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

Question 1

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

Answer 1

True
Explanation: Derived tax revenues result from taxes assessed on exchange transactions such as sales tax, income tax and motor fuel tax.

Question 2

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

Answer 2

True
Explanation: Inventories and prepaid items typically appear in government funds because they are current assets. These resources are nonspendable because they are used in operations rather than converted to cash.

Question 3

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.

Answer 3

True
Explanation: The designation given for rainy day funds would be committed or less commonly) restricted. Rainy day funds that are available "in emergencies" or in periods of "revenue shortfalls" would not be classified as committed unless the emergency or shortfall condition is specified and of a magnitude to distinguish it from events that occur routinely.

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

There are no expenses in modified accrual funds.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

Budgets are legally binding upon administrators.

Question 17

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

Question 18

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

Question 19

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

Question 20

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 21

Modified accrual accounting is essentially equivalent to cash basis accounting

Question 22

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

Question 23

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 24

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 25

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

Question 26

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

Question 27

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

Question 28

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 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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 41

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 42

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

Question 43

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

Question 44

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 45

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

Question 46

The modified accrual accounting used in governmental accounting is essentially equivalent to the cash basis accounting used by businesses.

Question 47

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

Question 48

The modified accrual basis is a distinct system of accounting that contains financial statement elements that appear nowhere else. Among these are expenditures and fund balances.

Question 49

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

Question 50

Modified accrual accounting records encumbrances when goods are ordered and a liability when goods are received and the government is obligated to pay vendors and accrual accounting does not record encumbrances and records a liability when goods are received.

Question 51

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

Question 52

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

Question 53

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 54

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

Question 55

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 56

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 57

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

Question 58

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

Question 59

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

Question 60

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

Question 61

Deferred Inflows of Resources have a credit balance but they do not represent obligations of the reporting entity

Question 62

The modified accrual basis evolved from the demand for accountability over public resources and is therefore closely tied to the budget function.

Question 63

Revenues are recorded the same under accrual and modified accrual accounting. The difference in the two methods applies only to expenses/expenditures.

Question 64

Deferred Outflows of Resources have a debit balances but are not assets of the reporting organization.

Question 65

What would be the total Nonspendable fund balance?

A) $ 69,000
B) $ 71,500
C) $190,000
D) $410,000

Question 66

Only items specifically identified in GASB standards may be reported as deferred inflows or deferred outflows.

Question 67

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

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

Question 68

Deferred Outflows of Resources have a debit balances and represent assets of the reporting organization.

Question 69

What would be the total Restricted fund balance?

A) $190,000
B) $410,000
C) $479,000
D) $ 49,000

Question 70

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 71

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 72

What would be the total Unassigned fund balance?

A) $190,000
B) $105,000
C) $185,000
D) $410,000

Question 73

Deferred Inflows of Resources have a credit balance and are obligations of the reporting entity

Question 74

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 75

What would be the total Committed fund balance?

A) $410,000
B) $600,000
C) $595,000
D) $239,000

Question 76

Property Taxes, , 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 77

What would be the total Assigned fund balance?

A) $105,000
B) $ 69,000
C) $259,000
D) $190,000

Question 78

Fund Balance is analogous to the capital of an investor-owned entity.

Question 79

Deferred Outflows of Resources have a credit balances and represent valuation accounts i.e. contra-assets) of the reporting organization.

Question 80

Governmental funds may not record liabilities or accrue expenditures when payable.