Government Accounting

Chapter 4: The Governmental Fund Accounting Cycle An Introduction to General and Special Revenue Funds Multiple Choice

1.

Accounting for a Spe cial Revenue Fund is most like the ac counting for which of the following? a. b. c. d.

Answer:

#.

a

$hen should propert% ta& revenues be recogni'ed in the accounting records? a. when the budget is prepared b. when the appropriations bill is signed into law c. when propert% ta&es are levied d. when propert% ta&es are actuall% received in cash

Answer:

(.

the General Fund an Internal Service Fund a ension !rust Fund an "nterprise Fund

c

$hat is the difference between the terms budgetar% fund balance and unreserved fund balance? a. budgetar% fund balance is reserved) unreserved fund balance is not reserved b. budgetar% fund balance is permanent in nature) unreserved fund balance is temporar% c. budgetar% fun d balance is the anti cipated change in fund bal ance as a result of adopting the budget ) unreserved fund balance is the actual difference between assets and liabilities d. budgetar% fund balance can be appropriated) unreserved fund balance cannot

Answer:

c

*. A local government alwa%s will have a General Fund a. b. c. d. Answer:

,.

a



$hich line item does not properl% belong in the balance sheet of a governmental fund? a. short/term investments b. fi&ed assets c. cash d. accounts 0or vouchers pa%able

Answer:

2.

a

$hen a cit% borrows cash short/term in anticipation of the receipt of propert% ta& revenues- which account would it credit? a. propert% ta&es receivable b. propert% ta& revenues c. estimated other financing sources d. ta& anticipation notes pa%able

Answer:

5.



$hich of the following 3ournal entries is a budgetar% entr%? a. debit estimated revenues and cr edit appropriations b. debit e&penditures and credit cash c. debit propert% ta&es receivable and credit propert% ta& revenues d. debit cash and credit propert% ta&es receivable

Answer:

4.

Funds

$hat is the general rule for recogni'ing revenues in governmental funds? a. revenues should be recogni'ed when the budget is adopted b. revenues should be recogni'ed when available and measurable c. revenues should be recogni'ed when collected in cash d. revenues ma% be rec ogni'ed eit her whe n collected in cas h or whe n the budget is adopted- at the option of the entit%

Answer:

.

no no %es

+ne or more Special Revenue %es no %es no %es

d

At %ear/end- a ci t%6s e&penditures e&ceed its revenues. $hen the accounts are

closed- which of the following entries will be made to record this fact? a. a credit to 7nreserved fund balance b. a debit to 7nreserved fund balance c. a credit to Appropriations d. a debit to 8udgetar% fund balance Answer:

19.

$hich of the following financial statements normall% are prepared for the General Fund? operating balance cashflows statement sheet statement a. %es no %es b. no %es %es c. %es %es %es d. %es %es no

Answer:

11.



d

"&penditures of a cit% or count%6s governmental funds include a. cash disbursements made to settle short/term liabilities b. depreciation of general fi&ed assets c. decreases in fund net assets for operating purposes but not for capital asset ac:uisitions d. decreases in fun d net asse ts for ope rating purposes- repa%ment of debt principal and interest- and capital asset ac:uisitions

Answer:

1#.

A village derives about , percent of it s General Fund rev enues from tr affic violation fines. ;iolators of the law have (9 da%s to appeal the fines. "&perience shows that the village ultimatel% collects on about 2,< of the violations. $hen should the village recogni'e these revenues in the General Fund? a. b. c. d.

Answer:

1(.

d

when the budget is prepared at the beginning of the %ear- based on an estimate of collections when the traffic violation tickets are issued when the cash is collected d

$hich line item do es not properl% appear in the Statement of Revenues"&penditures- and =hanges in Fund 8alance 0>operating statement> of a governmental fund? a. e&penditures//debt service

b. e&penditures//capital outla% c. propert% ta&es receivable d. beginning fund balance Answer:

1*.

c

If the 8udgetar% fund balance account was debited when the budget was recorded in the =it% of Ramville6s General Fund- then a. appropriations e&ceed estimated revenues b. actual e&penditures e&ceed appropriations c. estimated revenues e&ceed appropriations d. appropriations e&ceed actual revenues

Answer:

1,.

