Deck 15: Governmental Accounting: the General Fund and the Account Groups

Question 1

A primary distinction between the flow of resources through a business enterprise and through a governmental entity is that operations in a governmental entity consume resources and assets to

A)produce goods and services to citizens entitled to receive them.
B)generate return on investment.
C)generate net income.
D)generate capital for future investments.

Answer 1

A
The operations performed by a government to provide goods and services for citizens who are legally entitled to receive them are not intended to generate a profit.

Question 2

Property taxes are considered:

A)imposed tax revenues.
B)derived tax revenues.
C)voluntary nonexchange transactions.
D)exchange transactions.

Answer 2

A
Property taxes are imposed tax revenues that are levied upon property owners.

Question 3

Governmental financial statements report whether financial resources received during a period were sufficient to cover the expenditures of the period, and whether spending was within budgetary limits. This is demonstrating:

A)profitability.
B)working capital management.
C)fiscal compliance.
D)resource optimization.

Answer 3

C
An important focus of governmental financial reporting is demonstrating financial compliance. Operating statements report whether or not financial resources received during a period are sufficient to cover the expenditures of that period and whether or not spending in particular areas was in compliance with approved budgets.

Question 4

Fees for licenses and permits are typically recognized as revenue:

A)when billed if they are expected to be received within the current period or soon enough after to pay liabilities of the current period.
B)when received.
C)when earned.
D)to the extent that related expenditures have been made if the fees are restricted as such.

Question 5

Income taxes are considered:

A)imposed tax revenues.
B)derived tax revenues.
C)voluntary nonexchange transactions.
D)exchange transactions.

Question 6

Inflows from other financing sources recorded in the general fund include all of the following except for:

A)Issuing general long term debt
B)Receipt of interfund transfers
C)Revenues from the donation of capital assets
D)Sales of capital assets

Question 7

Property taxes are recorded as revenue in the General Fund

A)when the property taxes are levied.
B)when the property taxes are due.
C)when property tax payments are received.
D)on a monthly pro rata basis.

Question 8

Recently effective accounting standards require the preparation of two separate sets of financial statements. The first set of fund financial statements are similar to the historical fund based reporting model. Which of the following statements is false concerning the additional financial statements that are now required?

A)the statements are designed to focus on the governmental unit as a whole
B)the statements consolidate all government operations on a full accrual basis
C)the statements are designed to report on the profit making ability of the resources collected
D)the statements adopt an economic resources measurement focus

Question 9

Proceeds from issuing long-term debt reflected as ___________in the general fund.

A)revenue.
B)deferred revenue.
C)an other financing source.
D)an increase in liabilities.

Question 10

The governmental Accounting Standards Board has stated governmental financial reporting should be designed to show:

A)accountability
B)interperiod equity
C)whether future taxpayers will be required to assume burden for services previously reported
D)all of the above

Question 11

The focus of governmental funds in fund accounting is a(n):

A)Economic Resource Measurement Focus.
B)Financial Resources Measurement Focus.
C)Cash Flow Measurement Focus.
D)Accrual Measurement Focus.

Question 12

A special assessment levied on citizens for a service they are receiving from a local government should be accounted for in a fund that matches the nature of the special assessment. Which of the following funds would not derive inflows from a service activity?

A)Capital Projects Fund
B)General Fund
C)Special Revenue Fund
D)Proprietary Fund

Question 13

Interest and dividends from investments are typically recognized as revenue:

A)when billed.
B)when received.
C)when earned.
D)to the extent that related expenditures have been made if the income is restricted as such.

Question 14

Trash removal fees are considered:

A)imposed tax revenues.
B)derived tax revenues.
C)voluntary nonexchange transactions.
D)exchange transactions.

Question 15

In fund financial statements, the accrual method of accounting is applied to all but:

A)Governmental funds.
B)Proprietary funds.
C)Fiduciary funds.
D)None of the above.

Question 16

The modified accrual method of accounting is applied to which of the following funds or asset groups?

A)Proprietary funds
B)Governmental funds
C)Fiduciary funds
D)Government trust funds

Question 17

If the city expends more during the budget year than it receives during the budget year in revenues that are available to finance the expenditures, it will

A)increase interperiod equity.
B)decrease interperiod equity.
C)increase taxes.
D)force the city to fire some employees.

Question 18

Sales taxes and other derived taxes are typically recognized as revenue:

A)when billed if they are expected to be received within the current period or soon enough after to pay liabilities of the current period.
B)when received.
C)when the underlying transaction occurs.
D)to the extent that related expenditures have been made if the fees are restricted as such.

