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Chapter 2
Fund Accounting
TRUE/FALSE (CHAPTER 2)
1.
A
fund is a separate fiscal and accountingentity with a self-balancing set of
accounts.
2.
Fund
accounting promotes control and accountability over restricted resources.
3.
The
basis of accounting determines what transactions and events are recognized.
4.
An
entity’s measurement focus determines when transactions and events are
recognized.
5.
If
an entity adopts a full accrual basis of accounting, its measurement focus will
automatically be on all economic resources.
6.
If
an entity adopts a modified accrual basis of accounting, its measurement focus
will automatically be on current financial resources.
7.
A government may report some of its funds on a
full accrual basis.
8.
A
government may have as many general funds as it deems necessary.
9.
Funds
divide a government into functional departments.
10. General funds are established to
account for resources legally restricted for specified purposes.
11. Fiduciary activities only benefit
parties other than the government itself.
12. The Financial Accounting Standards
Board requires all nongovernmental not-for-profit entities to use fund
accounting.
MULTIPLE CHOICE (CHAPTER 2)
1. What is the primary reason that governmental
entities use fund accounting?
a) Fund accounting is required by
law.
b) Fund accounting is required by
GAAP.
c) Fund accounting promotes control
and accountability over restricted resources.
d) Fund accounting promotes better
control over operating activities.
2. Basis of accounting determines which of the
following?
a) When transactions and events are recognized.
b) What transactions and events will
be reported.
c) Where transactions and events
will be reported.
d) Why transactions and events will
be reported.
3. A fund is
a) A separate legal entity.
b) A separate fiscal and accounting
entity.
c) A separate self-balancing set of
accounts for inventory purposes.
d) None of the above.
4. Which of the following funds is a fiduciary
fund?
a) Permanent fund.
b) Agency fund.
c) Capital project fund.
d) Debt service fund.
5. When a governmental entity adopts a basis of
accounting other than full accrual and a measurement focus that excludes
long-lived assets and liabilities in its governmental fund types:
a) It is in violation of the law.
b) It is in violation of GAAP.
c) It has recorded transactions in
accordance with standards for presentation in the fund financial statement
required by the new GASB reporting model.
d) It has the ability to better
measure the results of operations.
6. A city receives a donation from a citizen
who specifies that the principal must be invested and the earnings must be used
to support operations of a city-owned recreational facility. The principal of this gift should be
accounted for in which of the following funds?
a) Trust fund.
b) Special revenue fund.
c) Permanent fund.
d) Internal service fund.
7. Which of the following is NOT a governmental
fund?
a) City Hall Debt Service Fund.
b) City Utilities Enterprise Fund.
c) Gasoline Tax Special Revenue
Fund.
d) City Hall Capital Project Fund.
8. Which of the following accounts
would you least expect to see in a debt service fund?
a) Principal payments.
b) Interest charges.
c) Interest earned.
d) Outstanding balance of the debt
being serviced.
9. Which of the following funds is a
proprietary fund?
a) Internal service fund.
b) Special revenue fund.
c) Capital project fund.
d) Permanent fund.
10.
Which of the following funds is a governmental fund?
a) Enterprise fund.
b) Debt service fund.
c) Internal service fund.
d) Agency fund.
11.
Which of the following activities should the City of Highland account for in a
trust fund?
a) General fund contributions
received by the City pension plan.
b) Greens fees received from golfers
at the City-owned golf course.
c) Grants received from the Federal
government to purchase buses to be used for public transit.
d) Proceeds of bonds issued to
construct a new city hall building.
12. The state collects a gasoline
tax that must be used to support highway construction and maintenance. The gasoline tax should be accounted for in
which of the following funds?
a) General fund.
b) Special revenue fund.
c) Debt service fund.
d) Internal service fund.
13. The City of San Jose built a
new city hall and financed construction by issuing bonds due in installments
over the next 30 years. The bond
principal and interest will be paid by a special tax levied on property in the
City. The money received from this
special tax should be accounted for in which of the following funds?
a) General fund.
b) Special revenue fund.
c) Capital project fund.
d) Debt service fund.
14. Riverside Golf Course is a
City-owned golf course that collects greens fees in amounts sufficient to cover
its expenses. Riverside Golf Course
should be accounted for in which of the following funds?
a) Internal service fund.
b) Enterprise fund.
c) General fund.
d) Special revenue fund.
15. To fulfill the printing needs
of its various departments and agencies, the City has established a Central
Print Shop which bills the various departments and agencies of the city for
printing services rendered. The Central
Print Shop should be accounted for in which of the following funds.
a) Internal service fund.
b) Enterprise fund.
c) General fund.
d) Special revenue fund.
