This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

Chapter 3 Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority True/False Questions 1. Net resources of a governmental fund represented by prepaid insurance is an example of a nonspendable fund balance Answer: True 2. A rainy day fund approved by the township governing board is an example of an assigned fund balance Answer: False 3. A contractual obligation (such as for the purchase of equipment) is an example of a committed fund balance. Answer: True 4. $200,000 to be used to fund government operations in the future is an example of an unassigned fund balance. Answer: True 5. Outstanding encumbrance of $80,000 for the purchase of furniture & fixtures is an example of a restricted fund balance. Answer: False 6. Rainy day funds are classified as committed if they are created by a resolution or ordinance that identifies the specific circumstances under which the resources may be expended. Answer: True 7. If rainy day funds are available in emergencies or periods of revenue shortfalls they are not ordinarily classified as committed. Answer: True 8. Rainy day funds that are available in emergencies or revenue shortfalls may still be classified as committed if the emergency or shortfall condition is specified and is of such a magnitude as to distinguish it from events that are routine. 1 Chapter 3 Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority Answer: True 9. An exchange transaction is one where each party is given and receives essentially equal value. Answer: True 10. A nonexchange transaction is one where a government gives or receives value without directly receiving or giving. Answer: True 11. When using modified accrual accounting, revenues should be recognized when measurable and available to finance expenditures of the current period. Property tax revenue is considered available if it is received no more than 60 days after the fiscal year end. Answer: True 12. Expenditures under modified accrual accounting are recognized when fund liabilities are incurred. Answer: True 13. Modified accrual accounting is essentially the same as cash basis except that long term assets are not recorded. Answer: False 14. The modified accrual basis is a distinct system of accounting that contains financial statement elements that appear nowhere else Answer: True 15. There are no expenses in modified accrual funds Answer: True 16. Revenues, but not expense are recorded the same under accrual and modified accrual accounting. 2 Chapter 3 Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority Answer: False 17. Fund balance indicates the legal claim of voters on the net assets of a proprietary fund.... View Full Document

End of Preview

Sign up now to access the rest of the document