Deck 4: Accounting for the General and Special Revenue Funds

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

Special revenue funds are used when it is desirable to provide separate reporting of resources that are assigned to expenditure for purposes other than debt service or capital projects.

Answer 3

False

Question 4

Special Revenue Funds may be used whenever a government wishes to segregate income for specific purposes.

Question 5

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

Question 6

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

Question 7

The General Fund accounts for any resources not reported in one of the other funds.

Question 8

Interfund transactions are of particular interest to financial statement preparers and users since failure to properly report these transactions will result in two funds being misstated.

Question 9

Most interfund transfers are eliminated in the government-wide statements.

Question 10

The purpose of fund accounting is to segregate those financial resources that have constraints or limitations on their use to demonstrate compliance with those limitations.

Question 11

Expenditures for claims and judgments and landfill postclosure care costs of governmental funds should be recognized to the extent that the liabilities are going to be paid with available resources.

Question 12

A common use of special revenue funds is to account for intergovernmental grants when federal or state governments provide resources to local governments.

Question 13

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

Question 14

Governmental fund financial statements are prepared using the modified accrual basis of accounting.

Question 15

Resources appropriately reported within proprietary or fiduciary funds are excluded from special revenue funds.

Question 16

Every general purpose government will have one General Fund.

Question 17

Governmental fund financial statements are prepared using the accrual basis of accounting.

Question 18

Transactions between funds of the same government are assumed to be arm's length in nature because there is no private inurement.

Question 19

Special revenue funds are used if the resources are required to be used to acquire capital assets or for the payment of interest and principal on long-term debt.

Question 20

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

Question 21

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

Question 22

After closing entries,a special revenue fund's Fund Balance account represents the net amount of resources available for appropriation.

Question 23

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 24

Expenditures for claims and judgments,compensated absences,and special termination benefits should be recognized in the General Fund whether or not the liabilities are to be paid with available resources.

Question 25

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 26

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 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

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 29

When closing 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.

Question 30

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 31

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

Question 32

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

Question 33

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

Question 34

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 35

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 36

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

Question 37

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 38

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

Question 39

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

Question 40

In special revenue funds,revenues are recognized when earned and measurable.

Question 41

The journal entry to record the re-establishment of encumbrances that were outstanding at the close of the prior period would include:

A) A credit to Fund Balance
B) A debit to Encumbrance Control
C) A credit to Encumbrance Control
D) A and B would both be included in the journal entry

Question 42

Regarding interfund transactions,which of the following is not correct?

A) Transaction between funds are not assumed to be arm's length in nature.
B) Failure to properly report interfund transactions will result in two funds being misstated.
C) Interfund transaction must be repaid.
D) Interfund reimbursement is a payment by one fund to second fund to repay it for a purchase which belongs in the first fund.

Question 43

Reciprocal interfund activity:

A) Is the internal counterpart to exchange transactions
B) Does not include interfund loans
C) Includes interfund transfers
D) None of the above

Question 44

The journal entry to record the budget would include:

A) A debit to appropriations Control
B) A credit to Estimated Revenues Control
C) A debit to Estimated Revenues Control
D) A and B would both be included in the journal entry

Question 45

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 finance general activities of the government.
D) Fund used to account for revenues from specific taxes or other revenue sources that are restricted or committed to particular activities of the government other than capital projects.

Question 46

Which of the following statements is not correct?

A) Transactions between funds of the same government may not be assumed to be arms' length in nature.
B) Most interfund transactions are eliminated in the government-wide statements.
C) Interfund reimbursements are classified as other financing sources or uses.
D) Interfund transfers are classified as other financing sources or uses.

Question 47

Which of the following is not true with respect to Special revenue funds?

A) Resources appropriately reported within proprietary or fiduciary funds are excluded from special revenue funds.
B) Special revenue funds may not be used for debt service or capital projects.
C) A special revenue funds would be used to account for taxes which are required by state law to be used by the government to support specific activities.
D) Special revenue funds may be used for any designated purpose to segregate revenues and ensure compliance with restrictions.

Question 48

Which of the following is not correct with respect to accounting for supplies inventories in a governmental fund?

A) Typically, supplies inventory is a significant portion of governmental fund balances.
B) Supplies inventories may be recorded using either the purchase method or the consumption method.
C) An amount equal to the ending balance of supplies is reported as Nonspendable Fund Balance.
D) The consumption method is preferable over the purchase method since it requires no adjustment to supplies expense when preparing the government-wide statements.

Question 49

The journal entry to record an encumbrance would include:

A) A debit to Encumbrance Control
B) A debit to Budgetary Fund Balance - Reserve for Encumbrances
C) A credit to Budgetary Fund Balance - Reserve for Encumbrances
D) A and C would both be included in the journal entry

Question 50

Which of the following statements is not true regarding modified accrual accounting?

A) Expenditures and fund liabilities are recorded when goods and services are received.
B) Debt service expenditures for principal and interest are accrued.
C) Expenditures for claims and judgments and landfill postclosure care costs of governmental funds should be recognized to the extent that the liabilities are going to be paid with available resources.
D) Compensated absences and special termination benefits of governmental funds that will not be paid with available resources should be reported as liabilities in the government-wide statements.