Question 19

The body currently responsible for developing local governmental accounting standards is the

A)Financial Accounting Standards Board (FASB)
B)Governmental Accounting Standards Board (GASB)
C)National Council on Governmental Accounting (NCGA)
D)Municipal Finance Officers Association (MFOA)

Question 20

The cornerstone of external financial reporting for governmental units and not-for-profit organizations is:

A)to show the flow of financial resources
B)to determine profit or loss
C)to compare budgeted to actual resources
D)accountability

Question 21

Which of the following is not a type of account classification found in the general fund?

A)permanent balance sheet accounts
B)budgetary accounts
C)forecast accounts
D)operating accounts

Question 22

Fund balance that has an internal constraint imposed by formal action of the government's highest decision making authority is classified as:

A)restricted.
B)committed.
C)nonspendable.
D)assigned.

Question 23

A loss incurred as a result of a civil riot is considered a(n):

A)special item.
B)expenditure.
C)extraordinary item.
D)other financing use.

Question 24

Which of the following correctly portrays the necessary journalization of the budget journal entry?

Question 25

An authorized expenditure is a(n):

A)approved financing use.
B)appropriation.
C)encumbrance.
D)expense.

Question 26

Fund balance that is constrained to be used for a certain purpose or is encumbered is classified as:

A)restricted.
B)committed.
C)nonspendable.
D)assigned.

Question 27

Fund balance that consists of amounts such as inventory that are not in spendable form is classified as:

A)restricted.
B)committed.
C)nonspendable.
D)assigned.

Question 28

Fund balance that has an external constraint imposed by creditors, grantors, contributors or regulations is classified as:

A)restricted.
B)committed.
C)nonspendable.
D)assigned.

Question 29

Estimated uncollectible property taxes are:

A)charged to expenditures because they are a cost of doing business.
B)charged to bad debt expense because they are a cost of doing business.
C)viewed as a reduction of revenue when taxes are levied.
D)viewed as a reduction of revenue when it is determined they won't be paid.

Question 30

Which of the following correctly identifies how certain transactions are recorded (as a debit or credit) in the general fund?

Question 31

Debt that is recorded as a liability in the general fund because it is expected to be paid with available financial resources is:

A)serial debt.
B)long-term vendor financing.
C)a capital lease.
D)operating debt.

Question 32

In the governmental funds, an expenditure is recognized when:

A)the related liability is expected to be liquidated through available financial resources.
B)a capital asset is acquired.
C)principal and interest are paid on long-term debt.
D)All of the above.

Question 33

Jay County received a report from its actuary that stated its unfunded pension liability was $100,000, and a deposit of $15,000 needed to be made prior to the end of the fiscal year to the Pension Trust Fund. Jay should record:

A)an $100,000 expenditure in the general fund.
B)$100,000 as general long-term debt in the GLTDAG.
C)a $15,000 expenditure in the general fund.
D)None of the above.

Question 34

The entry in the General Fund to record the posting of a tax lien by a city would include a credit to

A)Tax Lien Receivable.
B)Revenue.
C)Taxes Receivable.
D)Taxes Receivable--Delinquent.

Question 35

Which one of the following statements is false concerning the accounting for the budget in the general fund general ledger?

A)The budgetary accounts are affected regularly as revenues and expenditures are recognized.
B)The budgetary accounts may be adjusted during the year to reflect amendments to the budget.
C)The budgetary accounts are closed at the end of the period.
D)The budgetary account for expenditures is called appropriations.

Question 36

The entry to record the Warwick City budget for the General Fund includes the following: The entry to close the budget accounts at the end of the year would include a debit to

A)Estimated Other Financing Sources.
B)Appropriations.
C)Budgetary Fund Balance--Unassigned.
D)Encumbrances.

Question 37

Which of the following would not be considered a budgetary account in the General Fund?

A)Estimated Other Financial Sources
B)Appropriations
C)Estimated Revenues
D)Fund Balances--Nonspendable

Question 38

Property taxes in the amount of $3,000,000 are billed to city property owners. It is estimated that two percent will prove to be uncollectible. In recording this event,

A)estimated Revenues would be credited for $2,940,000.
B)bad Debts would be debited for $60,000.
C)tax Liens Receivable would be debited for $60,000.
D)allowance for Uncollectible Current Property Taxes would be credited for $60,000.

Question 39

The entry to record the Warwick City budget for the General Fund includes the following: The entry to record this budget would include a debit to

A)Estimated Other Financing Uses.
B)Appropriations.
C)Budgetary Fund Balance--Unassigned.
D)Encumbrances.

Question 40

Which is not true about special items and extraordinary items?

A)Special items arise from events within the control of management.
B)Both are reported separately in the financial statements.
C)Both are unusual and infrequent in nature.
D)Both may be reported in a governmental or propriety fund financial statement.

Question 41

If a government enters into a securities lending agreement or reverse repurchase transaction, they would record as assets

A)the assets lent and the collateral received which would "double count" the assets.
B)only the collateral received.
C)only the assets originally held and lent.
D)the fair market value of the asset if sold.

