Chapter 19 Q and A

Chapter 19 Q and A - Chapter 19 ACCOUNTING FOR STATE AND...

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Chapter 19 ACCOUNTING FOR STATE AND LOCAL GOVERNMENTAL UNITS — GOVERNMENTAL FUNDS Questions 1 The governmental fund accounting equation is: Current Assets – Current Liabilities = Fund Balance 2 Taxpayers are billed the full $200,000. The amount recorded as Revenue would be $194,000 with $6,000 recorded as Allowance for Uncollectible Taxes. 3 Encumbrance means “commitment,” and encumbrance accounting records commitments made for goods on order and for unperformed contracts in order to provide additional control over expenditures. 4 The required governmental fund financial statements include a statement of net assets or balance sheet and a statement of revenues, expenditures, and changes in fund balance. The fund financial statements for the governmental funds are prepared on the modified accrual basis of accounting. 5 Capital projects funds are used to account for the financing and acquisition of major general government capital facilities (general fixed assets) of a governmental unit. They are not used to account for the acquisition of capital facilities financed through internal service or enterprise funds. General fixed assets may be purchased through the general fund or special revenue funds. General fixed assets may be acquired by donation in which case the capital projects fund would not likely be involved. 6 Capital projects funds may receive resources from numerous sources such as the proceeds of general obligation bond issues, state and federal grants, shared revenues, and transfers from other funds. A CPF is terminated when the capital facilities have been acquired and project liabilities settled. This may involve a short period of time in the case of assets acquired by purchase and several years in the case of assets acquired by construction. Assets remaining after a capital project has been completed and paid for are ordinarily transferred to the general fund or to the debt service fund with responsibility for servicing the debt issued to finance the project. 7 A government may treat supply acquisitions as expenditures either when purchased ( purchases method ) or when used ( consumption method ), as long as it reports significant amounts of inventory in the balance sheet. While the consumption method is similar to the manner in which commercial businesses record supplies, the purchases method better allows for comparison of expenditures and appropriations. Under the purchases method, a government with significant inventory balances at year end will recognize the balances as assets in the fund balance sheet and establish an accompanying reservation of fund balance to reflect the fact that the supply amount is not an available financial asset. This reservation of fund balance is optional
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This note was uploaded on 04/11/2011 for the course ECON 3200 taught by Professor Azevedo during the Spring '11 term at UCM.

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Chapter 19 Q and A - Chapter 19 ACCOUNTING FOR STATE AND...

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