Deck 3: Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority

Question 1

Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures is an example of a restricted fund balance.

Answer 1

False

Question 2

The term,Fund Balance,is used to indicate the residual net position of a proprietary fund.

Answer 2

False

Question 3

When using modified accrual accounting,revenues should be recognized when measurable and available to finance expenditures of the current period.

Answer 3

True

Question 4

$200,000 to be used to fund government operations in the future from the General Fund is an example of an unassigned fund balance.

Question 5

Real estate property taxes are an example of derived tax revenue.

Question 6

Property tax revenue is considered available if it is received no more than 30 days after the fiscal year end.

Question 7

Net resources of a governmental fund represented by currently due taxes receivable is an example of a nonspendable fund balance

Question 8

A nonexchange transaction is one where a government receives resources without giving equal value in return.

Question 9

If "rainy day" funds are available "in emergencies" or periods of "revenue shortfalls" they are not ordinarily classified as committed.

Question 10

Rainy day funds are classified as restricted if they are created by a resolution or ordinance that identifies the specific circumstances under which the resources may be expended.

Question 11

Sales taxes,income taxes,and motor fuel taxes are examples of derived tax revenues.

Question 12

Rainy day funds that are available "in emergencies" or "revenue shortfalls" may still be classified as committed if the emergency or shortfall condition is specified and is of such a magnitude as to distinguish it from events that are routine.

Question 13

Modified accrual accounting is essentially the same as cash basis except that long term assets are not recorded.

Question 14

There are no expenses in modified accrual funds.

Question 15

Net resources of a governmental fund represented by prepaid insurance is an example of a nonspendable fund balance

Question 16

The modified accrual basis is a distinct system of accounting that contains financial statement elements that appear nowhere else.

Question 17

An exchange transaction is one where each party is given and receives essentially equal value.

Question 18

Revenues,but not expenses,are recorded the same under accrual and modified accrual accounting.

Question 19

Encumbrances under modified accrual accounting are recognized when fund liabilities are incurred.

Question 20

Budgets are legally binding upon administrators.

Question 21

When a purchase order or contract is issued as authorized by an appropriation,it is known as an expenditure.

Question 22

The GASB has created four "eligibility requirements" that must be met before revenue can be recognized:
(1)required classification of recipients,(2)timing,(3)reimbursements,and (4)contingencies.

Question 23

With respect to Governmental Funds,Fund Balance must be broken down into assigned and unassigned.

Question 24

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

Question 25

The budgetary account used to record budgeted revenues is called "Estimated Revenues Control."

Question 26

Examples of budgetary accounts include Estimated Revenues,Appropriations,and Estimated Other Financing Uses.

Question 27

The category "other financing sources" includes transfers from other funds,but not bond issue proceeds.

Question 28

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

Question 29

The only difference between modified accrual accounting and accrual accounting is the difference in the recognition of long-term assets and liabilities.

Question 30

The GASB has categorized nonexchange transactions into two categories:
(1)imposed nonexchange revenues and (2)voluntary nonexchange transactions.

Question 31

When liabilities authorized by an appropriation have been incurred,the appropriation is said to be expended.

Question 32

GASB requires that the budgetary basis of accounting for the General Fund used in the Budget-Actual Comparison Schedule be on the same modified accrual basis as the governmental fund Statement of Revenues,Expenditures and Changes in Fund Balance.

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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.

Question 38

Under the modified accrual basis,property taxes are recognized in the period in which cash is received,regardless of when the taxes were levied.

Question 39

Modified accrual accounting is essentially equivalent to cash basis accounting

Question 40

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

Question 41

Budgetary accounts begin each year with a zero balance and are closed at the end of each year.

Question 42

GASB requires a reconciliation between the amount shown as GAAP expenditures in the basic financial statements and the amount shown in the budgetary comparison schedule.

Question 43

When purchase orders are filled and the invoice amount differs from the estimated amount,the amount reversed from the encumbrance account equals the invoice amount.

Question 44

The modified accrual basis is a distinct system of accounting that:

A) Differs from accrual accounting only in its failure to recognize long term assets and liabilities.
B) Records expenses and revenues the same as accrual accounting.
C) Records expenditures and fund balances.
D) Is equivalent to cash basis accounting

Question 45

Revenues for governmental funds should be recognized when measurable and earned.

