Deck 4: Accounting for the General and Special Revenue Funds

Question 1

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

Answer 1

True
Explanation: The General Fund accounts for any resources not reported in one of the other, limited-use, funds.

Question 2

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

Answer 2

False
Explanation: The General Fund uses modified accrual accounting. Revenues are recognized when they are both measurable and available to finance expenditures of the current period.

Question 3

Every general purpose government may have more than one General Fund.

Answer 3

False
Explanation: Every general -purpose government will have one, and only one, General Fund.

Question 4

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

Question 5

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

Question 6

Most interfund transfers are not eliminated in the government-wide statements.

Question 7

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

Question 8

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

Question 9

Governmental fund financial statements are prepared using the current financial resource measurement focus.

Question 10

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 11

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

Question 12

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

Question 13

Receivables from sales taxes are recorded in the period that the retailer submits the taxes to the government.

Question 14

When the General Fund purchases water from an enterprise fund, the General Fund would credit expenditure.

Question 15

Transactions between funds of the same government are not assumed to be arm's length in nature.

Question 16

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 17

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

Question 18

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 19

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

Question 20

Resources appropriately reported within proprietary or fiduciary funds are included in special revenue funds.

Question 21

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

Question 22

Only the General Fund may have a positive Unassigned Fund Balance

Question 23

A Special Revenue Fund may not have a positive Unassigned Fund Balance.

Question 24

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 25

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

Question 26

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

Question 27

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

Question 28

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.

Question 29

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 30

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

Question 31

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

Question 32

Interfund services provided and used are recognized directly as Revenues and Expenditures.

Question 33

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

Question 34

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 35

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

Question 36

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

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

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

Question 39

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

Question 40

The fund balance represents the excess of fund assets and deferred outflows) over fund liabilities and deferred inflows).

Question 41

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

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) Interfund transactions must be repaid.
C) Failure to properly report interfund transactions will result in two funds being misstated.
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

The journal entry to record the prior year's deferred Inflows: property taxes those expected to be collected more than 60 days beyond year-end) as revenue in the current year would include:

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

Question 44

Which of the following is an interfund transaction?

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

Question 45

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

Question 46

GASB standards provide particular guidance for the use of special revenue funds. Specifically, the standards require that special revenue funds be used only if a substantial portion of the resources are provided by one or more restricted, committed or assigned revenue sources.

Question 47

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

A) Resources appropriately reported within proprietary or fiduciary funds are excluded from special revenue funds.
B) 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.
C) Special revenue funds may be used for any designated purpose to segregate revenues and ensure compliance with restrictions.
D) None of the above

Question 48

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

Question 49

When establishing funds, governments should never attempt to minimize the number of special revenue and other funds, instead using functional classification to record transaction detail.

Question 50

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 51

Special revenue funds are not used if the fund resources are required to be used to acquire capital assets or for the payment of interest and principal on long-term debt.

Question 52

The journal entry to record an encumbrance would include:

A) A debit to Budgetary Fund Balance - Reserve for Encumbrances
B) A credit to Budgetary Fund Balance - Reserve for Encumbrances
C) A debit to Appropriations Control
D) A credit to Encumbrance Control

Question 53

Although a government may use resources to supplement a special revenue fund, assignment of resources is not sufficient for the establishment of a special revenue fund.

Question 54

Generally, expenditures are recorded and fund liabilities are recognized when goods and services are received, regardless of whether resources are available in the fund.

Question 55

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 post-closure 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 56

The journal entry to record the budget of a Special Revenue Fund would include:

A) No entry; Special Revenue Funds do not record budgets
B) A debit to Estimated Revenues Control
C) A credit to Estimated Revenues Control
D) A debit to appropriations Control

Question 57

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 58

Expenditures recorded under modified accrual accounting is essentially the same as an expense recorded under accrual accounting.

Question 59

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) Special Revenue Funds are appropriate if the sole source of resources are assigned funds
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 60

If the government expects that a substantial portion of the resources supporting a special revenue fund's activities will no longer be derived from restricted and committed revenue sources, the government should discontinue the use of a special revenue fund and report the fund's remaining resources in the General Fund.