Question 51

The journal entry to record the property tax levy for a municipality would include:

A) A debit to Estimated Uncollectible Current Taxes
B) A credit to Revenues Control
C) A credit to Taxes Receivable - Current
D) None of the above

Question 52

Which of the following is true regarding the use of Special Revenue Funds?

A) Special Revenue Funds may be used whenever a government wishes to segregate income for specific purposes.
B) Assigned resources may be accounted for in a Special Revenue Fund.
C) Special Revenue Funds may only be used when a substantial portion of the resources are provided by restricted or committed revenue sources.
D) Once a Special Revenue Fund is established, it will continue to be a Special Revenue Fund until all resources are exhausted.

Question 53

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 54

The journal entry to record the prior year's deferred property taxes (those expected to be collected more than 30 days beyond year end)as revenue in the current year would include:

A) A debit to Revenues Control
B) A debit to Deferred Revenues
C) A credit to Revenues Control
D) B and C would both be included in the journal entry

Question 55

Which of the following is true with respect to Special revenue funds?

A) Special revenue funds are used when it is desirable to provide separate reporting of resources that are designated for specific purposes.
B) Special revenue funds are used when it is desirable to provide separate reporting for capital projects.
C) Special revenue funds are used when it is desirable to provide funding for debt service.
D) Special revenue funds are used when it is desirable to provide separate reporting of resources that are restricted or committed as to expenditure for purposes other than debt service or capital projects.

Question 56

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 57

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 58

Nonreciprocal interfund activity:

A) Includes interfund services provided and used
B) Includes exchange-like transactions
C) Includes interfund transfers and reimbursements
D) Includes interfund loans

Question 59

Which of the following is an interfund transaction?

A) Interfund services provided and used
B) Interfund transfers
C) Interfund reimbursement
D) All of the above are interfund transactions

Question 60

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 61

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

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

Question 62

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

A) Appropriations Control.
B) Encumbrances Control.
C) Budgetary Fund Balance -- Reserve for Encumbrances.
D) Vouchers Payable.

Question 63

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 64

Indicate which of the following use Modified Accrual Accounting?

A) Option A
B) Option B
C) Option C
D) Option D

Question 65

The General Fund of the City of Lexington approved a tax levy for the calendar year 2012 in the amount of $2,000,000.Of that amount,$30,000 is expected to be uncollectible.During 2012,$1,750,000 was collected.During 2013,$100,000 was collected during the first 30 days,$70,000 was collected during the next 30 days,and $50,000 was collected during the next 30 days.During the postaudit,you discovered that the City showed $2,000,000 in revenues.What adjusting entry would you need to make,assuming you decided to allow the maximum amount of revenues for 2012,using modified accrual accounting?

A) Debit Revenues and Credit Deferred Revenues in the amount of $50,000.
B) Debit Revenues and Credit Deferred Revenues in the amount of $120,000.
C) Debit Revenues and Credit Deferred Revenues in the amount of $350,000.
D) No entry is required.

Question 66

The City of Pine Cove levied property taxes for the fiscal year ended June 30,2012 in the amount of $9,000,000.It is estimated that 2% will not be collected.During the year ended June 30,2012,$8,100,000 in property taxes was collected.It is estimated that $500,000 will be collected during the next 60 days,$265,000 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 30,2012 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) $9,000,000.
B) $8,865,000.
C) $8,600,000.
D) $8,100,000.

Question 67

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 68

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 69

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 services used by General Fund departments should be recognized when those 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 70

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

A) Fund balance is increased.
B) 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 71

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 72

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) Budgetary Fund Balance -- Reserve for Encumbrances.
D) Other Financing Sources-Transfers In.

Question 73

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 74

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) Budgetary Fund Balance -- Reserve for Encumbrances.
D) Appropriations.

Question 75

A local government was awarded a federal grant in the amount of $1,200,000 to provide for a summer employment program for young people.The grant was a reimbursement grant and was awarded on April 30,2012.The local government expended the resources as follows: June,2012,$440,000; July 2012,$400,000; August,2012,$360,000.The federal government provided the funds the following months.The local government would recognize revenues for the fiscal year ended June 30,2012 in which amount?

A) $1,200,000
B) $840,000
C) $440,000
D) $-0-

Question 76

A donor pledged $200,000 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 16,2011 but was conditioned on the government raising an additional $200,000 from other donors.By the fiscal year-end of June 30,2012,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 30,2012?

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

Question 77

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 78

The City of Brownsville had a balance in the Budgetary Fund Balance -- Reserve for Encumbrances account at the end of 2011 in the amount of $30,000.During 2012,all purchase orders related to the $90,000 were filled,and the invoice amount was $91,200.Which of the following would be true regarding the Statement of Revenues,Expenditures,and Changes in Fund Balances for 2012? (assume encumbrances do not lapse)

A) The amount shown for Expenditures would include only the $1,200.
B) The amount shown for Expenditures would include only the $90,000.
C) The amount shown for Expenditures would include the $91,200.
D) The amount shown for Expenditures would not include items related to orders placed in 2011.

Question 79

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

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

Question 80

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.