Question 46

An appropriation is authorization for administrators to incur specified amounts of liabilities on behalf of the government for specified purposes.

Question 47

"Unexpended Appropriations Balance" may be interpreted as how much a government may continue to spend and remain within its budget.

Question 48

Appropriation is the legal authorization for administrators of governmental unit to incur liabilities for purposes specified and to not exceed the amount specified.

Question 49

Transfers from one fund to another are classified as expenditures in the fund making the transfer.

Question 50

When purchase orders are filled and the invoice amount differs from the estimated amount,the amount recorded as an expenditure corresponds to the invoice amount.

Question 51

Encumbrances are often deemed necessary for recurring expenditures such as payroll.

Question 52

The Budgetary Comparison Schedule requires a column for the original budget,a column for the final revised budget,and a column for actual figures,computed on the accrual basis.

Question 53

The journal entry to record a purchase order in the General Fund would be a debit to encumbrances control account and credit Accounts Payable

Question 54

The Budgetary Comparison Schedule is considered a part of Required Supplementary Information in the Comprehensive Annual Financial Report.

Question 55

Expenditure classification by character includes current,capital outlay,and debt service.

Question 56

Modified accrual accounting records encumbrances when goods are ordered and accrual accounting only records a liability only when goods are received.

Question 57

Expenditure is a decrease in fund financial resources (net of liabilities)other than through interfund transfers.

Question 58

Governments may create special revenue funds whenever a tax or other revenue source is legislated to be used for a specific purpose,other than capital assets or debt service.

Question 59

Encumbrances are recorded when a purchase order is filled or a contract is executed.

Question 60

The Township of Thomasville's General Fund has the following net resources at year end:
•$77,000 of prepaid insurance
•$375,000 rainy day fund approved by the township governing board with specific conditions for its use
•$2,500 of supplies inventory
•$61,000 state grant for snow removal
•$150,000 contractual obligations for the purchase of equipment
•$200,000 to be used to fund government operations in the future
•Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures (assume no contractual obligation)
What would be the total Nonspendable fund balance?

A) $ 2,500
B) $ 77,000
C) $ 79,500
D) $159,500

Question 61

The general ledger journal entry in the General Fund to record actual expenditures and reversal of the associated encumbrance would include:

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

Question 62

According to GASB Statement No.54,spendable fund balances are displayed in which of the following categories?

A) Restricted, Committed, Assigned, Unassigned
B) Restricted, Unrestricted, Assigned, Unassigned
C) Spendable, Assigned, Unassigned
D) Restricted, Unrestricted

Question 63

Which of the following is true with respect to rainy day funds?

A) Rainy day funds are classified as committed if they are created by a resolution or ordinance that identifies the specific circumstances under which the resources may be expended.
B) If rainy day funds are available "in emergencies" or periods of "revenue shortfalls" they are classified as committed.
C) Both A and B.
D) Neither A nor B.

Question 64

A transaction in which a government receives resources without directly giving equal value in exchange is known as a(n):

A) Equity Transaction.
B) Fair Exchange.
C) Non-exchange Transaction.
D) Not Fair Market Exchange transaction.

Question 65

With respect to budgetary reporting by governments,which of the following is not true?

A) While GASB standards guide the format of the comparison, it does not require governments to maintain budgetary accounts.
B) The basis of accounting used to report the "Actual" column in the budgetary comparison schedule is prepared according to legal requirements for budget preparation; even if it is a departure from GASB standards.
C) Budgetary accounts are required to appear in the general purpose financial statements.
D) GASB standards require governments to present a comparison of budgeted and actual results for the General Fund and special revenue funds with legally adopted budgets.

Question 66

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 67

Which of the following statements is correct with respect to GASB Statement No.54 regarding committed funds?

A) Committed funds are those that are designated as committed through ordinance or resolution by the government's highest level of authority.
B) These constraints are easily changed by administrators.
C) This is constraint is imposed by law and may not be changed without amendment of the law.
D) Committed funds may be redesignated to uncommitted in the event of a budget shortfall.