Question 42

After the closing entries have been journalized and posted, but prior to the next accounting period, which of the following accounts would have a balance?

A)Fund Balance--Unassigned
B)Appropriations
C)Other Financing Uses
D)Revenues

Question 43

A city should record an unfunded liability for a claim from a citizen who files suit because their toddler drowned in the community swimming pool unattended by a lifeguard as:

A)an expenditure in the General Fund.
B)a liability in the GLTDAG.
C)an expenditure in a Special Purpose Fund.
D)a liability in the General Fund.

Question 44

An expected expenditure is a(n):

A)approved financing use.
B)appropriation.
C)encumbrance.
D)expense.

Question 45

A government may avoid charging depreciation on infrastructure assets if:

A)the governmental unit can demonstrate they have incurred costs to preserve the assets at or above a conditional level.
B)the asset is not expected to be replaced.
C)the asset has a useful life of less than five years.
D)the asset will be replaced within five years.

Question 46

When recording the acquisition of a fixed asset in a city's General Fixed Asset Account Group (GFAAG), the debit entry should be selected from one of the following accounts except:

A)Land
B)Expenditures
C)Machinery and Equipment
D)Construction in Progress

Question 47

The purpose of an encumbrance is to:

A)amend the budgeted appropriations.
B)assist the administration to avoid overspending and plan for payment of expected liabilities.
C)record liabilities that will be paid beyond the period where funds are currently available.
D)None of the above

Question 48

If the police department purchases a police car for $20,000 and trades in the old car for $6,000 paying a net cash payment of $14,000, the entry in the General Fund would

A)debit Automobiles for $14,000.
B)debit Expenditures for $14,000.
C)credit Automobiles for $6,000.
D)debit Expenditures for $20,000.

Question 49

Which of the following accounts would not be found on a city's General Fund Balance Sheet?

A)Other Financial Sources
B)Vouchers Payable
C)Allowance for Uncollectible Tax Liens
D)Due from State Government

Question 50

The City of Olburg failed to record invoiced expenditures for the last year of $15,000 that were not encumbered. Of this amount, $10,000 was paid this year debited to Expenditures (Control). The unpaid portion has not been vouchered. The entry to record this event would include a

A)$15,000 credit to Expenditures.
B)$15,000 debit to Fund Balance--Unassigned.
C)$5,000 debit to Expenditures.
D)$10,000 credit to Fund Balance--Unassigned.

Question 51

The City of Franklin has adopted the General Fund budget for the next fiscal year. The details of the budget are:
Required:
Prepare journal entries to record the budget for the City of Franklin.

Question 52

If a city uses a General Fixed Asset Account Group (GFAAG) and records depreciation in anticipation of the city wide financial reports, accumulated depreciation accounts are credited in the GFAAG. What would be the corresponding debit entry?

A)Expenditure in the General Fund
B)Depreciation expenditure in the GFAAG
C)The appropriate investment in general fixed assets account in the GFAAG
D)Accounting for usage is not permitted in the General Fund or GFAAG

Question 53

Goods ordered and originally encumbered at $7,500 were received with an invoice price of $7,700. In recording this event,

A)Encumbrances would be debited for $200.
B)Fund Balances--Assigned would be debited for $7,700.
C)Expenditures would be debited for $7,700.
D)Appropriations would be debited for $200.

Question 54

When recording the acquisition of a fixed asset in a city's General Fixed Asset Account Group, the credit entry may be to which one of the following accounts?

A)Investment in General Fixed Assets--General Fund Revenues
B)Fund Balance Reserved for Encumbrances
C)Contributed Capital
D)Fund Balance--Expended

Question 55

Goods ordered and originally encumbered at $7,500 were received with an invoice price of $7,700. In recording this event,

A)Encumbrances would be debited for $200.
B)Fund Balances--Assigned would be debited for $7,500.
C)Expenditures would be debited for $7,500.
D)Appropriations would be debited for $200.

Question 56

To record the sale of a fixed asset carried in the General Fixed Assets Account Group, a city could debit which one of the following accounts in the GFAAG?

A)Cash
B)Expenditures
C)Accounts Receivable
D)Investment in General Fixed Assets - General Fund

Question 57

Which one of the following equations will yield the unobligated balance in an expenditure subsidiary ledger account? Unobligated Balance equals

A)Appropriations Expenditures total
B)Appropriations Encumbrances balance
C)Appropriations Expenditures total Encumbrances balance
D)Appropriations Expenditures total Encumbrances balance

Question 58

Generally, a governmental entity's investments should be reported on the balance sheet at:

A)lower of cost or market.
B)fair value.
C)amortized cost.
D)Investments are not recorded in a governmental entity's balance sheet.

