Question 1

When closing out the General Fund and Special Revenue Funds of a state or local governmental unit, the balance of the operating statement accounts and the balances of the budgetary accounts are closed to Fund Balance - Unreserved

Accepted Answer

When closing out the General Fund and Special Revenue Funds of a state or local governmental unit, the balance of the operating statement accounts and the balances of the budgetary accounts are closed to Fund Balance - Unreserved. This is because Fund Balance - Unreserved represents the residual equity in a fund that is available for future use by the government.

Question 2

When a special revenue fund accounts for grants that are awarded on a reimbursement basis, revenues are recognized only after expenditures have been recognized.

Accepted Answer

Grants that are awarded on a reimbursement basis require the recipient to first incur expenses before receiving any funding. Therefore, the revenues generated from these grants are recognized only after the corresponding expenses have been recognized. As a result, the special revenue fund will recognize the revenues and the expenses in the same accounting period.

Question 3

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.

Accepted Answer

Revenue recognition occurs when the resulting resources are deemed to be both measurable and available to finance expenditures of the current period. Property taxes collected within 60 days after the end of the fiscal year may be deemed to be available and recorded as revenue in the year assessed rather than the year collected.

Question 4

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

Accepted Answer

This is because an excess of revenues indicates that the government has more money than expected, which increases the Budgetary Fund Balance.

Question 5

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

Accepted Answer

Voluntary nonexchange transactions are donations and grants given to support a program. Since the program is not required, the receiving government voluntarily agrees to participate.

Question 6

Sales taxes, income taxes and motor fuel taxes are examples of exchange transactions.

Accepted Answer

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Question 7

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

Accepted Answer

Under GASB Statement 33 requirements, property tax revenue should be recognized in the period for which the taxes are levied, not necessarily when they are collected. This is known as the "tax levy" accounting method.

Question 8

Real estate property tax is an example of derived tax revenue.

Accepted Answer

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Question 9

When closing the books for the General Fund, an excess of revenues over expenditures and encumbrances would be credited to Fund Balance-Unreserved.

Accepted Answer

When there is an excess of revenues over expenditures and encumbrances in the General Fund, it indicates a surplus. This surplus is credited to Fund Balance-Unreserved as it is not restricted for any specific purpose or project.

Question 10

Receivables from sales taxes are recorded when the taxpayer's underlying transaction takes place.

Accepted Answer

According to Generally Accepted Accounting Principles (GAAP), receivables from sales taxes are recorded in the same accounting period as the sale transaction takes place. This is known as the accrual basis of accounting. Therefore, the statement is true.

Question 11

The GASB has created four "eligibility requirements" that must be met before revenue can be recognized: (1) required characteristics of recipients, (2) timing, (3) reimbursements and (4) contingencies.

Accepted Answer

This statement is true. The GASB has established eligibility requirements that must be met before revenue can be recognized, including characteristics of recipients, timing, reimbursements, and contingencies.

Question 12

When the General Fund purchases water from an enterprise fund, the General Fund would debit Transfers Out.

Accepted Answer

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Question 13

If a government uses the purchases method of accounting for inventories, the expenditures account is debited when supplies are received and the inventory of supplies account is adjusted at year-end.

Accepted Answer

This is the correct statement for the purchases method of accounting for inventories. The expenditures account is debited when supplies are received and the inventory of supplies account is adjusted at year-end to reflect the ending balance of inventory on hand.

Question 14

If inventories are significant, GAAP requires that an asset account be credited in order to record a fund balance reserve when using the purchases method.

Accepted Answer

Under GAAP, when using the purchases method, an asset account is not credited to record a fund balance reserve; instead, expenditures are recorded when inventory is purchased, and adjustments are made at the end of the period to reflect the actual inventory on hand.

Question 15

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

Accepted Answer

Government-mandated nonexchange transactions are grants from higher levels of government given to support a program. Since the program is required, the lower-level government has no choice but to participate. Sales taxes, income taxes and motor fuel taxes are derived tax revenues.

Question 16

Interfund services provided and used are recognized directly as Transfers In and Transfers Out.

Accepted Answer

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Question 17

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

Accepted Answer

Property tax is an example of an imposed nonexchange revenue, as it is a tax imposed on individuals or companies who own property, without any exchange of goods or services.

Question 18

Interfund services provided and used are recognized as Increases and Decreases in Fund Balance

Accepted Answer

Intergovernmental services provided and used are not recognized as increases and decreases in fund balance. Instead, they are eliminated in the preparation of government-wide financial statements.

Question 19

The GASB has categorized nonexchange transactions into three types: (1) derived tax revenues, (2) imposed nonexchange revenues and (3) voluntary nonexchange transactions.

Accepted Answer

The GASB categorizes nonexchange transactions into four types: (1) derived tax revenues, (2) imposed nonexchange revenues, (3) government-mandated nonexchange transactions, and (4) voluntary nonexchange transactions.

Question 20

A special item is a significant transaction that is unusual and infrequent, but within the control of management

Accepted Answer

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Quiz 4: Accounting for the General and Special Revenue Funds