Question 1

What is the correct sequence in the expenditure process in governmental accounting?

Accepted Answer

The correct sequence in the expenditure process in governmental accounting is Appropriation, Encumbrance, Expenditure, and Disbursement. Appropriation is the budgeted amount for a specific purpose. Encumbrance is the commitment made to use a portion of the appropriation for a specific transaction. Expenditure is the actual use of funds for a specific transaction. Disbursement is the actual payment of funds for a specific transaction.

Question 2

The Town of Pasco has no supplies inventory in its general fund on January 1,20X8.During 20X8,Pasco incurred expenditures of $200,000 for the acquisition of supplies.On December 31,20X8,Pasco's inventory of supplies amounted to $30,000.Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year.On December 31,20X8,the general fund of Pasco should credit:

Accepted Answer

Under the purchase method, the entire amount of supplies purchased is initially recorded as an expenditure. At year-end, the inventory on hand ($30,000) is reclassified from expenditures to Fund Balance-Nonspendable to reflect that these supplies are not available for spending.

Question 3

Which of the following funds should use the modified accrual basis of accounting?

Accepted Answer

Capital projects and special revenue funds should use the modified accrual basis of accounting. The modified accrual basis of accounting is used for governmental funds, which are funds used for specific governmental functions. Capital projects funds are used for the construction or acquisition of major capital facilities, and special revenue funds are used to account for specific revenue streams dedicated to particular purposes. Both of these funds focus on specific projects or programs and use the modified accrual basis to track their finances.

Question 4

On July 25,20X8,the city of Pullman,which reports on a calendar-year basis,ordered five police cars at an estimated cost of $200,000.On August 26,20X8,the police cars were received,and the actual cost amounted to $197,000.Pullman encumbered the appropriation for police cars in its general fund when the cars were ordered.When the police cars were received,the general fund of Pullman should:

Accepted Answer

When the police cars are received, the general fund of Pullman should debit Expenditures for the actual cost of $197,000. This represents the actual outflow of resources from the fund. The Encumbrances account should be closed out because the goods have been received and the liability has been extinguished. Therefore, the encumbrance should be reversed by debiting the account and crediting Budgetary Fund Balance Assigned for Encumbrances in the amount of $200,000 (original amount of encumbrance). The remaining $3,000 ($200,000 - $197,000) in the encumbrance account is released and no longer needs to be reserved.

Question 5

The general fund of the City of Atlanta received a check for $10,000 from an Atlanta resident on July 1,20X8.Of the amount received,$4,800 represented full payment of property taxes for 20X8,and the remaining $5,200 represented an advance payment for property taxes of 20X9.On July 1,20X8,the general fund should record the receipt by debiting Cash for $10,000 and by crediting

Accepted Answer

The general fund should record the receipt by debiting Cash for $10,000 and by crediting Property Taxes Receivable-Current for $4,800 and Deferred Revenue for $5,200. The $4,800 payment for 20X8 property taxes is recorded as a receivable because it is not yet earned. The $5,200 advance payment for 20X9 property taxes is recorded as deferred revenue because it is not yet earned.

Question 6

Revenues from parking meters and parking fines should be reported in the general fund when:

Accepted Answer

The answer of Revenues from parking meters and parking fines...

Question 7

The following information pertains to property taxes levied by Sycamore City for 20X7:

What amount should Sycamore report for 20X7 net property tax revenues?

Accepted Answer

The answer of The following information pertains to property taxes...

Question 8

Which of the following funds should use the accrual basis of accounting?

Accepted Answer

Enterprise and private-purpose trust funds are proprietary and fiduciary funds, respectively, which use the accrual basis of accounting.

Question 9

What amount should be reported as expenditures for the current fiscal year when accounting for inventories of supplies under the purchase method and under the consumption method?

Accepted Answer

The answer of What amount should be reported as expenditures...

Question 10

Which of the following items is not recognized as revenue by a governmental unit?