7nder the modified accrual basis of accounting a. e&penditures are recogni'ed when paid in cash i! not previousl% encumbered b. revenues are recogni'ed when earned c. revenues are recogni'ed when the% become measurable and available d. encumbrances are e:uivalent to e&penditures

Answer:

1.

c

In governmental accounting- expenditures are a. e:ual to e&penses minus depreciation b. incurred for operating purposes- capital ac:uisitions- and debt service c. e:ual to encumbrances plus appropriations d. incurred to generate revenue in order to prom ote the well/being of the citi'ens

Answer:

12.

a



$hich of the following accounts properl% would not appear in the General Fund6s closing entr% at fiscal %ear end? a. revenues b. unreserved fund balance c. ta&es receivable d. e&penditures

Answer:

14.

c

If the 7nreserved fund balance account of a Spe cial Revenue Fund has a debi t balance at the end of the fiscal %ear- it means that a. revenues are less than e&penditures for the %ear b. actual revenues are less than estimated revenues c. total liabilities e&ceed total assets

d. e&penditures consistentl% e&ceeded encumbrances Answer:

15.

c

$ithin a cit%6s Ge neral Fund- which source of rev enues is least likel% to be accrued in advance of receipt in cash? a. building inspection fees b. propert% ta&es c. interest on investments d. sales ta&es

Answer:

#9.

A count% bor rows cash on a short/term basis. $hich of the f ollowing is t he proper account to be credited in this transaction? a. ta& anticipation notes pa%able b. revenues from borrowing c. appropriations//borrowed mone% d. unreserved fund balance

Answer:

#1.

a

!he accounting and financial reporting for the General Fund is least similar to that for a a. capital pro3ects fund b. debt service fund c. pension trust fund d. special revenue fund

Answer:

#(.

a

$hich of the following financial statements normall% are pre pared for a Spec ial Revenue Fund? operating balance cashflows statement sheet statement a. %es %es no b. no %es %es c. %es %es %es d. %es no %es

Answer:

##.

a

c

A favorable e&penditures variance signifies that- during the %eara. 7nreserved fund balance increased b. actual spending was less than budgeted spending c. estimated revenues were less than actual revenues

d. total e&penditures did not e&ceed total encumbrances Answer:

#*.



!he total amount of ta& es receivable from all ta &pa%ers within a gove rnment6s 3urisdiction will be posted to which t%pe of account? a. a control account b. a contra account c. a net assets account d. a subsidiar% account

Answer:

#,.

a

In governmental accounting- vouchers pa%able is mos t similar to wh ich of the following accounts used b% business enterprises? a. contributed capital b. accounts pa%able c. dividends pa%able d. unearned revenues

Answer:



"rolems

#.

0ournal entries / basic events and transactions repare entries to record the following events and transactions for !ropical !ownship for the %ear #995. a. !he !ownship adopted a budget calling for appropriations of @(9-999. !he estimated revenues 0all prop ert% ta&es wer e @(*9-999. b. !he !ownship sent propert% ta& bills amounting to @(*9-999 to propert% owners. c. ropert% owners paid @((,-999 to the !ownship. d. A purchase order of @#,-999 was sent to a vendor of supplies. e. !he supplies ordered in transaction d. were received in good order and the accompan%ing invoice of @#*-999 was approved.

Answer:

a. "stimatedrevenues/propert%ta&es 8udgetar%fundbalance

(*9-999 #9-999

Appropriations b. ropert% ta&es receivable Revenuespropert% / ta&es

(*9-999

c. =ash ropert%ta&esreceivable

((,-999

d. "ncumbrances 8udgetar% fund balance reserved for encumbrances

e. 8udgetar% fund balance reserved for encumbrances "ncumbrances "&penditures / supplies ;ouchers pa%able

#2.

(9-999

(*9-999

((,-999 #,-999 #,-999

#,-999 #,-999 #*-999 #*-999

0ournal entries / budgetar% and financial repare 3ournal entries to record the following transactions for =osmotown for #995. !he !own records encumbrances onl% for its Supplies appropriation. a. =osmotown adopted the following budget for the %ear Revenues: ropert% ta&es @#2,-999 Bicenses and fees (,-999 Appropriations: Salaries #,,-999 Supplies *9-999 Interest 1-,99 b. ropert% ta& bills amounting to @#2,-999 were sent to the propert% owners. c. 8ecause propert% ta&es were not due to be rec eived for several months and the town needed cash to finance its activities- =osmotown borrowed @199-999 on ta& anticipation notes from a local bank. d. =osmotown paid salaries in the amount of @2,-999.

e. !he town sent out tw o purchase orders for supplies purchase order A for @-999 and purchase order 8 for @,-999. f. !he town rece ived @1(9 -999 from prop ert% owne rs in pa%ment of thei r propert% ta&es.

g. =osmotown repaid th e bank on its borrowing in tr ansaction c. !he amount paid was @191-999- which included interest of @1-999. h. !he town collected @1,-999 for fishing licenses. i. !he town received the supplies ordered on purchase order A in transaction e. All the supplies arrived in good condition and the invoic e for @-199 was approved for pa%ment. 3. !he town !reasurer paid the invoice in transaction i. for @-199. Answer:

a.

