Chp_3_Homework - Chapter 03 - Governmental Operating...

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting CHAPTER 3: GOVERNMENTAL OPERATING STATEMENT ACCOUNTS; BUDGETARY ACCOUNTING Answers to Questions 3-1 The governmental fund financial statements report current financial resources information intended to help users assess current period fiscal accountability —whether revenues were raised only from authorized sources and expended for authorized purposes. As such, the governmental fund statements lack the mid- to long-term focus on economic resources and cost of services needed to assess operational accountability. 3-2 Using the net (expense) or revenue format, sometimes referred to as the “cost of services” approach, identifies the extent to which each function or program is self- supporting from fees and intergovernmental aid, or must be subsidized by general revenues of the government. 3-3 Depreciation expense is reported as a direct expense when it relates to capital assets that are clearly identified with a function or program because it captures a real cost of using capital assets to provide that service function or program. Even depreciation expense for infrastructure assets should be reported as a direct expense of the public works or transportation function, if that is the function responsible for those assets. 3-7 Definitions of these terms are given in the Glossary of the text. Below are briefer statements: a. Expenditures and Encumbrances are both charges against appropriations. An encumbrance is a charge for an estimated amount at the time goods are ordered; an expenditure is a charge for an actual amount at the time the goods are received (accrual and modified accrual basis) or paid (cash basis). Encumbrance accounting is used only in those funds where it is needed to achieve budgetary control over expenditures. b. Revenues are increases in net assets of the government as a whole or of a fund other than from interfund transfers or debt issue proceeds, recognized at the time the increase is earned (accrual basis), available for use (modified accrual basis) or received in cash (cash basis). Estimated revenues are amounts expected to be available for use or received under enabling legislation during a budget period. Estimated Revenues is a budgetary account representing the expected amount of revenues to be realized from various sources. c. The term e ncumbrances is defined in a above. Reserve for Encumbrances is a balance sheet account representing the amount segregated from fund balance for expected liabilities resulting from purchase orders and contracts issued. 3-1
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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting d . Reserve for Encumbrances is defined in c above. The Fund Balance of a governmental fund is the excess of fund assets over fund liabilities, appropriations, and reserves; in short, the assets available for appropriation [defined in e below] in governmental funds. e
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Chp_3_Homework - Chapter 03 - Governmental Operating...

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