Deck 4: An Introduction to General and Special Revenue Funds

Question 1

A city has only one General Fund buy may have many Special Revenue Funds.

Answer 1

True

Question 2

General Fund activities are financed primarily through taxes, intergovernmental grants, and borrowing.

Answer 2

False

Question 3

Governments use Special Revenue Funds to provide elected officials, resource providers, and the citizenry with a greater degree of assurance that the revenues provided for specified purposes are used only for those purposes.

Answer 3

True

Question 4

In the General Fund, revenues for property taxes are recognized only if they are both measurable and available.

Question 5

Proceeds from tax anticipation notes are recorded as other financing sources in the General Fund.

Question 6

Interest on outstanding tax anticipation notes should be accrued in the General Fund at the end of a government's fiscal year.

Question 7

In the General Fund, interest on short-term investments always should be accrued as revenue at a government's fiscal year-end.

Question 8

To record its General Fund budget at the beginning of its fiscal year, a city would debit appropriation accounts and credit estimated revenue accounts.

Question 9

Governments record revenues for levied property taxes in the General Fund when the property taxes are measurable and available.

Question 10

When making a budget adjustment to decrease appropriations in a Special Revenue Fund's budgetary accounts, a credit entry is made to an appropriations account.

Question 11

When goods that were ordered using a Special Revenue Fund's resources are received, a debit entry should be made to an encumbrances account.

Question 12

An expenditure for salaries should be recorded in a General or Special Revenue Fund for the work of employees during the last few days of a fiscal year that is not paid until early in the next fiscal year.

Question 13

According to GASB financial reporting requirements, the General Fund and major Special Revenue Funds are required to prepare a budgetary comparison statement.

Question 14

The actual revenues and expenditures in the budgetary comparison schedule or statement are prepared using the modified accrual basis of accounting.

Question 15

Major sections of the statement of revenues, expenditures, and changes in fund balance include revenues, expenditures, and other financing sources and uses.

Question 16

Closing entries for the General Fund and Special Revenue Funds include closing the budgetary accounts against each other and closing the nominal financial accounts to fund balance.

Question 17

To close the nominal financial accounts of a Special Revenue Fund, a debit needs to be made to revenue accounts and a credit made to expense accounts.

Question 18

The tax roll serves as the subsidiary ledger for a government's property taxes receivable.

Question 19

The General Fund is formally defined as the fund used to account for and report on:

A) All resources not accounted for in another fund
B) All financial resources not accounted for in another fund
C) All resources, except resources of the government's business-type activities
D) All financial resources, except resources of the government's fiduciary activities

Question 20

A city or county always will have
$\begin{array}{cc} & \text { One or more } \\\text { A General Fund } & \text { Special Revenue Funds }\end{array}$

A) $\begin{array}{cc} && \text { yes } &&&&&&&& \text { no } \\\end{array}$
B) $\begin{array}{cc} && \text { no } &&&&&&&& \text { yes } \\\end{array}$
C) $\begin{array}{cc} && \text { no } &&&&&&&& \text { no } \\\end{array}$
D) $\begin{array}{cc} && \text { yes } &&&&&&&& \text { yes }\end{array}$

Question 21

Which of the following best describes accrued liabilities of the General and Special Revenue Funds?

A) Liabilities need not be accrued.
B) Liabilities are accrued when expenses have been incurred but not paid.
C) Liabilities are accrued when measurable and cash is available to make the payment.
D) Liabilities are accrued when the expenditure, once incurred, is normally paid in a timely manner and in full from current financial resources.

Question 22

Grant proceeds that are restricted for spending on salaries of public health workers who educate citizens about the dangers of diabetes would most likely be accounted for in a:

A) General Fund
B) Special Revenue Fund
C) Capital Projects Fund
D) Permanent fund

Question 23

The Village of Walton borrows $500,000 for a period not to exceed six months using a tax anticipation note. The proceeds from the borrowing are deposited in the General Fund. The note will be repaid when property taxes are collected. What journal entry, if any, should be made in the General Fund when the Village borrows the money?
a.
$\begin{array}{ll}\text { Cash } & 500,000 \\\text { Other financina source-debtissued } && 500.000\end{array}$

b.
$\begin{array}{lll}\text { Cash } & 500,000 & \\\quad \text { Revenues-property taxes } && 500,000\end{array}$

c.
$\begin{array}{lll}\text { Cash } & 500,000 & \\\text { Tax anticipation notes payable } && 500,000\end{array}$

d. Tax anticipation notes are not recorded in governmental-type funds, including the General Fund.

