to the fund balance in the process of recording a budget for a governmental unit, it can be assumed that

Accepted Answer

A) estimated expenses exceed actual revenues. 
B) actual expenses exceed estimated expenses. 
C) estimated revenues exceed appropriations. 
D) appropriations exceed estimated revenues. 
A) estimated expenses exceed actual revenues. 
B) actual expenses exceed estimated expenses. 
C) estimated revenues exceed appropriations. 
D) appropriations exceed estimated revenues.

Question 9

The term used to describe the application of accounting to expendable fund entities is the

Accepted Answer

A) accrual method. 
B) cash method. 
C) modified cash method. 
D) modified accrual method. 
A) accrual method. 
B) cash method. 
C) modified cash method. 
D) modified accrual method.

Question 10

In accounting for and reporting inventory in the financial statements, the "Reserve for Inventory" account is used under

Accepted Answer

A) the consumption method. 
B) the purchase method. 
C) both the consumption and purchase methods. 
D) none of these. 
A) the consumption method. 
B) the purchase method. 
C) both the consumption and purchase methods. 
D) none of these.

Question 11

What journal entry should be made at the end of the fiscal year to close out encumbrances for which goods and services have not been received?

Accepted Answer

A) Debit reserve for encumbrance and credit encumbrances. 
B) Debit reserve for encumbrances and credit fund balance. 
C) Debit fund balance and credit encumbrances. 
D) Debit encumbrances and credit reserve for encumbrances. 
A) Debit reserve for encumbrance and credit encumbrances. 
B) Debit reserve for encumbrances and credit fund balance. 
C) Debit fund balance and credit encumbrances. 
D) Debit encumbrances and credit reserve for encumbrances.

Question 12

Governmental units include all of the following except

Accepted Answer

A) counties. 
B) school districts. 
C) industrial development districts. 
D) voluntary health and welfare organizations. 
A) counties. 
B) school districts. 
C) industrial development districts. 
D) voluntary health and welfare organizations.

Question 13

The following related entries were recorded in sequence in the general fund of a municipality:   The sequence of entries indicates that

Accepted Answer

A) an adverse event was foreseen and a reserve of $15,000 was created; later the reserve was cancelled and a liability for the item was acknowledged. 
B) an order was placed for goods or services estimated to cost $15,000; the actual cost was $15,350 for which a liability was acknowledged upon receipt. 
C) encumbrances were anticipated but later failed to materialize and were reversed.A liability of $15,350 was incurred. 
D) the first entry was erroneous and was reversed; a liability of $15,350 was acknowledged. 
A) an adverse event was foreseen and a reserve of $15,000 was created; later the reserve was cancelled and a liability for the item was acknowledged. 
B) an order was placed for goods or services estimated to cost $15,000; the actual cost was $15,350 for which a liability was acknowledged upon receipt. 
C) encumbrances were anticipated but later failed to materialize and were reversed.A liability of $15,350 was incurred. 
D) the first entry was erroneous and was reversed; a liability of $15,350 was acknowledged.

Question 14

Is the year-end balance in the Reserve for En-cumbrances account a liability? Explain.

Accepted Answer

The balance in the Reserve for Encumbran

Question 15

Distinguish between an appropriation, an en-cumbrance encumbrance, an expenditure, and a disbursement.

Accepted Answer

An appropriation is an authorization ena

Question 16

What are the revenue-recognition criteria for expendable fund entities? How do these criteria differ from revenue-recognition criteria for profit-oriented enterprises?

Accepted Answer

In accounting for expendable funds entit

Question 17

Why may it be difficult or impossible for a governmental unit to determine the total cost of performing a particular activity or function?
Business Ethics Question from the Textbook
At State College, where football has long reigned asking and fans are near fanatical in their attendance, the frenzy for football tickets has recently reached an all-time high.With requests for home game tickets at an unprecedented level, prices on everything from parking passes to hotel rooms to home rentals have soared beyond belief.Parking passes were going for $500 on eBay, and hotel rates have doubled-and in some cases nearly tripled-reaching as high as $650 per night at some hotels.

Accepted Answer

In order to determine the total cost of

Question 18

Expenditures may be classified by function, activity, object, or organizational unit.Give an ex-ample of each classification for a municipality.Which classification is the most appropriate for
external financial reporting?

Accepted Answer

Municipality:
Functions - Public Safety

Question 19

How does the adoption of a budget for a general fund entity differ from the adoption of a budget by a commercial unit?

Accepted Answer

The adoption of a budget for a general f

Question 20

The "reserve for encumbrances-prior year" account represents amounts recorded by a governmental unit for

Accepted Answer

A) anticipated expenditures in the next year. 
B) expenditures for which purchase orders were made in the prior year but disbursement will be in the current year. 
C) excess expenditures in the prior year that will be offset against the current-year budgeted amounts. 
D) unanticipated expenditures of the prior year that become evident in the current year. 
A) anticipated expenditures in the next year. 
B) expenditures for which purchase orders were made in the prior year but disbursement will be in the current year. 
C) excess expenditures in the prior year that will be offset against the current-year budgeted amounts. 
D) unanticipated expenditures of the prior year that become evident in the current year.

Why is depreciation on fixed assets not recorded in the records of expendable fund entities?

