Question 1

Only the General Fund has a positive Unassigned Fund Balance

Accepted Answer

The Unassigned Fund Balance is typically associated with the General Fund, as it represents resources not allocated to specific purposes, unlike other funds which are often restricted or assigned for particular uses.

Question 2

Unmatured principal installments and accrued interest which is due shortly after year end are required to be reported as liabilities in the debt service fund at year end.

Accepted Answer

Interest on long term debt is not generally accrued. GASB permits one exception: If a government has resources available for payment in a debt service fund and the period of time until interest or principal payment is due no more than one month, then the interest or principal payment may be accrued at year end but is not required.

Question 3

The fund balance of permanent funds should be classified as Nonspendable,Spendable and Committed.

Accepted Answer

The principal of a permanent fund must be maintained so it is classified s nonspendable fund balance. The remaining unexpended resources would be classified as restricted or assigned fund balance.

Question 4

Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Restricted Fund Balance

Accepted Answer

Intergovernmental grants and taxes dedicated to capital improvements are restricted in their use and therefore are likely to be classified as Restricted Fund Balance in a capital projects fund.

Question 5

Debt service funds should accrue interest and report principle payments due within the next12 months following year end.

Accepted Answer

In a debt service fund, interest is generally not accrued. Interest and principle payments are recognized as an expenditure in the year in which the payment is due.

Question 6

If a bond sinking fund is required by creditors or law,the unexpended resources would be classified as Assigned.

Accepted Answer

In governmental accounting, unexpended resources in a bond sinking fund are classified as Restricted, not Assigned, because they are legally required to be used for a specific purpose.

Question 7

The residual classification for governmental funds other than the General Fund is Assigned.

Accepted Answer

According to the Governmental Accounting Standards Board (GASB), the residual classification for governmental funds other than the General Fund is Assigned.

Question 8

Special assessments may be levied to finance construction projects or to provide current services.

Accepted Answer

Special assessments are a common way for local governments to finance construction projects or to provide current services such as garbage collection, street lighting, and sewer improvements. These assessments are typically levied on property owners within a special assessment district based on the benefits they receive from the project or service.

Question 9

A special assessment tax is a tax levy that is assessed against only those taxpayers who are deemed to benefit from the service or project paid for by the proceeds of the special assessment levy.

Accepted Answer

A special assessment tax is designed to only affect taxpayers who will benefit from the project or service being funded by the levy. This is different from a general tax levy, which is applied to all taxpayers in a certain area regardless of whether they directly benefit from the project or service being funded.

Question 10

The principal of permanent funds is classified as Nonspendable Fund Balance.

Accepted Answer

Permanent funds, which are intended to be held indefinitely, are classified as Nonspendable Fund Balance because their principal cannot be spent. Only the earnings generated by the principal can be used for their designated purpose.

Question 11

If a sinking fund is required by creditors or law,the unexpended resources would be classified as Restricted Fund Balance.

Accepted Answer

This is because the sinking fund is designated for a specific purpose and cannot be used for any other expenses, making it a restricted fund balance.

Question 12

Because debt service and permanent funds use modified accrual accounting,these funds would typically record encumbrances.

Accepted Answer

Only the General Fund, Special Revenue and Capital Projects funds record encumbrances. Debt Service and Permanent funds do not record encumbrances.

Question 13

Unexpended resources transferred to the debt service fund from the General Fund would typically be classified as Restricted Fund Balance.

Accepted Answer

Unexpended resources transferred to the debt service fund from the General Fund would typically be classified as Restricted Fund Balance or Assigned Fund Balance.

Question 14

Because capital project,debt service and permanent funds use modified accrual accounting,these funds would typically record budgets.

Accepted Answer

Only the General Fund and Special Revenue funds record budgets.

Question 15

Net assets represented by supplies and prepaid expenses are classified in governmental funds as Nonspendable Fund balance.

Accepted Answer

Net assets represented by supplies and prepaid expenses are considered non-spendable in governmental funds because they cannot be expended in the current period. Instead, they will be consumed or utilized in future periods.

Question 16

Positive fund balances of capital projects funds are classified as restricted,committed assigned or unassigned.

Accepted Answer

Positive fund balances of capital projects funds are typically classified as restricted, committed, or assigned, but not unassigned, as they are designated for specific purposes related to capital projects.

Question 17

Capital Projects funds recognize encumbrances and expenditures,not expenses.

Accepted Answer

Capital Projects funds are used for the acquisition, construction, or improvement of long-term capital assets. Therefore, they focus on the funding and spending of capital projects and recognize encumbrances (commitment of funds for an order or contract) and expenditures (actual payment of funds) but do not recognize expenses (the consumption of goods or services).

Question 18

All of the governmental funds use the modified accrual basis of accounting

Accepted Answer

It is true that all of the governmental funds use the modified accrual basis of accounting. This means that revenues are recognized when they are measurable and available to finance current-period expenditures, while expenditures are recognized when they are incurred and expected to be paid with available resources within a reasonable timeframe. This basis of accounting is different from the accrual basis used in the private sector, which recognizes revenues when they are earned and expenses when they are incurred, regardless of when the cash is received or paid.

Question 19

Fund balances of debt service funds are classified among the categories identified in GASB Statement 54 as Restricted and Unrestricted.

Accepted Answer

The answer of Fund balances of debt service funds are...

Question 20

Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Committed Fund Balance

Accepted Answer

Intergovernmental grants and taxes dedicated to capital improvements are likely to be classified as restricted. Resources not meeting the definition of restricted are likely to be reported as committed fund balance.

Quiz 5: Accounting for Other Governmental Fund Types: Capital Projects, Debt Service, and Permanent