Deck 4: Accounting for the General and Special Revenue Funds

Question 1

When closing out the General Fund and Special Revenue Funds of a state or local governmental unit, the balance of the operating statement accounts and the balances of the budgetary accounts are closed to Fund Balance - Unreserved

Answer 1

True

Question 2

When a special revenue fund accounts for grants that are awarded on a reimbursement basis, revenues are recognized only after expenditures have been recognized.

Answer 2

True

Question 3

Under modified accrual accounting, property tax revenue should be recognized when measurable and available; available means collected no more than 90 days after year-end.

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

Real estate property tax is an example of derived tax revenue.

Question 9

When closing the books for the General Fund, an excess of revenues over expenditures and encumbrances would be credited to Fund Balance-Unreserved.

Question 10

Receivables from sales taxes are recorded when the taxpayer's underlying transaction takes place.

Question 11

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.

Question 12

When the General Fund purchases water from an enterprise fund, the General Fund would debit Transfers Out.

Question 13

If a government uses the purchases method of accounting for inventories, the expenditures account is debited when supplies are received and the inventory of supplies account is adjusted at year-end.

Question 14

If inventories are significant, GAAP requires that an asset account be credited in order to record a fund balance reserve when using the purchases method.

Question 15

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

Question 16

Interfund services provided and used are recognized directly as Transfers In and Transfers Out.

Question 17

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

Question 18

Interfund services provided and used are recognized as Increases and Decreases in Fund Balance

Question 19

The GASB has categorized nonexchange transactions into three types: (1) derived tax revenues, (2) imposed nonexchange revenues and (3) voluntary nonexchange transactions.

Question 20

A special item is a significant transaction that is unusual and infrequent, but within the control of management

Question 21

When establishing funds, governments should attempt to have a large number of special revenue and other funds to provide the user with enough detail to understand the transactions.

Question 22

Governmental fund financial statements are to be prepared on the accrual basis of accounting.

Question 23

Under the purchases method to account for supplies inventory, the expenditures account is debited when the supplies are received and the inventory account is adjusted at year end if significant.

Question 24

Under the consumption method to account for supplies inventory, an asset is recorded when inventories are acquired and the Expenditure is recorded when the supplies are consumed.

Question 25

In the General Fund, revenues are recognized when measurable and available.

Question 26

The unreserved fund balance represents the amount of resources in the fund.

Question 27

Under the consumption method to account for supplies inventory, the expenditures account is debited when the supplies are received and the inventory account is adjusted at year end if significant.

Question 28

Proceeds from the Sale of Land in the General Fund is a source of funds and would be closed at year end.

Question 29

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

Question 30

After closing entries, the Unreserved Fund Balance account represents the net amount of resources available for appropriation

Question 31

Government fund statements use the modified accrual basis, while government-wide, proprietary fund and fiduciary funds use accrual basis.

Question 32

Non-exchange transactions are transactions in which one party gives or receives value without directly receiving or giving equal value in return.

Question 33

The Debt Service Fund would record the receipt of money from the General Fund as other financing sources on the activities Statement of Revenues, Expenditures and Changes in Fund Balance.

Question 34

In the General Fund, revenues are recognized when earned and available

Question 35

When establishing funds, governments should attempt to minimize the number of special revenue and other funds, instead using functional classification to record transaction detail.

Question 36

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

Question 37

GASB requires both extraordinary and special items to be reported separately after other financing sources and uses in the general and special revenue fund financial statements

Question 38

Fines and Forfeits are typically recognized as revenue when the fines are levied and or monies forfeited

Question 39

In the General Fund, revenues are recognized when earned and measurable.

Question 40

Under the purchases method to account for supplies inventory, an asset is recorded when inventories are acquired and the Expenditure is recorded when the supplies are consumed.

Question 41

The entry to re-establish encumbrances related to purchase orders from the prior year would include:

A) A debit to Fund Balance - Unreserved
B) A debit to Encumbrances Control
C) A credit to Fund Balance - Reserved for Encumbrances
D) None of the above

Question 42

A donor pledged $100,000 to the fund raising drive of a local government to assist its police officers in obtaining the latest technology. The pledge was made on July 16, 2008 but was conditioned on the government raising an additional $100,000 from other donors. By the fiscal year-end of June 30, 2009, the local government had raised only $5,000 from other donors. What entry would be made for the initial pledge by the local government during the year ended June 30, 2009?