Question 24

The Village of Walton borrowed $500,000 for a period of six months using a tax anticipation note on November 1, 2019. The Village is charged interest on the borrowing at annual rate of 6 percent. The Village's fiscal year-end is September 30, 2020. What journal entry should be made in the Village's General Fund when the Village repays the loan with interest on April 30, 2020?
a.
$\begin{array}{lll}\text { Expenditures-notes principal } & 500,000 \\\text { Expenditures-interest } & 30,000 \\\text { Cash } &&530,000\end{array}$

b.
$\begin{array}{lll}\text { Expenditures-notes principal } & 500,000 \\\text { Expenditures-interest } & 15,000 \\\text { Cash } &&515,000\end{array}$

c.
$\begin{array}{lr}\text { Tax anticipation notes payable } & 500,000 \\\text { Expenditures-interest } & 30,000\\\text { Cash } &&530,000\end{array}$

d.
$\begin{array}{lr}\text { Tax anticipation notes payable } & 500,000 \\\text { Expenditures-interest } & 15,000\\\text { Cash } &&515,000\end{array}$

Question 25

The Village of Monroe borrowed $500,000 for a period of six months using a tax anticipation note on November 1, 2019. The Village is charged interest on the borrowing at annual rate of 6 percent. The Village's fiscal year-end is December 31, 2019. What journal entry, if any, should be made in the Village's General Fund on December 31, 2019?
a.
$\begin{array}{l}\text { Expenditures-interest } &5,000\\\text { Interest payable }&&5,000\end{array}$

b.
$\begin{array}{l}\text { Expenditures-interest } &15,000\\\text { Interest payable }&&15,000\end{array}$

c.
$\begin{array}{lll}\text { Interest expense } & 5,000 & \\\text { Interest payable } && 5,000\end{array}$

d. No entry is required on December 31, 2019.

Question 26

A city invests $500,000 of its idle General Fund cash in a certificate of deposit (CD) on August 1, 2019. The CD pays interest of 1 percent per annum and matures on January 31, 2020. When it closes its books on December 31, 2019, how much interest receivable should the city accrue?

A) $0
B) $5,000
C) $2,083
D) $2,500

Question 27

The city council passed a budget for its only Special Revenue Fund. The budget included estimated revenues of $400,000 and appropriations of $380,000. What journal entry should be made to record the city's budget for its Special Revenue Fund?
a.
$\begin{array}{lrr}\text { Appropriations } & 380,000 & \\\text { Budgetary fund balance } & 20,000 & \\\text { Estimated revenues } && 400,000\end{array}$

b.
$\begin{array}{lr}\text { Estimated revenues } & 400,000 \\\text { Appropriations } && 380,000 \\\text { Budgetary fund balance } && 20,000\end{array}$

c.
$\begin{array}{lr}\text { Appropriations } & 380,000 \\\text { Unassigned fund balance } & 20,000\\\text { Estimated revenues } &&400,000\end{array}$

d.
$\begin{array}{lr}\text { Estimated revenues } & 400,000 \\\text { Appropriations } && 380,000 \\\text { Unassigned fund balance } && 20,000\end{array}$

Question 28

Which of the following statements regarding budgetary fund balance is accurate?

A) Budgetary fund balance is always recorded as a credit.
B) Budgetary fund balance is permanent in nature.
C) Budgetary fund balance is the anticipated change in fund balance as a result of adopting the budget.
D) Budgetary fund balance can be used to pay bills.

Question 29

A city had placed a purchase order for $25,000 for street maintenance supplies; the order allowed for price increases up to 5 percent of the order. The vendor shipped the supplies and billed the city for a total of $26,000. The city inspected the shipment and approved the invoice for $26,000. What budgetary journal entry should the city make when the supplies are received?