Accepted Answer

Bond proceeds are not recognized as revenue by a governmental unit, as they represent debt financing rather than actual revenue earned through taxes or other sources. The other choices (A, B, and D) all represent actual revenue earned by the government.

Question 11

Assuming there is a budget surplus,which of the following accounts are credited when the general fund records its operating budget at the beginning of the year?

Accepted Answer

When the general fund records its operating budget at the beginning of the fiscal year, the accounts credited are Appropriations Control, which represents the authority to incur obligations for expenditures, and Budgetary Fund Balance-Unassigned, which reflects the portion of fund balance that is not constrained for a specific purpose and can be used for any general government purpose. This entry reflects the establishment of the budgetary authority for the year.

Question 12

The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet.What account is debited in the general fund when Ames acquires supplies?

Accepted Answer

When using the consumption method for reporting inventory of supplies in the general fund, the acquisition of supplies is recorded as an expenditure. This method recognizes the cost of supplies as an expense when they are consumed, not when they are purchased.

Question 13

The general fund of Caldwell had the following operating budget for the fiscal year beginning July 1,20X9:

When the general fund records its operating budget on July 1,20X9,Budgetary Fund Balance-Unassigned should be

Accepted Answer

The answer of The general fund of Caldwell had the...

Question 14

Which combination of fund and measurement basis is correct?

Accepted Answer

The answer of Which combination of fund and measurement basis...

Question 15

The general fund of Gillette levied property taxes of $400,000 on November 1,20X8.However,the property taxes are not collectible until May and August of 20X9.Assume Gillette reports on the calendar year.On Gillette's general fund balance sheet at December 31,20X8,the property taxes levied on November 1 should:

Accepted Answer

Property taxes levied but not yet collected are considered deferred revenue. Therefore, on Gillette's general fund balance sheet at December 31,20X8, the property taxes levied on November 1 should be reported as an asset and as a deferred revenue.

Question 16

The general fund of the Town of Dean levied property taxes of $3,000,000 for the fiscal year beginning on January 1,20X8.It was estimated that 1% of the levy would be uncollectible.During the period January 1,20X8,through December 31,20X8,$2,960,000 of the property tax levy was collected.At December 31,20X8,Dean estimated that $10,000 of property taxes levied in 20X8 would be collected during the first 60 days of 20X9.What amount of property tax revenue should be reported by the general fund for the year ended December 31,20X8?

Accepted Answer

The estimated uncollectible amount is 1% of the levy, which is $30,000 ($3,000,000 x 1%). Therefore, the total amount of property tax revenue that should be recognized for the year ended December 31, 20X8 is the levy of $3,000,000 minus the estimated uncollectible amount of $30,000, which is $2,970,000. Since $2,960,000 of the levy was collected during the year and an additional $10,000 is expected to be collected in the first 60 days of the following year, the total revenue recognized for the year ended December 31, 20X8 is $2,970,000.

Question 17

In a town's general fund operating budget for the year,the amount of its estimated revenues exceeded the amount of its appropriations.This excess should be:

Accepted Answer

The excess of estimated revenues over appropriations is called a surplus. Surpluses are credited to the Budgetary Fund Balance-Unassigned account, which represents resources available for future budgetary needs. This account is used to carry over the remaining budgetary resources from the prior fiscal year to the current year. Therefore, option A is the correct choice.

Question 18

Which of the following observations concerning encumbrances is NOT true?

Accepted Answer

This observation is not true because encumbrances are recognized at the time the purchase order or contract is established, not at the time disbursements are made.

Question 19

Under the modified accrual basis of accounting for the general fund,expenditures should be recognized in the period in which the related liability is:
I.paid.
II.incurred.

Accepted Answer

The answer of Under the modified accrual basis of accounting...

Question 20

Under the modified accrual basis of accounting,revenue should be recognized when it is:

Accepted Answer

Under the modified accrual basis of accounting, revenue is recognized when it is both measurable and available to finance expenditures of the current period.

Quiz 17: Governmental Entities: Introduction and General Fund Accounting