"stimatedrevenues/propert%ta&es "stimated revenues /licensesand fees Appropriationssalaries / Appropriationssupplies / Appropriations interest / 8udgetar% fund balance

#2,-999 (,-999 #,,-999 *9-999 1-,99 1(-,99

b. ropert% ta&es receivable Revenues propert% / ta&es

#2,-999

c. =ash !a&anticipationnotespa%able

199-999

d. "&pendituressalaries / =ash e. "ncumbrances 8udgetar% fund balance reserved for encumbrances f.

=ash ropert%ta&esreceivable

g. !a&anticipationnotespa%able "&pendituresinterest / =ash

#2,-999

2,-999 2,-999 11-999 11-999 1(9-999 1(9-999 199-999 1-999

h. =ash Revenueslicenses / andfees

1,-999

i.

-999

8udgetar% fund balance reserved for encumbrances "ncumbrances "&penditures supplies / ;ouchers pa%able

199-999

191-999

1,-999

-999 -199 -199

3.

#4.

;ouchers pa%able =ash

-199 -199

0=alculating ending unreserved fund balance from selected information resented below is information a Special Revenue Fund of !rinket =it% for fiscal #995. 8ased on this information- determine the amounts of a. actual revenues for #995b. actual e&penditures for #995- and c. ending unreserved fund balance at the end of fiscal #995. 8eginning unreserved fund balance 0actual 8eginning budgetar% fund balance // debit !otalappropriation !otalrevenuevariance//favorable !otale&penditurevariance//favorable

@ 19-999 01,-999 199-999 4-999 *-999

Answer:

a. "stimated revenues C Appropriation less budgetar% fund balance C 199-999 / 1,-999 C 4,-999. Actual revenues C "stimated revenues D favorable revenues variance C 4,-999 D 4-999 C 5(-999. b. Actual e&penditures C Appropriations less favorable e&penditure variance C 199-999 / *-999 C 5-999. c. Actual revenues C "&penditures C Eecreaseinunreservedfundbalance 8eginningunreservedfundbalance "ndingunreservedfundbalance

@ 5(-999 5-999 0(-999 19-999 @2-999

#5. 0reparing closing entries and financial sta tements resented below is the ad3usted trial balance for the General Fund of the !ownship of Seans aven at une (9- #995- the end of the fiscal %ear. 8ased on this information- prepare- in good form a. closing entries b. the statement of revenues- e&penditures- and changes in fund balance for the %ear c. the balance sheet at une (9- #995.

Township o! Sean#s $aven General Fund Ad%usted Trial &alance 'une ()* +)),

=ash

-#99 @

!a&es receivable Investments

*9-999 ,-999

;ouchers pa%able

(4-2,9

!a& anticipationnotespa%able 7nreserved fund balance "stimated revenues

1#-2,9 ,2-999 191-999

Appropriations

55-999

8udgetar% fund balance

#-999

Revenues/ta&es

199-999

Revenues/other

#-949

"&penditures/personalservices "&penditures/supplies

5*-299 9

*-49 @(11-,49

@(11-,49

Answer:

a. =losing entries Appropriations 8udgetar%fundbalance "stimated revenues

55-999 #-999

Revenues/ta&es

199-999

191-999

Revenues/other "&penditures/personalservices "&penditures/supplies 7nreserved fund balance

b.

#-949 5*-299 *-49 #-299

Statement of Revenues- "&penditures- and =hanges in Fund 8alance Township o! Sean#s $aven General Fund Statement o! Revenues* -.penditures* and Changes in Fund &alance For the year ended 'une ()* +)),

Revenues !a&es

@199-999

+ther

#-949

!otal revenues

@19#-949

"&penditures ersonal services Supplies !otal e&penditures

5*-299 *-49 55-(49

"&cessofrevenuesover0undere&penditures Fundbalance-beginningof%ear Fund balanceend of %ear

c.

8alance Sheet

#-299 ,2-999 ,5-299 @

Township o! Sean#s $aven General Fund &alance Sheet At 'une ()* +)),

Assets =ash !a&es receivable Investments

-#99 @ *9-999 ,-999

!otal assets

111-#99 @

Biabilities ;ouchers pa%able !a&anticipationnotespa%able !otal liabilities

(4-2,9 @ 1#-2,9 ,1-,99

Fund balance 7nreserved !otalliabilitiesandfundbalance

,5-299 @111-#99