A) Debit Budgetary fund balance reserved for encumbrances and credit Encumbrances for $25,000.
B) Debit Budgetary fund balance reserved for encumbrances for $26,000 and credit Encumbrances for $26,000.
C) Debit Budgetary fund balance reserved for encumbrances for $26,000, credit Encumbrances for $25,000, and credit Budgetary fund balance for $1,000.
D) Debit Budgetary fund balance reserved for encumbrances for $25,000, debit Expenditures for $1,000, and credit Encumbrances for $26,000

Question 30

At the end of its fiscal year, the City of Lancaster owes public safety workers $18,000 and general government employees $12,000 for work performed related to General Fund activities prior to its December 31^st fiscal year end. The employees are not paid until January 10^th of the following year. What journal entry, if any, should the City of Lancaster make to record this transaction in its General Fund on December 31^st?
a.
$\begin{array}{lll}\text { Salaries expense-public safety } & 18,000 & \\\text { Salaries expense-general government } & 12,000 & \\\quad \text { Accrued salaries payable } & & 30,000\end{array}$

b.
$\begin{array}{lll} \text {Encumbrances--salaries}&30,000\\ \text {Budgetary fund balance reserved for encumbrances}&&20,000\end{array}$

c.
$\begin{array}{ll}\text { Expenditures-public safety salaries } & 18,000 \\\text { Expenditures-general government salaries } & 12,000 \\\text { Accrued salaries navable } &&30,000\end{array}$

d. No entry is required because this transaction relates to an activity accounted for in the General Fund.

Question 31

The City of Stewart levies property taxes of $1,800,000 for its current fiscal year. The City expects to collect all of the property taxes before its fiscal year-end. What journal entry, if any, should the City of Stewart make to record this levy of the property taxes in its General Fund?
a.
$\begin{array}{lll}\text { Property taxes receivable } & 1,800,000 & \\\quad \text { Revenues-property taxes } && 1,800,000 \\\end{array}$

b.
$\begin{array}{lll}\text { Property taxes receivable } & 1,800,000 \\\quad \text { Other financing source-property taxes } & &1,800,000 \\\end{array}$

c.
$\begin{array}{lll}\text { Property taxes receivable } & 1,800,000 \\\quad \text { Deferred revenues-property taxes }& & 1,800,000\end{array}$

d. No entry is required because this transaction relates to an activity accounted for in the General Fund and revenue should only be recognized when it is collected.

Question 32

On January 1, 2019, a city adopted a budget wherein estimated revenues were $30,000 greater than the appropriations. Because of a slowdown in the economy, it became apparent in June that there would be a shortfall of $25,000 in sales tax collections. The city amended its budget to take account of the reduction in estimated sales tax collections. What journal entry should the city make in June?

A) Debit Revenues-sales tax and credit Estimated revenues-sales tax for $25,000
B) Debit Appropriations and credit Estimated revenues-sales tax for $25,000
C) Debit Estimated revenues-sales tax and credit Revenues-sales tax for $25,000
D) Debit Budgetary fund balance and credit Estimated revenues-sales tax for $25,000

Question 33

As provided in the adopted budget, on January 1, 2020 Croton City levies real property taxes of $28 million for General Fund activities, payable in two equal installments, in March and September. The city assumes all taxes will be paid in the fiscal year the taxes were levied. What journal entry should the city make on January 1 in its General Fund?

A) Debit Property taxes receivable and credit Revenues-property taxes for $28 million
B) Debit Property taxes receivable and credit Revenues-property taxes for $14 million
C) Debit Estimated Revenues-property taxes and credit Revenues-property taxes for $28 million
D) Make no journal entry until cash is received

Question 34

The City of Seales has a December 31 fiscal year end. Salaries earned by the City's General Fund employees for the period December 24 through December 31 will not be paid until January 7 of the next year. When it closes its books for the year, the City of Seales' accounting personnel would:

A) Make no journal entry because it uses the modified accrual accounting basis.
B) Debit Expenditures-salaries and credit Cash.
C) Debit Estimated expenditures and credit Appropriations payable.
D) Debit Expenditures-salaries and credit Accrued salaries payable.

Question 35

A city considers annual revenues from fines to be immaterial. Under the circumstances, the city

A) Must make a year-end accrual for unpaid fines
B) Must account for fines the same way it accounts for property taxes
C) May account for fines on the cash basis of accounting
D) Must make an accrual for unpaid fines if it is measurable

Question 36

Which of the following is required to be prepared for the General Fund according to GASB standards?

A) Budgetary comparison statement or schedule
B) Statement of revenues, expenditures, and changes in fund balance
C) Balance sheet
D) All of the above are required

Question 37

Which of these line items is not appropriate in the statement of revenues, expenditures, and changes in fund balance of the General Fund?

A) Revenues-property taxes
B) Expenditures-public safety supplies
C) Property taxes receivable
D) Fund balance, beginning of year

Question 38

Which line item would not be appropriate in the closing entry of a General Fund or a Special Revenue Fund?

