Question 1

Major sources of funding for Capital Project Funds include the issuance of long term debt and grants from other governmental units.

Accepted Answer

Long term debt and grants from other governmental units are indeed major sources of funding for Capital Project Funds.

Question 2

Capital assets are not reported in governmental funds.

Accepted Answer

Capital assets, such as buildings, land, and equipment, are reported in the government-wide financial statements, but not in governmental funds. Instead, governmental funds focus on the inflows and outflows of current financial resources.

Question 3

An annuity serial bond is one where the amount of the principal increases each year by the same amount that the interest payments decrease.

Accepted Answer

The annual debt service payments remain relatively uniform over the term of the issue for an annuity serial bond. The principal repayments increase each year by approximately the same amount that interest payments decrease.

Question 4

If taxes and/or special assessments are levied specifically for payment of interest and principal on long-term debt,those taxes are recognized as revenues of the debt service fund.

Accepted Answer

This is true according to generally accepted accounting principles for governmental entities.

Question 5

When using debt service accounting,interest on long term debt is not to be accrued unless the payment is due in no more than one month and the government has resources available for payment.

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.

Question 6

A gift of $1,000,000 to a city,to be invested permanently,with the proceeds to be used to maintain the city war memorials should be accounted for in a special revenue fund.

Accepted Answer

The principle is nonexpendable. The income is to benefit the government or its citizenry and will be accounted for in a permanent fund.

Question 7

Encumbrance accounting is typically not used for Permanent Funds.

Accepted Answer

Encumbrance accounting is typically used for General Funds, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds, but not for Permanent Funds.

Question 8

A non-expendable trust which benefits a government or its citizenry and which stipulates that earnings only (not principal)may be used for its prescribed purpose would be reported in a Special Revenue Fund.

Accepted Answer

A non-expendable trust which benefits a government or its citizenry and which stipulates that earnings only not principal may be used for its prescribed purpose would be reported in a Permanent Fund.

Question 9

Fund basis financial statements in which capital projects funds are reported are the Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues,Expenditures,and Changes in Fund Balances.

Accepted Answer

Capital projects funds are a type of governmental fund, and their financial statements are included in the overall financial statements of the governmental funds. Therefore, the Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances will include information on capital projects funds.

Question 10

Budgets are typically recorded for Capital Projects Funds.

Accepted Answer

Capital projects funds do not typically record budgets.

Question 11

Fixed assets of completed projects are recorded in the accounts of capital projects funds.

Accepted Answer

Fixed assets are not reported in governmental funds. They are recorded in the government-wide statements.

Question 12

General Funds and special revenue funds typically record budgets.

Accepted Answer

Both general funds and special revenue funds typically record budgets, as these types of funds are used for specific purposes and require accurate planning and tracking of expenses.

Question 13

Permanent funds account for resources that are donor restricted to the extent earnings (but not principal)may be used to support government programs.

Accepted Answer

Permanent funds are donor restricted and allow for earnings to be used to support government programs while preserving the principal.

Question 14

A Debt Service Fund is a fund type that is used to account for revenues and other financing sources that are intended to service debt.

Accepted Answer

This is the correct definition of a Debt Service Fund. Its purpose is to ensure that there are sufficient funds set aside to pay for the principal and interest payments on outstanding debt. It is often used by governments and municipalities to manage their debt obligations.

Question 15

Budgets are typically recorded for Debt Service Funds.

Accepted Answer

Debt service funds do not typically record budgets

Question 16

Budgets are typically not recorded for Special Revenue Funds.

Accepted Answer

Budgets are required to be recorded for Special Revenue Funds as they are used to account for specific revenue sources that are restricted for particular purposes such as grants, taxes, or other dedicated revenue sources. Hence, it is necessary to have a budget to ensure that the resources are being used appropriately and efficiently.

Question 17

Premiums generated from the issuance of bonds for a capital projects fund are generally transferred to the Debt Service Fund.

Accepted Answer

Premiums generated from bond issuances for capital projects are transferred to the Debt Service Fund to pay for the principal and interest payments on the bonds.

Question 18

Capital project funds exist for the duration of the project for which it is created and are then closed.

Accepted Answer

Capital project funds are created to finance a specific project and are closed once the project is completed. The funds cannot be used for any other purpose than the intended project.

Question 19

Private-purpose Trust Funds benefit individuals,private organizations,or other governments.

Accepted Answer

Private-purpose Trust Funds are established to benefit specific individuals or private organizations, such as universities, hospitals, or social service agencies, or other governments.

Question 20

Budgets are typically recorded for capital projects,debt service,and permanent funds.

Accepted Answer

Budgets are typically recorded for the general fund and special revenue funds. Budgets are not typically recorded for capital projects, debt service and permanent funds.

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