A) Debit a receivable and credit a revenue
B) Debit a receivable and credit deferred revenues, a liability
C) Debit a receivable and credit Fund Balance
D) No entry

Question 43

When would a special revenue fund be deemed to have satisfied the eligibility requirement of a reimbursement-type federal grant, under GASB Statement 33?

A) Only as work is completed for a project
B) When a plan for use of the funds has been developed and approved
C) Only after work is completely finished for the project
D) When work has started for the project

Question 44

When payrolls and other liabilities are incurred and must be paid before substantial amounts of cash will be collected, what type of short-term note is desirable and secured by a government's power to tax?

A) Tax Relief Note Payable
B) Tax Budget Note Payable
C) Tax Anticipation Note Payable
D) Tax Encumbrances Note Payable

Question 45

Property Taxes, special assessments and fines and forfeits are types of nonexchange transactions and assets should be recognized when an enforceable legal claim exists or when the resources are received, which ever is first. These are examples of:

A) Government-mandated nonexchange transactions
B) Imposed nonexchange transactions
C) Deferred tax revenues
D) Voluntary nonexchange transactions

Question 46

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

Question 47

Indicate which of the following use Modified Accrual Accounting?

$\begin{array}{l}\begin{array} {|c|c|} \hline&\text { Capital } & \text { Financial } \\&\text { Projects Fund } & \text { Statements } \\\hline\text { A) } & \text { Yes } & \text { No } \\\hline\text { B) } & \text { No } & \text { Yes } \\\hline \text { C) } & \text { Yes } & \text { No } \\\hline\text { D) } & \text { Yes } & \text { Yes }\\\hline\end{array}\begin{array} {|c|c|} \hline\text { Special Revenue } & \text { Enterprise } \\ \text { Fund } & \text { Fund }\\\hline \text { Yes } & \text { No } \\\hline \text { No } & \text { Yes } \\\hline \text { Yes } & \text { Yes } \\\hline \text { No } & \text { No } \\\hline\end{array}\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 48

The General Fund of the City of Richmond approved a tax levy for the calendar year 2009 in the amount of $1,600,000. Of that amount, $30,000 is expected to be uncollectible. During 2009, $1,400,000 was collected. During 2010, $100,000 was collected during the first 30 days, $40,000 was collected during the next 30 days and $30,000 was collected during the next 30 days. During the postaudit, you discovered that the City showed $1,570,000 in revenues. What adjusting entry would you need to make, assuming you decided to allow the maximum amount of revenues for 2009, using modified accrual accounting?

A) Debit Revenues and Credit Deferred Revenues in the amount of $30,000
B) Debit Revenues and Credit Deferred Revenues in the amount of $70,000
C) Debit Revenues and Credit Deferred Revenues in the amount of $200,000
D) No entry is necessary

Question 49

Expenditures are generally recorded and fund liabilities are recognized

A) When goods and services are received, but only if resources are available in the fund
B) When goods and services are received, regardless of whether or not resources are available in the fund
C) When purchase orders are issued, regardless of whether or not resources are available in the fund
D) When invoices are paid

Question 50

A local government was awarded a federal grant in the amount of $600,000 to provide for a summer employment program for young people. The grant was a reimbursement grant and was awarded on April 30, 2009. The local government expended the resources as follows: June, 2009, $220,000; July 2009, $200,000; August, 2009, $180,000. The federal government provided the funds the following months. The local government would recognize revenues for the fiscal year ended June 30, 2009 in which amount?

A) $ - 0 -
B) $220,000
C) $420,000
D) $600,000

Question 51

What is a Special Revenue Fund?

A) Fund created to account for all resources and revenues to be used for the construction or acquisition of capital assets
B) Fund used to account for all revenue transactions of a governmental unit that are not accounted for in another fund
C) Fund used to account for revenues from general taxes or other revenue sources that by law are designated to finance general activities of the government
D) Fund used to account for revenues from specific taxes or other revenue sources that by law are designated to finance particular activities of the government other than capital projects

Question 52

GASB standards for property tax revenue recognition under the modified accrual basis of accounting provide that revenue is permitted to be recorded if the expected amount to be collected can be determined and collection is reasonably assured even if the taxes are expected to be collected more than 60 days after the fiscal year end.