A) Expenditures-public safety salaries
B) Expenditures-debt service
C) Fund balance
D) Expenditures-depreciation

Question 39

Which of the following accounts would not be appropriate in the closing entry of a General Fund or a Special Revenue Fund?

A) Revenues
B) Fund balance
C) Taxes receivable
D) Expenditures

Question 40

The city council passed a budget for its only Special Revenue Fund. The budget included estimated revenues of $380,000 and appropriations of $410,000. The budget was recorded in the general ledger at the beginning of the year and no amendments to the budget occurred during the year. What journal entry should be made to close the city's budgetary accounts for its Special Revenue Fund at its fiscal year-end?
a.
$\begin{array}{lr}\text { Appropriations } & 410,000 \\\text { Estimated revenues } && 380,000 \\\text { Budgetary fund balance } && 30,000\end{array}$

b.
$\begin{array}{lrl}\text { Estimated revenues } & 380,000 & \\\text { Budgetary fund balance } & 30,000 & \\\text { Appropriations } & & 410,000\end{array}$

c.
$\begin{array}{lr}\text { Appropriations } & 410,000 \\\text { Estimated revenues } && 380,000 \\\text { Unassigned fund balance } && 30,000\end{array}$

d.
$\begin{array}{lrl}\text { Estimated revenues } & 380,000 & \\\text { Unassigned fund balance } & 30,000 & \\\text { Appropriations } & & 410,000\end{array}$

Question 41

A tax roll for property taxes serves as a:

A) A control account for property taxes receivable.
B) A subsidiary ledger for property taxes receivable.
C) A contra account for property taxes receivable.
D) A multi-year list of cumulative property taxes owed to a jurisdiction

Question 42

The village of Briarcliff operates on a calendar-year basis. Because of cash flow imbalances in the General Fund, the village needs to borrow cash during the year. Also, at various times during the year, the village has idle cash to invest. Prepare journal entries to record the following transactions:
a. The village borrows $1,500,000 on a tax anticipation note (TAN) on February 1, 2020 at an interest rate of 1.2 percent. One-half of the borrowing is payable with interest on July 31, 2020; the other half is payable with interest on January 31, 2021.
b. The village repays $750,000 of the TAN with interest on July 31, 2020.
c. On September 1, 2020, the village invests idle cash of $400,000 in a three-month CD paying 1.5 percent per annum.
d. The investment made on September 1, 2020 (item c, above) matures on November 30, 2020. The village receives the cash, including interest
e. The village prepares financial statements as of December 31, 2020 and accrues the interest payable on the TAN (see item a., above).

Question 43

On April 1, 2019, a county borrows $1,000,000 for its General Fund activities on a tax anticipation note (TAN) that matures on January 31, 2020 with interest of 3 percent per annum. The county operates on a calendar-year basis. What journal entries, if any, should the county make in its General Fund on April 1, 2019 and December 31, 2019?

Question 44

Prepare journal entries to record the following transactions and events for Tropical Township's General Fund for the year 2020.
a. The township adopted a budget calling for appropriations of $360,000. Estimated revenues (all property taxes) were 340,000.
b. The township sent property tax bills amounting to $340,000 to property owners. All taxes are expected to be collected during the fiscal year.
c. Property owners paid $335,000 of taxes to the township.
d. A purchase order of $25,000 was sent to a supplier.
e. The supplies ordered in d., above, were received in good order and the accompanying invoice of $24,000 was approved but not yet paid.

Question 45

Prepare journal entries to record the following transactions for Cosmotown for 2020. The town records encumbrances only for its Supplies appropriation.
a. Cosmotown adopted the following budget for the year:
$$\begin{array} { l r } \text { Revenues } & \\\text { Property taxes } & 275,000 \\\text { Licenses and fees } & 35,000 \\\text { Appropriations } & \\\text { Salaries } & 255,000 \\\text { Supplies } & 40,000 \\\text { Interest } & 1,500\end{array}$$
b. Property tax bills amounting to $275,000 were sent to property owners.
c. Because property taxes were not due to be received for several months and the town needed cash to finance its activities. Cosmotown borrowed $100,000 from a local bank, using tax anticipation notes.
d. Cosmotown paid salaries in the amount of $75,000.
e. The town sent out two purchase orders for supplies: purchase order A for $6,000 and purchase order B for $5,000.
f. The town received $130,000 from property owners in payment of property taxes.
g. Cosmotown repaid the bank on its borrowing in transaction c. The amount paid was $101,000, which included interest of $1,000.
h. The town collected $15,000 for fishing licenses.
i. The town received the supplies ordered on purchase order A in transaction e. The supplies arrived in good condition and the invoice for $6,100 was approved for payment.
j. The town treasurer paid the invoice in transaction i. for $6,100.

