Question 1

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

Accepted Answer

An appropriation is a legal authorization for administrators to incur specified amounts of liabilities on behalf of the government for specified purposes, such as spending on government programs, services or debt payments. It is a fundamental part of the budget process and enables the government to allocate resources to achieve its objectives.

Question 2

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

Accepted Answer

Expenditure refers to a decrease in fund financial resources (net of liabilities). Interfund transfers do not result in a decrease in fund financial resources, so they are excluded from expenditures.

Question 3

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

Accepted Answer

Budgetary accounts are reset to zero at the beginning of each fiscal year and are closed at the end of the year.

Question 4

The Township of Thomasville's General Fund has the following net resources at year end:
•$66,000 of prepaid insurance
•$375,000 rainy day fund approved by the township governing board with specific conditions for its use
•$2,500 of supplies inventory
•$61,000 state grant for snow removal
•$150,000 contractual obligations for the purchase of equipment
•$200,000 to be used to fund government operations in the future
•Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures
-What would be the total Nonspendable fund balance?

Accepted Answer

Nonspendable fund balance includes resources that cannot be spent because they are either not in a spendable form or are legally or contractually required to be maintained intact. This includes the $66,000 of prepaid insurance, $2,500 of supplies inventory, and outstanding encumbrance of $80,000 for the purchase of furniture & fixtures. Therefore, the total Nonspendable fund balance is $68,500 ($66,000 + $2,500 + $80,000).

Question 5

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

Accepted Answer

Encumbrances are recorded in modified accrual accounting to show the amount of money that has been committed to be spent on goods or services. This is recorded at the time the order is placed, rather than when goods are received, as is done in accrual accounting when recording liabilities for goods received.

Question 6

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

Accepted Answer

This is true. Expenditure classification by character typically includes current expenditures (for things like employee salaries and supplies), capital outlay (for things like construction projects or major equipment purchases), and debt service (for payments on loans or bonds).

Question 7

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.

Accepted Answer

Governments can create special revenue funds for specific purposes, such as funding education or environmental initiatives. These funds are distinct from general funds that are used to pay for a variety of government expenses. However, capital assets and debt service may also be funded through special revenue funds in some cases.

Question 8

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.

Accepted Answer

When purchase orders are filled and the invoice amount differs from the estimated amount, the amount reversed from the encumbrance account equals the amount of the original purchase order. A liability will be recorded for the invoice amount.

Question 9

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.

Accepted Answer

Typically, budget-actual comparisons are schedules in RSI. Governments may also elect to provide those comparisons as one of the basic statements rather than as a schedule. The schedule must provide the original budget, the final budget and the actual amounts of revenues, expenditures and other financing sources and uses. The amounts in the actual column are to be reported on the basis required by law for budget preparation, even if that basis differs from the basis provided in the GASB standards.

Question 10

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

Accepted Answer

This is the principle of revenue recognition for governmental funds per the Governmental Accounting Standards Board (GASB). Revenues should be recognized in the period in which they are both measurable and available for expenditure.

Question 11

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

Accepted Answer

Transfers from one fund to another are not considered expenditures. They are simply movements of resources between funds and are classified as such in financial statements.

Question 12

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

Accepted Answer

Encumbrance is a commitment to expend resources in the future, often used in budgeting to set aside funds for specific purposes, but it is not a legal authorization to incur liabilities.

Question 13

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

Accepted Answer

When a purchase order is filled or a contract is executed, the fund reverses the encumbrance for the original amount records an expenditure and fund liability.

Question 14

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

Accepted Answer

The answer of The journal entry to record a purchase...

Question 15

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.

Accepted Answer

This statement is true. GASB Statement No. 34 requires governments to prepare budgetary comparison schedules that reconcile the budgetary basis information to the GAAP basis information presented in the basic financial statements. This helps to ensure consistent and transparent reporting of financial information.

Question 16

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

Accepted Answer

Encumbrances are typically used for one-time or occasional expenditures and are not necessary for recurring expenses like payroll that are part of regular operations.

Question 17

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

Accepted Answer

The Budgetary Comparison Schedule is a required part of the Comprehensive Annual Financial Report and is considered to be part of the Required Supplementary Information (RSI). This schedule provides a comparison between the budgeted and actual revenue and expenditures for the reporting period.

Question 18

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

Accepted Answer

The term "Unexpended Appropriations Balance" refers to the funds that have been allocated for specific purposes but have not yet been spent. This balance represents the amount that a government may still spend without exceeding its budget. Therefore, the statement is true.

Question 19

The modified accrual basis is a distinct system of accounting that:

Accepted Answer

The modified accrual basis of accounting records expenditures and fund balances, which differs from both accrual and cash basis accounting. It recognizes revenues when they become available and measurable but only recognizes expenditures when they are paid out of the fund. It also does not recognize long-term assets or liabilities, making it distinct from accrual accounting.

Question 20

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.

Accepted Answer

This is true as the expenditure should be recorded based on the actual invoice amount rather than the estimated amount.

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