Question 61

The City of Pine Cove levied property taxes for the fiscal year ended June 30, 2017, in the amount of $9,600,000. During the year ended June 30, 2017, $8,350,000 in property taxes was collected. It is estimated that $375,000 will be collected during the next 60 days, $695,000 will be collected after 60 days, and $180,000 will not be collected. What is the maximum amount Pine Cove can recognize as property tax revenue for the fiscal year ended June 30, 2017, 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) $8,500,000.
B) $8,725,000.
C) $9,815,000.
D) $10,000,000.

Question 62

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 63

Reciprocal interfund activity:

A) Does not include interfund loans
B) Includes interfund transfers
C) Is the external counterpart to exchange transactions
D) Is the internal counterpart to exchange transactions

Question 64

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 qualified expenditures are incurred.
B) Only after work is completely finished for the project.
C) When a plan for use of the funds has been developed and approved.
D) When the grant is first approved by the granting agency.

Question 65

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

A) A debit to Bad Debts Expense
B) A credit to Estimated Uncollectible Taxes
C) A credit to Taxes Receivable
D) A and B would both be included in the journal entry

Question 66

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

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

Question 67

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 68

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

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

Question 69

Indicate which of the following use Modified Accrual Accounting?
$\begin{array}{lcccc}&&\text { Government- }\\&& \text {wide}&& \text {Interna}\\&\text { Capital}& \text { Financial}&\text { Special Revenue }&\text { Service }\\&\underline{ \text { Projects Fund }} &\underline{ \text { Statements }} & \underline{\text { Fund} } & \underline{\text { Fund } }\\\text { A) } & \text { No } & \text { Yes } & \text { No } & \text { Yes } \\\text { B) } & \text { Yes } & \text { No } & \text { Yes } & \text { No } \\\text { C) } & \text { Yes } & \text { No } & \text { Yes } & \text { Yes } \\\text { D) } & \text { Yes } & \text { Yes } & \text { No } & \text { No }\end{array}$

Question 70

Nonreciprocal interfund activity:

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

Question 71

The General Fund of the City of Lexington approved a tax levy for the calendar year 2017 in the amount of $2,600,000. During 2017, $2,250,000 was collected. During 2018, $95,000 was collected during the first 30 days, $75,000 was collected during days 31-60, and $70,000 was collected during the days 61-90. The balance is expected to be uncollectible. During the post-audit, you discovered that the City showed $2,600,000 in revenues. How much revenue should the City recognize in 2017 from this tax levy?

A) $ 2,250,000
B) $ 2,345,000
C) $ 2,420,000
D) $ 2,465,000

Question 72

The City of Brownsville had a balance in the Budgetary Fund Balance -- Reserve for Encumbrances account at the end of 2016 in the amount of $90,000. During 2017, 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 2017? 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 2016.

Question 73

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 74

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, 2016, but was conditioned on the government raising an additional $200,000 from other donors. By the fiscal year-end of June 30, 2017, 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, 2017?

A) No entry is required until the condition is fully met.
B) Debit a receivable and credit deferred inflows.
C) Debit a receivable and credit Fund Balance.
D) Debit a receivable and credit revenue

Question 75

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

Question 76

Which of the following is correct with respect to accounting for supplies inventories in a governmental fund?

A) Supplies inventories may be recorded using either the purchase method or the consumption method.
B) An amount equal to the ending balance of supplies is reported as Nonspendable Fund Balance.
C) The consumption method is preferable over the purchase method since it requires no adjustment to supplies expense when preparing the government-wide statements.
D) All of the above are correct

Question 77

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

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

Question 78

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

Question 79

The journal entry to write off an uncollectible property tax receivable for a municipality would include:

A) A credit to Estimated Uncollectible Taxes
B) A debit to Bad Debts Expense
C) A credit to Taxes Receivable
D) B and C would both be included in the journal entry

Question 80

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

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