Question 1

Which basis of accounting must be used in presenting the "actual" column of the fund-level budgetary comparison schedules for the General Fund and major Special Revenue Funds?

Accepted Answer

The "actual" column in the fund-level budgetary comparison schedules for the General Fund and major Special Revenue Funds must be presented using the government's budgetary basis of accounting, as it reflects how the budget was legally adopted and executed.

Question 2

(Matching transactions with funds and operating statement line items)
Harmony Township maintains four funds:
A the General Fund,
B the Library Special Revenue Fund,
C the Capital Projects Fund (recently established to account for the construction of a new city park),and
D the Water Enterprise Fund.
For each of the transactions described below,indicate by letter the fund(s)involved and by number the operating statement line item(s)that could be affected. $\begin{array}{lllr}
1 & \text { Revenues } & 4 & \text { Other financing sources } \
2 & \text { Expenditures } & 5 & \text { Other financing uses } \
3 & \text { Expenses } & 6 & \text { None (this is a balance sheet transaction) }
\end{array}$

Accepted Answer

The answer of (Matching transactions with funds and operating statement...

Question 3

To what extent should economic factors be discussed in Management's Discussion and Analysis (MD&A)?

Accepted Answer

Major economic factors can have a significant impact on a company's operating results and should be included in the MD&A to provide investors with a better understanding of the company's performance. This helps investors to make more informed investment decisions. Not including economic factors in the MD&A can make it difficult for investors to understand the company's performance and its prospects. Therefore, it is essential to discuss the major economic factors affecting the company's operating results in the MD&A.

Question 4

Which information must be presented in budgetary comparison schedules?

Accepted Answer

Budgetary comparison schedules must present both the original appropriated budget and the final appropriated budget to allow for comparison of planned versus actual spending.

Question 5

In the net position component called "invested in capital assets,net of related debt" (that appears in proprietary fund financial statements),what is the meaning of net of related debt?

Accepted Answer

"Net of related debt" means that the amount invested in capital assets reflects the outstanding balances of bonds, notes, or other borrowings that were specifically issued to acquire or improve the capital assets shown in that amount. Therefore, option D is the correct choice. Option A is too narrow as it only includes borrowings specifically issued to acquire or improve capital assets, while option B is too broad as it includes borrowings issued for any approved purpose. Option C includes all liabilities, not just those specifically related to the capital assets in question.

Question 6

What is the general rule for reporting on funds in the fund-level financial statements for fiduciary funds?

Accepted Answer

Fiduciary funds are reported by fund type, not by individual funds, in the fund-level financial statements.

Question 7

Which of the following financial statements is not required to be prepared for proprietary funds in the fund-level financial statements?

Accepted Answer

The Statement of Revenues, Expenditures, and Changes in Fund Balances is not required for proprietary funds because it is used for governmental funds. Proprietary funds use accrual accounting and focus on the flow of economic resources, which is reflected in the other statements listed.

Question 8

Which of the following best expresses the kind of information included in notes to the financial statements?

Accepted Answer

Notes to the financial statements typically contain additional information that is essential to a user's understanding of the reporting entity's financial position and resource inflows and outflows. This may include details about significant accounting policies, contingencies, long-term debt, commitments, and other important matters affecting financial performance. The information in these notes is considered an integral part of the financial statements and is intended to provide necessary context for interpreting the reported financial results. Other options (A, C, and D) may also be included in the notes on occasion but are not typically the primary focus.

Question 9

Why are separate operating statements prepared for governmental funds and proprietary funds in the fund-level financial statements?

Accepted Answer

Governmental funds have a current financial resources measurement focus and use the modified accrual basis of accounting, whereas proprietary funds have an economic resources measurement focus and use the accrual basis of accounting. Thus, separate operating statements are necessary to properly reflect the financial activity of each type of fund.

Question 10

A municipality incurs liabilities in its operations (such as vacation leave and expected claim settlements)that could be classified as "long-term" because cash payouts will not occur for more than one year.The liabilities result from both governmental and proprietary activities.Where are these long-term liabilities reported in the fund-level balance sheets?

Accepted Answer

Long-term liabilities are reported as noncurrent liabilities in the proprietary funds balance sheet because these funds use the accrual basis of accounting, which recognizes liabilities when they occur, regardless of when they are paid. However, governmental funds use the modified accrual basis of accounting and do not report long-term liabilities on the fund level balance sheets; instead, such liabilities are reported in the government-wide financial statements.