Question 46

The preclosing trial balance of the General Fund of the City of Thomason shows the following balances at the end of the fiscal year. Based on that information, (a) prepare closing entries for the budgetary and financial accounts, and (b) calculate the city's actual ending fund balance.
$$\begin{array} { l r } \text { Budgetary fund balance } & \$ 10,000 \\\text { Fund balance, beginning (actual) } & 150,000 \\\text { Estimated revenues } & 620,000 \\\text { Appropriations } & 610,000 \\\text { Revenues (actual) } & 625,000 \\\text { Expenditures } & 605,000\end{array}$$

Question 47

The city council passed a budget for its Special Revenue Fund. The budget included estimated revenues of $1,080,000 and appropriations of $1,100,000. The budget was recorded in the general ledger at the beginning of the year and no amendments to the budget occurred during the year. Prepare the journal entry to close the city's budgetary accounts for its Special Revenue Fund at its fiscal year-end.

Question 48

Winter County enacted a law establishing a Highway Special Revenue Fund, effective January 1, 2020. The fund expenditures were to be financed by a special gasoline tax. Prepare journal entries to record the following transactions for the calendar year 2020. Also, prepare a preclosing trial balance as of December 31,2020.
a. Winter County adopted the following budget for the fund:
$\begin{array}{lr}\text { Estimated revenues\_gasoline taxes } & 855,000 \\\text { Appropriations-maintenance salaries } & 745,000 \\\text { Appropriations-maintenance supplies } & 90,000 \\\text { Budgeted increase in fund balance } & 20,000\end{array}$
b. The county collected gasoline taxes of $825,000.
c. The county paid maintenance salaries of $730,000.
d. The county placed purchase orders for maintenance supplies totaling $65,000.
e. The supplies ordered in d., above, were received and accepted. Because the purchase orders allowed for additional quantities to be shipped, the invoices totaled $68,000.
f. Because of the shortfall in gasoline tax collections, the county reduced estimated revenues by $30,000. It also ordered a halt to all purchases of maintenance supplies and reduced the appropriation for maintenance supplies by $20,000.
g. Unpaid salaries for the last few days in December (to be paid in January 2021) totaled $14,000.

Question 49

Use the information in Problem 1, above, regarding Winter County, to prepare (a) a balance sheet, (b) a statement of revenues, expenditures, and changes in fund balance, and (c) a budgetary comparison schedule, for the year ended December 31, 2020. Report the ending fund balance as restricted.

Question 50

Use the preclosing trial balance prepared for Problem 1, above, regarding Winter County, to close the accounts for the year ended December 31, 2020.

Question 51

Following is the adjusted trial balance for the General Fund of the Township of Whitt as of June 30, 2020, the end of the fiscal year. Prepare (a) a balance sheet and (b) a statement of revenues, expenditures, and changes in fund balance.
$\begin{array}{c}\text {Township of Whitt }\\\text {General Fund }\\\text {Adjusted Trial Balance}\\\text { June 30, 2020}\\\begin{array}{lrr}\text { Cash } & \$ 6,200 \\\text { Taxes receivable } & 40,000 \\\text { Investments } & 65,000\\\text { Vouchers payable } && \$ 38,750 \\\text { Tax anticipation notes payable } && 12,750 \\\text { Unassigned fund balance }&&57,000\\\text { Estimated revenues } & 101,000 \\\text { Appropriations } && 99,000 \\\text { Budgetary fund balance } && 2,000 \\\text { Revenues-taxes } && 100,000 \\\text { Revenues-other } && 2.080\\\text { Expenditures--personal services } & 94,700 \\ \text { Expenditures-supplies } & \underline{4,680}&\underline{\quad\quad} \\& \underline{\$ 311,580}& \underline{\$ 311,580} \\ \end{array}\end{array}$

Question 52

Use the adjusted trial balance shown in Problem 4, above, regarding the Township of Whitt, to close the accounts for the year ended June 30, 2020.