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

Question 1

Fund balance indicates the legal claim of voters on the net assets of a proprietary fund.

Answer 1

False

Question 2

A contractual obligation (such as for the purchase of equipment)is an example of a committed fund balance.

Answer 2

True

Question 3

Budgets are not legally binding upon administrators.

Answer 3

False

Question 4

When using modified accrual accounting,revenues should be recognized when measurable and available to finance expenditures of the current period.Property tax revenue is considered available if it is received no more than 60 days after the fiscal year end.

Question 5

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

Question 6

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

Question 7

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

Question 8

A nonexchange transaction is one where a government gives or receives value without directly receiving or giving.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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.

Question 14

There are no expenses in modified accrual funds.

Question 15

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

Question 16

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

Question 17

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 18

A rainy day fund approved by the township governing board is an example of an assigned fund balance.

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

The category "other financing uses" includes transfers from other funds and bond issue proceeds.

Question 26

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

Question 27

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 28

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

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

Modified accrual accounting is essentially equivalent to cash basis accounting.

Question 31

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

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

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

Question 34

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

Question 35

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

Question 36

The fund balance of a government fund is analogous to the capital of an investor-owned entity.

Question 37

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

Question 38

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

Question 39

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 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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

Question 47

Revenues for governmental funds should be recognized when measurable and available for expenditure in the current period.

Question 48

Encumbrances Control is closed at year-end.

Question 49

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 50

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

Question 51

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

Question 52

The journal entry to record a purchase order in the General Fund would be a debit to encumbrances control account and credit the Budgetary Fund Balance-Reserve for Encumbrances account.

Question 53

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

Question 54

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

Question 55

"Estimated Revenues Not Yet Realized" will commonly have a net debit balance during the year.

Question 56

Ad valorem property taxes depend on two factors:
the assessed valuation of the property being taxed and the tax rate.

Question 57

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

Question 58

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

Question 59

Ad valorem property tax revenues may not exceed the amount received during the fiscal year plus the amount expected to be received during the first 30 days after the end of the fiscal year.

Question 60

An expenditure is defined as a decrease in fund financial resources through interfund transfers.

Question 61

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 62

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 63

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 64

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 65

What would be the total Assigned fund balance?

A) $105,000
B) $455,000
C) $67,500
D) $80,000

Question 66

What would be the total Committed fund balance?

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

Question 67

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 68

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

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

Question 69

What would be the total Nonspendable fund balance?

A) $2,500
B) $65,000
C) $67,500
D) $105,000

Question 70

The four classes of non-exchange transactions include all of the following except:

A) Imposed non-exchange revenues.
B) Derived tax revenues.
C) Donor exchange revenues.
D) Voluntary non-exchange transactions.

Question 71

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 72

Which of the following is not one of the four eligibility requirements for a government to record revenue from a nonexchange transaction?

A) Required characteristics of Recipients
B) Time requirement
C) Measurable and available
D) Contingencies

Question 73

Solid waste collection and solid waste disposal are examples of classification by function.

Question 74

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,whichever is first.These are examples of:

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

Question 75

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

Question 76

What would be the total Restricted Fund balance?

A) $275,000
B) $210,000
C) $150,000
D) $60,000

Question 77

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 78

What would be the total Unassigned fund balance?

A) $200,000
B) $280,000
C) $80,000
D) $377,500

Question 79

Fines and Forfeits are typically recognized:

A) When cash is received.
B) When cash is deposited.
C) When the transaction is finalized.
D) None of the above.

Question 80

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.