16. Which of the following funds
is accounted for on the modified accrual basis of accounting?
a) General fund.
b) Internal service fund.
c) Proprietary fund.
d) Pension trust fund.
17. Which of the following assets
would NOT be found in the fund balance sheet of the General Fund of the City of
Harrison?
a) Cash.
b) Capital assets.
c) Receivable from Special Revenue
Fund.
d) Receivable from State.
18. Which of the following
liabilities would NOT be found in the fund balance sheet of the General Fund of
the City of Marmaduke?
a) Accounts payable.
b) Payable to the special revenue
fund.
c) Deferred revenue.
d) Bonds payable, due in 5 years.
19. For
which of the following entities is fund accounting mandated?
a) American Hospital Association.
b) City of New York.
c) Grace Lutheran Church.
d) United Way.
20.
Governments
most commonly separate resources into funds to assure that they adhere to
restrictions placed on them by
a) legislators.
b)
grantors.
c)
donors.
d)
all of the above.
PROBLEMS (CHAPTER 2)
1. Assume that the City of Ft. Smith
maintains its books and records in a manner that facilitates the preparation of
the fund financial statements. For each
of the following events indicate in which fund(s) of the City of Ft. Smith the
event would be recorded and justify your fund selection.
- The City collected property
taxes levied for the general operations of the City.
- The City collected property
taxes levied to pay principal and interest on bonds issued several years
in the past to construct a new fire station.
- The City collected property
taxes levied on a specific area of the City for the purposes of providing
more frequent snow removal than is enjoyed by the rest of the City.
- The City sold bonds to
finance the construction of a new City Hall.
- The City sold bonds to
finance major renovations at the city-owned electric utility.
2. Assume that the City of Amber maintains its
books and records in a manner that facilitates the preparation of the fund
financial statements. Amber City
maintains a general fund, a capital project fund, and a special revenue
fund. During 2002, the City engaged in
the following transactions. Record all
transactions. Be sure to clearly
indicate the fund in which the entry is made.
- The City sold bonds, face
value $26 million, at par to finance the construction of a new City Hall.
- The City purchased two new
police cars at a total cost of $50,000.
- The City collected $8,000 in
taxes dedicated for the eradication of noxious weeds.
- The City spent $6,000 on
pesticides for noxious weeds.
- The City acquired a new
tractor for $75,000. The City paid
$20,000 in cash, and signed a $55,000 note which is due in three years.
3. Assume that the Blackfoot County maintains
its books and records in a manner that facilitates the preparation of the fund
financial statements. Blackfoot County
engaged in the following transactions during the current month. Prepare journal entries in the general fund
to record these events.
a. Paid salaries to County employees,
$100,000.
b.
Borrowed $35,000 at a local bank to use to buy a County car.
c.
Purchased an automobile for the use by County administrative officials,
$35,000.
d.
Made a $7,000 payment on the outstanding accounts payable.
e.
Collected $3,500,000 of the current property tax lavy.
f.
Received a $50,000 grant from the State to support general government
activities.
4. For each of the following funds list the
basis of accounting it should use, either modified accrual or full accrual.
a. General fund
b.
Debt service fund
c.
Internal service fund
d.
Investment trusts
e.
Private purpose trusts
5. For each of the following funds list the
measurement focus it should use, either current financial resources or economic
resources.
a.
General fund
b.
Special revenue funds
c.
Capital projects funds
d.
Enterprise funds
e.
Pension trusts
ESSAYS
(CHAPTER 2)
1. Why do governments and
not-for-profit entities use fund accounting?
2. Governments use the modified
accrual basis of accounting and a current financial resources measurement focus
when presenting the fund financial statements of the governmental funds, but they use the accrual basis of accounting
and the flow of economic resources for the government-wide financial
statements. What is a basis of
accounting? What is measurement
focus? How does the selection of one
affect the selection of the other?
3. For what purposes do governmental
and not-for-profit entities use agency funds?
What are the distinguishing characteristics of agency funds?
4. Briefly describe the three broad
categories of activities that most general-purpose governments engage in.
ACC 410 Week 3 Quiz – Strayer
Chapter 3
Government Financial Reporting
TRUE/FALSE (CHAPTER 3)
1. In addition to preparing fund financial
statements, governments should also prepare consolidated financial statements
to provide information on the financial position and operating results of the
government as a single economic entity.
2. Fiduciary activities should be reported in
fund statements, but should be excluded from the government-wide statements.