Question 53

Which of the following is true regarding modified accrual accounting?

A) Modified accrual accounting requires that all expenditures be recognized on the cash basis
B) Revenues are recognized in the period in which they become available and measurable and expenditures are recognized at the time a liability is incurred, except for principal and interest on long-term debt
C) Modified accrual accounting is required for all fund financial statements
D) All of the above

Question 54

Under the modified accrual basis of accounting, GASB standards for property tax revenue recognition provide that revenue should not be recognized for property taxes collected:

A) After fiscal year end
B) More than 30 days after fiscal year end
C) More than 60 days after fiscal year end
D) More than 90 days after fiscal year end

Question 55

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

Question 56

Which of the following is not likely to be recorded in a special revenue fund?

A) Phone fees restricted to supporting the emergency 911 access system
B) Hotel taxes restricted to promoting tourism
C) Sales taxes restricted to courthouse additions
D) State motor fuel tax restricted to road maintenance

Question 57

If a government has debt service due no more than one month after the end of a fiscal year and has the resources available, then it is permitted to accrue expenditures and a fund liability for the debt service.

Question 58

Which of the following is true regarding modified accrual accounting?

A) Expenditures for claims and judgments, compensated absences and special termination benefits should be recognized whether or not the liabilities are to be paid with available resources
B) Expenditures for goods and services used by General Fund departments should be recognized when those goods and services are received, regardless of whether or not resources are available in the fund
C) Both of the above are true
D) Neither of the above is true

Question 59

The Town of Little River expects to collect $50,000 in sales tax from the state government within 30 days of the end of fiscal year 2009. What entry, if any, would Little River make at the end of 2009? $\begin{array}{lcc}\text { A) Taxes receivable - current } & 50,000 & \\\text { Revenues control }&& 50,000 & \\\text { B) Taxes receivable - deferred } & 50,000 & \\\text { Revenues control }&& 50,000 & \\\text { C) Taxes receivable - current } & 50,000 & \\\text { Due from state government }&&50,000\\\text { D) Due from state government } & 50,000 & \\\text { Revenues control }&& 50,000 & \\\end{array}$

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 60

Short-term loans which are backed by the taxing power of the governmental unit and used to meet working capital requirements are called:

A) Tax anticipation notes
B) Inter-fund loans
C) Other financing sources
D) Appropriation loan

Question 61

The General Fund of the City of Bangor purchased water from its Water Utility Fund in the amount of $20,000. The General Fund would debit:

A) Expenditures Control
B) Other Financing Uses-Transfers Out
C) Water Expense
D) None of the above; no entries would be made

Question 62

The City of Greenville had a balance in the Reserve for Encumbrances account at the end of 2008 in the amount of $30,000. During 2009, all purchase orders related to the $30,000 were filled and the invoice amount was $30,500. Which of the following would be true regarding the Statement of Revenues, Expenditures and Changes in Fund Balances for 2009? (assume encumbrances do not lapse)

A) The amount shown for Expenditures would include only the $500
B) The amount shown for Expenditures would include only the $30,000
C) The amount shown for Expenditures would include the $30,500
D) The amount shown for Expenditures would not include items related to orders placed in 2008

Question 63

Which of the following accounts in the General Fund is credited when a purchase order is approved?

A) Appropriations Control
B) Encumbrances Control
C) Reserve for Encumbrances
D) Vouchers Payable

Question 64

When accounting for the General Fund, the Encumbrances Control account is credited when:

A) A purchase order is approved
B) A purchase order is filled or canceled
C) An invoice is paid
D) The budget is approved

Question 65

General Fund resources were expended in the amount of $180,000 to purchase a new fire truck. The General Fund would debit:

A) Expenditures Control
B) Capital assets -Motor Vehicles
C) Both (a) and (b) above
D) None of the above; no entry is made in the General Fund when a motor vehicle is purchased

Question 66

The Expenditures control account in the General Fund is debited when:

A) Equipment previously ordered is received
B) The budget is recorded
C) The books are closed at the end of the year
D) Supplies are ordered

Question 67

When supplies ordered by a governmental unit are received at an actual price which is more than the estimated price on the purchase order, the Encumbrance Control account is:

A) Credited for the original estimated price for the supplies received
B) Credited for the actual price on the purchase order
C) Debited for the estimated price on the purchase order
D) Debited for the actual price for the supplies received

Question 68

A local government was awarded a federal grant in the amount of $800,000 to provide for a summer youth employment program for young people. The grant was a reimbursement grant and a notification of the grant award was received on Apri1 30, 2009. The local government expended the resources as follows: • June, 2009, $300,000;
• July, 2009, $250,000;
• August, 2009, $250,000
The federal government sent the funds in the month following the expenditure. The local government would recognize revenues for the fiscal year ended June 30, 2009 in which amount?