Question 59

If the City of Billings determines that it has $200,000 of unfunded pension liability, it would record this liability as a(n)

A)expenditure in the General Fund
B)deferred liability in the GLTDAG
C)unfunded pension liability in the GLTDAG
D)due to pension trust fund in the General Fund

Question 60

Which of the following accounts would not be found in the year-end General Fund balance sheet of a city?

A)Cash
B)Allowance for Uncollectible Taxes
C)Land--Parks
D)Fund Balance--Reserved for Encumbrances

Question 61

The pre-closing trial balance of the General Fund of Volter Village at the end of its fiscal year, June 30, 20X1, is as follows:
Required:
a.Prepare closing entries.
b.Prepare a statement of revenues, expenditures, and changes in fund balances for the General Fund for the year ended June 30, 20X1.
c.Prepare the General Fund balance sheet as of June 30, 20X1.

Question 62

What is infrastructure and where would it be accounted for?

Question 63

Define an encumbrance and explain why a state or local government would use encumbrances.

Question 64

Explain why governmental funds use budgetary accounts.

Question 65

Following is a list of selected transactions for the City of Alpena:
a.The city used general property taxes to purchase a computer for the police department. The cost of the computer was $30,000. It was not encumbered.
b.Joseph Green donated land and a building to the city with book values of $25,000 and $150,000, respectively. When the gift was made, the appraisal values were $35,000 for the land and $135,000 for the building.
c.The city sold an old police car originally purchased by the General Fund for $10,000. The selling price was $2,500.Required:Make the necessary journal entries in the funds and account groups affected.

Question 66

Describe the three basic fund types and account groups and explain what changes, if any, the adoption of GASB standard #34 has made on these classifications?

Question 67

The following activities took place in the city of Littlewood during 20X2. Make the necessary journal entries to account for these transactions in the General Fund, including the year end closing entries. Littlewood does not utilize an encumbrance system.

Question 68

The following transactions were made by Cape City:
Required:
Make the journal entries necessary to record the transactions in the General Fund and in the General Fixed Assets Account Group (GFAAG).

Question 69

The following transactions were made by the City of Morrell:
June 2, 20X5
Purchase orders of $57,000 were approved.
June 17, 20X5
Goods of $32,000 of the purchase orders were received. These items are in good order. The invoices totaled $29,000 and vouchers were approved for payment.
June 30, 20X5
Make entries for the City of Morell's year-end to close the encumbrances and the start of the next fiscal year on July 1, 20X5 to reinstate them.
July 16, 20X5
The remaining items arrived in good order.
The invoices totaled $25,000.
Required:
Make the necessary journal entries to record the transactions in the General Fund.

Question 70

Consider the following events:
a.The General Fund vouchered the purchase of trucks for $65,000. The purchase had been encumbered earlier in the year at $60,000.
b.Several years ago, equipment costing $15,000 was acquired with General Fund Revenues. It was sold for $5,000, with proceeds belonging to the General Fund.
c.Early in the year, a citizen donated land appraised at $100,000 to the city. She submitted plans for a new library and agreed to cover the total cost of construction, paying the company directly as work proceeds. At year end, the building was two-thirds finished, with costs to date of $300,000.
d.A snow plow was purchased with General Fund cash for $48,000, which represented a cost of $61,000 less trade-in of $13,000 for an old snow plow originally purchased for $35,000 from Special Revenue Funds. As an emergency purchase, the acquisition of the new snow plow had not been encumbered.Required:Prepare journal entries to record the events using the General Fund and the General Fixed Assets Account Group:

Question 71

Following is a list of selected transactions for the City of Andrew:
a.The city issued $750,000 in term bonds. The bonds sold at 102.
b.After the payment of interest, the city transferred $100,000 from the General Fund to retire serial bonds.
c.The bonds in b are retired.Required:Make the necessary journal entries in the funds and account groups affected except the Debt Service Fund.

Question 72

The following selected account balances for the City of Hampton on January 1, 20X8 are listed below:
Required:
Record the following transactions that occurred during 20X8:
a.Current property taxes are levied at $750,000 with a 4% allowance for uncollectible property taxes.
b.Property to which tax liens apply is sold for $6,000 and the account is closed.
c.Current property taxes are collected in the amount of $702,000.
d.Previous delinquent property taxes are converted to tax liens and the current uncollected property taxes are considered delinquent.

Question 73

What is the concept of interperiod equity?

Question 74

Lake City had the following transactions.
July 1, 20X3
Lake City levied $500,000 in property taxes to be paid by its citizens before October 1, 20X3. Estimated uncollectible accounts are 1% of the taxes levied.
July 31, 20X3
During July, $10,000 was collected for licenses and permits.
August 1, 20X3
Received a grant from the state government to pay for a drug enforcement officer for one year. The amount is $50,000 and the officer is to begin on October 1, 20X3.
Required:
Make the necessary journal entries to record the impact of the transactions in the General Fund for the fiscal year ended June 30, 20x4.