Question 68

Which of the following would not be a nonexchange transaction for a state government?

A) Sales of lottery tickets.
B) Property taxes.
C) Fines and forfeits.
D) Income taxes.

Question 69

The four classes of nonexchange transactions include all of the following except:

A) Imposed nonexchange revenues.
B) Derived tax revenues.
C) Voluntary nonexchange transactions.
D) Sales of Services.

Question 70

Which of the following statements is not true with respect to GASB Statement No.54 regarding restricted fund balances?

A) Restricted funds are those that are subject to constraints imposed by external parties or by law.
B) Restricted fund balance can result from legally enforceable requirements that resources be used only for specific purpose.
C) Restricted funds are the result of a self-imposed constraint by a government upon itself.
D) All of the above are correct

Question 71

The general ledger journal entry in the General Fund to record encumbrances for the issuance of purchase orders would include:

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

Question 72

The Township of Thomasville's General Fund has the following net resources at year end:
•$77,000 of prepaid insurance
•$375,000 rainy day fund approved by the township governing board with specific conditions for its use
•$2,500 of supplies inventory
•$61,000 state grant for snow removal
•$150,000 contractual obligations for the purchase of equipment
•$200,000 to be used to fund government operations in the future
•Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures (assume no contractual obligation)
What would be the total Unassigned fund balance?

A) $ 80,000
B) $200,000
C) $280,000
D) $375,000

Question 73

According to GASB Statement No.54 which of the following is an example of a nonspendable fund balance?

A) Resources (such as supplies) that are used in operations rather than converted to cash
B) The corpus of a permanent fund that may not be spent
C) Prepaid insurance
D) All of the above

Question 74

The Township of Thomasville's General Fund has the following net resources at year end:
•$77,000 of prepaid insurance
•$375,000 rainy day fund approved by the township governing board with specific conditions for its use
•$2,500 of supplies inventory
•$61,000 state grant for snow removal
•$150,000 contractual obligations for the purchase of equipment
•$200,000 to be used to fund government operations in the future
•Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures (assume no contractual obligation)
What would be the total Assigned fund balance?

A) $ 61,000
B) $ 77,000
C) $ 80,000
D) $150,000

Question 75

The general ledger journal entry in the General Fund to record the adoption of a budget would include:

A) A debit to Estimated Revenues Control
B) A credit to Estimated Other Financing Sources Control
C) A debit to Budgetary Fund Balance-Reserve for Encumbrances
D) A debit to Appropriations Control

Question 76

The Township of Thomasville's General Fund has the following net resources at year end:
•$77,000 of prepaid insurance
•$375,000 rainy day fund approved by the township governing board with specific conditions for its use
•$2,500 of supplies inventory
•$61,000 state grant for snow removal
•$150,000 contractual obligations for the purchase of equipment
•$200,000 to be used to fund government operations in the future
•Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures (assume no contractual obligation)
What would be the total Committed fund balance?

A) $375,000
B) $290,000
C) $525,000
D) $455,000

Question 77

Governmental Funds Fund Balance is displayed in which of the following categories?

A) Nonspendable, Spendable, Assigned, Unassigned
B) Nonspendable, Restricted, Unrestricted
C) Restricted, Unrestricted, Assigned, Unassigned
D) Nonspendable, Restricted, Committed, Assigned, Unassigned

Question 78

Property Taxes,special assessments,and fines and forfeits are types of nonexchange transactions. These are examples of:

A) Government-mandated nonexchange transactions.
B) Imposed nonexchange transactions.
C) Deferred Inflows.
D) Voluntary nonexchange transactions.

Question 79

Sales taxes,income taxes,and motor fuel taxes are examples of which class of nonexchange transactions?

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

Question 80

The Township of Thomasville's General Fund has the following net resources at year end:
•$77,000 of prepaid insurance
•$375,000 rainy day fund approved by the township governing board with specific conditions for its use
•$2,500 of supplies inventory
•$61,000 state grant for snow removal
•$150,000 contractual obligations for the purchase of equipment
•$200,000 to be used to fund government operations in the future
•Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures (assume no contractual obligation)
What would be the total Restricted fund balance?

A) $ 61,000
B) $150,000
C) $200,000
D) $375,000