A) $0
B) $300,000
C) $550,000
D) $800,000

Question 69

Which of the following accounts of a governmental unit is debited when supplies previously ordered are received?

A) Encumbrances Control
B) Reserve for Supplies
C) Reserve for Encumbrances
D) Appropriations

Question 70

Which of the following accounts of a governmental unit is credited to close it at the end of the fiscal year?

A) Appropriations Control
B) Encumbrances Control
C) Reserve for Encumbrances
D) Other Financing Sources-Transfers In

Question 71

The asset, equipment, used by a department accounted for by the General Fund of a governmental unit should be reported in the:

A) General Fund
B) Government-Wide Statements
C) Both (a) and (b)
D) None of the above

Question 72

The following items were included in the City of Wilson's General Fund expenditures for the year ended June 30, 2009: Personal computer for City Clerk $\quad$ $\quad$ $\$ 4,000$
Furniture for Controller's Office $\quad$ $\quad$ $\$ 10,000$ How much should be classified as capital assets in Wilson's General Fund balance sheet at June 30, 2009?

A) $14,000
B) $10,000
C) $ 4,000
D) $ - 0 -

Question 73

The City of Lonesome Pines levied property taxes for the fiscal year ended June 30, 2009 in the amount of $8,000,000. It is estimated that 2% will not be collected. During the year ended June 30, 2009, $7,200,000 in property taxes were collected. It is estimated that $400,000 will be collected during the next 60 days, $240,000 will be collected after 60 days and $160,000 will not be collected. What is the maximum amount Lonesome Pines can recognize as property tax revenue for the fiscal year ended June 30, 2009 in its Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances, assuming there were no unpaid property taxes at the end of the previous year?

A) $7,200,000
B) $7,600,000
C) $7,840,000
D) $8,000,000

Question 74

The Revenues Control account of the General Fund is debited when:

A) The budget is recorded at the beginning of the year
B) Uncollectible taxes receivable accounts are written off
C) Property taxes are collected
D) None of the above

Question 75

The initial transfer of cash from the General Fund to establish a motor pool internal service fund would require the General Fund to credit Cash and debit:

A) Investment in Internal Service Fund
B) Other Financing Uses-Transfers Out Control
C) Expenditures - Vehicle maintenance
D) Accounts Receivable-Internal Service Fund

Question 76

What is the effect on the General Fund's unreserved fund balance when capital assets are purchased during a year from General Fund revenues?

A) Unreserved fund balance is increased
B) Unreserved fund balance is decreased
C) There is no effect, since one asset (cash) is replaced by another (capital asset)
D) None of the above, capital assets must be purchased through a capital projects fund

Question 77

What would be the effect on the Unreserved Fund Balance at the end of the current fiscal year of recording a $15,000 expenditure for a new computer, assuming a $14,600 encumbrance had been recorded in a General Fund department in the previous fiscal year?

A) Reduce the General Fund's Unreserved Fund Balance $400
B) Reduce the General Fund's Unreserved Fund Balance $14,600
C) Reduce the General Fund's Unreserved Fund Balance $15,000
D) Have no effect on the General Fund's Unreserved Fund Balance

Question 78

Liabilities incurred, such as for accrued payroll, but still unpaid at year-end, should be recorded in the General Fund by a debit to which one of the following accounts?

A) Salary Expense
B) Appropriations Control
C) Encumbrances Control
D) Expenditures Control

Question 79

A transfer should be reported in the operating statement of the General Fund as a(an):

A) Revenue or Expenditure
B) Due from or Due to Other Funds
C) Other Financing Source or Use
D) None of the above, it is a direct increase or decrease to fund balance

Question 80

Under modified accrual accounting, revenues are recognized when measurable and:

A) Earned
B) Available
C) Collected
D) Expenditures have been made