What columns would you suggest for a subsidiary ledger account in order that it might be a subsidiary not only to the "appropriations" control account but also the "encumbrances" and the "expenditures" control accounts?

The reserve for encumbrances account is properly considered to be a

Which type of fund entities are used to account for the activities of nonbusiness organizations that are similar to those of business enterprises?

Under GASB Statement No.34, a government-wide financial statement should include a:

What is the significance of the "unreserved fund balance" of an expendable fund entity?

The GASB has the responsibility for establishing financial accounting standards for all of the following entities except:

If a credit was made to the fund balance in the process of recording a budget for a governmental unit, it can be assumed that

The term used to describe the application of accounting to expendable fund entities is the

In accounting for and reporting inventory in the financial statements, the "Reserve for Inventory" account is used under

What journal entry should be made at the end of the fiscal year to close out encumbrances for which goods and services have not been received?

Governmental units include all of the following except

The following related entries were recorded in sequence in the general fund of a municipality: The sequence of entries indicates that

Is the year-end balance in the Reserve for En-cumbrances account a liability? Explain.

Distinguish between an appropriation, an en-cumbrance encumbrance, an expenditure, and a disbursement.

What are the revenue-recognition criteria for expendable fund entities? How do these criteria differ from revenue-recognition criteria for profit-oriented enterprises?

Expenditures may be classified by function, activity, object, or organizational unit.Give an ex-ample of each classification for a municipality.Which classification is the most appropriate for external financial reporting?

How does the adoption of a budget for a general fund entity differ from the adoption of a budget by a commercial unit?

The "reserve for encumbrances-prior year" account represents amounts recorded by a governmental unit for

Introduction to Business Combinations and the Conceptual Framework

Accounting for Business Combinations

Consolidated Financial Statementsdate of Acquisition

Consolidated Financial Statements After Acquisition

Allocation and Depreciation of Differences Between Implied and Book Value

Elimination of Unrealized Profit on Intercompany Sales of Inventory

Elimination of Unrealized Gains or Losses on Intercompany Sales of Property and Equipment

Changes in Ownership Interest

Intercompany Bond Holdings and Miscellaneous

Insolvency Liquidation and Reorganization

International Financial Reporting Standards

Accounting for Foreign Currency Transactions

The Translation of Financial Statements of Foreign Affiliates

Reporting for Segments and for Interim Financial Periods

Partnerships: Formation, Operation, and Ownership Changes

Partnership Liquidation

Introduction to Accounting for State and Local Governmental Units

Accounting for Nongovernment Nonbusiness Organizations:

Filters

Exam 17: Introduction to Fund Accounting

Why is depreciation on fixed assets not recorded in the records of expendable fund entities?

What columns would you suggest for a subsidiary ledger account in order that it might be a subsidiary not only to the "appropriations" control account but also the "encumbrances" and the "expenditures" control accounts?

The reserve for encumbrances account is properly considered to be a

Which type of fund entities are used to account for the activities of nonbusiness organizations that are similar to those of business enterprises?

Under GASB Statement No.34, a government-wide financial statement should include a:

What is the significance of the "unreserved fund balance" of an expendable fund entity?

The GASB has the responsibility for establishing financial accounting standards for all of the following entities except:

If a credit was made to the fund balance in the process of recording a budget for a governmental unit, it can be assumed that

The term used to describe the application of accounting to expendable fund entities is the

In accounting for and reporting inventory in the financial statements, the "Reserve for Inventory" account is used under

What journal entry should be made at the end of the fiscal year to close out encumbrances for which goods and services have not been received?

Governmental units include all of the following except

The following related entries were recorded in sequence in the general fund of a municipality: The sequence of entries indicates that

Is the year-end balance in the Reserve for En-cumbrances account a liability? Explain.

Distinguish between an appropriation, an en-cumbrance encumbrance, an expenditure, and a disbursement.

What are the revenue-recognition criteria for expendable fund entities? How do these criteria differ from revenue-recognition criteria for profit-oriented enterprises?

Expenditures may be classified by function, activity, object, or organizational unit.Give an ex-ample of each classification for a municipality.Which classification is the most appropriate for external financial reporting?

How does the adoption of a budget for a general fund entity differ from the adoption of a budget by a commercial unit?

The "reserve for encumbrances-prior year" account represents amounts recorded by a governmental unit for

Introduction to Business Combinations and the Conceptual Framework

Accounting for Business Combinations

Consolidated Financial Statementsdate of Acquisition

Consolidated Financial Statements After Acquisition

Allocation and Depreciation of Differences Between Implied and Book Value

Elimination of Unrealized Profit on Intercompany Sales of Inventory

Elimination of Unrealized Gains or Losses on Intercompany Sales of Property and Equipment

Changes in Ownership Interest

Intercompany Bond Holdings and Miscellaneous

Insolvency Liquidation and Reorganization

International Financial Reporting Standards

Accounting for Foreign Currency Transactions

The Translation of Financial Statements of Foreign Affiliates

Reporting for Segments and for Interim Financial Periods

Partnerships: Formation, Operation, and Ownership Changes

Partnership Liquidation

Introduction to Accounting for State and Local Governmental Units

Accounting for Nongovernment Nonbusiness Organizations:

Filters