Question 11

What is the purpose of preparing proprietary fund balance sheets in classified format?

Accepted Answer

The classified format of a balance sheet is used to distinguish between current and noncurrent assets and liabilities, providing a clearer picture of the entity's financial position.

Question 12

Match between columns Premises: The relationships between two primary governments and a third organization may be such that the third organization can be a component unit of both primary governments. An example of a state's ability to impose its will on the operations of a legally separate toll road is its ability to approve the road's proposed increases in toll rates. Only general-purpose governments,like states,cities,counties,towns,and villages can be primary governments.Special purpose governmental entities,like school districts and hospitals,can never be primary governments.
When an organization is part of a primary government's financial reporting entity,the accounts of the former are always "blended" with the accounts of the latter;that is,the individual funds of the component unit are added to the funds of the primary government.

Accepted Answer

The Answer of False and True is...

Question 13

Which of the following financial statements or schedules is prepared for all fiduciary funds?

Accepted Answer

The Statement of Fiduciary Net Position is prepared for all fiduciary funds and presents the assets, liabilities, and net position of those funds. The other options are not necessarily prepared for all fiduciary funds. The Statement of Fiduciary Cash Flows is only prepared if the fiduciary fund has cash receipts or disbursements, the Budgetary Comparison Schedule is only prepared if the fund has a budget, and the Reconciliation between Fund-level and Government-wide Level Operating Activities is not specific to fiduciary funds.

Question 14

A municipality allows its employees to accumulate up to 45 days' vacation pay that may be "cashed in" by the employees on retirement.Many employees whose salaries are paid from General Fund appropriations avail themselves of this opportunity.Where does this liability appear on the governmental funds balance sheet when employees are not expected to retire in the near future?

Accepted Answer

In governmental accounting, expenditures (and related liabilities) are recognized under the modified accrual basis. This means that long-term liabilities, such as accrued vacation leave that is not expected to be paid in the near future, do not appear on the balance sheet of governmental funds. Instead, such liabilities are reported in the government-wide financial statements, which are prepared using the accrual basis of accounting.

Question 15

What is the reporting requirement for the fund balance section of the governmental funds balance sheet?

Accepted Answer

According to GASB guidance, the fund balance section of the governmental funds balance sheet should be segregated into five components: non-spendable, restricted, committed, assigned, and unassigned. Non-spendable fund balances are amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Restricted fund balances are amounts that can only be used for specific purposes as set by external parties, constitutional provisions, or enabling legislation. Committed fund balances are amounts that can only be used for specific purposes as determined by a formal government action such as a resolution, ordinance, or budgetary document. Assigned fund balances are amounts that are intended to be used for specific purposes but are neither restricted nor committed. Unassigned fund balances are amounts that are available for any lawful purpose.

Question 16

How are amounts due to other funds reported in fund-level financial statements?

Accepted Answer

Amounts due to other funds are reported as liabilities in the balance sheet of the fund-level financial statements. This is because they represent amounts that the reporting fund owes to other funds, which is a form of debt or obligation.

Question 17

How are long-term loan receivables reported in the fund balance section of governmental funds balance sheets?

Accepted Answer

Long-term loan receivables are reported as nonspendable in the fund balance section because they are not in a spendable form.

Question 18

Statistical tables included in the Comprehensive Annual Financial Report are intended to help users by providing what kind of information?

Accepted Answer

The statistical tables included in the Comprehensive Annual Financial Report are intended to provide additional financial, economic, and demographic data that helps users place the financial statements of a government in a broader context. This information can include data on the population served by the government, economic indicators, and fiscal policies. It is not intended to show whether the entity has delivered public services efficiently or effectively nor detailed data on the financial position and results of operations of each individual fund, but rather an overview of the financial position and results of operations of the entity as a whole.

Question 19

Which of the following best expresses the general rule regarding the reporting of operating revenues,nonoperating revenues,and special items in the proprietary funds statement of revenues,expenses,and changes in fund net position?

Accepted Answer

Operating revenues, nonoperating revenues, and special items are reported in separate sections of the statement to clearly distinguish between the different types of income and expenses, providing a clearer financial picture of the proprietary fund's operations.

Question 20

Budgetary comparison schedules (or statements)must be prepared for:

Accepted Answer

The answer of Budgetary comparison schedules (or statements)must be prepared...

Quiz 9: Reporting Principles and Preparation of Fund Financial Statements