19_Fischer10e_SM_Ch16_final

19_Fischer10e_SM_Ch16_final - CHAPTER 16 UNDERSTANDING THE...

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CHAPTER 16 UNDERSTANDING THE ISSUES 1. Capital projects funds are used to account for the inflows and outflows of financial resources raised and expended to acquire major capital assets used by the general government. This accounting is in accordance with the flows of financial resources measurement focus adop- ted for governmental funds. Fixed assets ac- quired with proceeds from general obligation bonds are accounted for in the general fixed assets account group subsequent to acquisi- tion. 2. Closing of a capital projects fund at the end of a period is desirable to adjust and balance the fund accounts for the annual preparation of the financial statements. As part of this process, the fund balance, unreserved, undesignated is determined. This amount is the balance avail- able for completion of the project. Also, the total amount of expenditures on a project is determ- ined, which is recorded in the general fixed as- sets account group as the cost of a completed asset or as Construction in Progress. 3. Capital special assessments are levied in in- stallments to provide more time over which to spread collections. Only the portion available in the current period is recognized as revenue. Recognition of revenue must be deferred for those installments to be collected in future peri- ods. 4. The due date and amounts of principal and in- terest payments are known. No useful data would be produced by using budgetary accounts. 5. Revenues would be credited if resources were received from a source outside of the govern- mental unit that need not be repaid. An ex- ample is a property tax levy. If repayment is required, as in the case of a bond issue, the credit is to Other Financing Sources. The latter account is also used for amounts received from other funds of the same governmental unit if that unit had previously recorded the resources as revenue. The procedure prevents recogniz- ing the same resources twice as revenue. 6. Both funds account for public-purpose trusts. If the resources and any earnings on investments can be used to finance government programs, then a special revenue fund is used. If only the earnings can be spent, a permanent fund is used. 7. Two major types of interfund transfers are oper- ating transfers and equity transfers. Operating transfers are of a frequent and recurring nature and record billings for goods or services provided, or transfers between funds for such items as debt servicing, financing of specific programs, or funding of major construction pro- jects. Equity transfers are infrequent and often nonrecurring. These transfers are often in con- junction with the initiating or closing of a fund. Operating or equity transfers between govern- mental funds use “other financing sources” and “other financing uses” accounts. Operating transfers between proprietary funds and gov- ernmental funds or between two proprietary funds are recorded as revenues and expendit- ures/expenses. Equity transfers between gov- ernmental funds and proprietary funds are
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19_Fischer10e_SM_Ch16_final - CHAPTER 16 UNDERSTANDING THE...

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