3. To prepare their government-wide
statements, governments must adjust the governmental fund statements from the
full accrual basis to the modified accrual basis.
4. The format that may now be used for the
government-wide statement of net assets is “assets plus liabilities equals net
assets.”
5. The government-wide statement of activities
bears little resemblance to the income statement of a business.
6. A reservation of fund balance is, in
essence, an additional restriction on fund resources.
7. Internal service fund balances generally
are included in the governmental activities column of the government-wide
statement of net assets, rather than in the business-type activities column.
8. A governmental funds balance sheet does not
include capital or other noncurrent assets.
9. Fund balance is equal to fund assets plus
fund liabilities.
10. Footnotes are not required to be included as
part of the basic financial statements of governments.
MULTIPLE CHOICE (CHAPTER 3)
1. __________ is governments’ responsibility to
report the extent to which they have met their operating objectives efficiently
and effectively, using all resources available for that purpose, and whether
they can continue to meet their objectives for the foreseeable future.
a)
Fund accountability.
b)
Fiscal accountability.
c)
Operational accountability.
d)
Government accountability.
2. __________ is the responsibility of
governments to justify that their actions in the current period have complied
with public decisions concerning the raising and spending of public moneys in
the short term.
a)
Fund accountability.
b)
Fiscal accountability.
c)
Operational accountability.
d)
Government accountability.
3. Which of the following is NOT considered
Required Supplementary Information (RSI)?
a)
Notes to the financial statements.
b)
Management’s Discussion and Analysis.
c)
Budgetary comparisons.
d)
Pension schedules.
4. Government-wide financial statements should
include
a)
the statement of net assets, and the statement of activities.
b)
the statement of net assets only.
c)
the statement of activities only.
d)
the statement of net assets, the statement of activities, and the
statement of cash flows.
5. In addition to government-wide statements,
GASB Statement No. 34 requires fund financial statements be included in the
government’s basic set of financial statements.
The basic fund financial statements that should be included for governmental
funds are
a)
the Balance Sheet and
the Statement of Revenues, Expenditures,
and Changes in Fund Balance.
b)
the Statement of Nets Assets,
the Statement of Revenues,
Expenses, and Changes in Fund Net Assets, and
the
Statement of Cash Flows.
c)
the Statement of Fiduciary Net Assets, and
the
Statement of Changes in Fiduciary Net Assets.
d)
the Balance Sheet,
the
Income Statement,
the
Statement of Cash Flows, and
the
Statement of Retained Earnings.
6. In addition to government-wide statements,
GASB Statement No. 34 requires fund financial statements be included in the
government’s basic set of financial statements.
The basic fund financial statements that should be included for proprietary
funds are
a)
the Balance Sheet and
the Statement of Revenues, Expenditures,
and Changes in Fund Balance.
b)
the Statement of Nets Assets,
the Statement of Revenues,
Expenses, and Changes in Fund Net Assets, and
the
Statement of Cash Flows.
c)
the Statement of Fiduciary Net Assets, and
the
Statement of Changes in Fiduciary Net Assets.
d)
the Balance Sheet,
the
Income Statement,
the
Statement of Cash Flows, and
the
Statement of Retained Earnings.
7. In addition to government-wide statements,
GASB Statement No. 34 requires fund financial statements be included in the
government’s basic set of financial statements.
The basic fund financial statements that should be included for
fiduciary funds are
a)
the Balance Sheet and
the Statement of Revenues, Expenditures,
and Changes in Fund Balance.
b)
the Statement of Nets Assets,
the Statement of Revenues,
Expenses, and Changes in Fund Net Assets, and
the
Statement of Cash Flows.
c)
the Statement of Fiduciary Net Assets, and
the
Statement of Changes in Fiduciary Net Assets.
d)
the Balance Sheet,
the
Income Statement,
the
Statement of Cash Flows, and
the
Statement of Retained Earnings.
8. The aim of the government-wide statement of
activities is to show
a)
the net cost of each of the government’s main functions and programs.
b)
the net income for the government as a whole.
c)
the net income for the government’s governmental activities and
fiduciary activities.
d)
the net income for the government’s governmental activities and
proprietary activities.
9. The government-wide statements should be
prepared using
a)
the cash basis.
b)
the full accrual basis.
c)
the modified accrual basis.
d)
the modified accrual basis for the governmental activities, and the full
accrual basis for the business-type activities.
10. In the fund financial statements, the
statements for the governmental funds should be prepared using
a)
the cash basis.
b)
the full accrual basis.
c)
the modified accrual basis.
d)
the modified cash basis.
11. In the fund financial statements, the
statements for the proprietary funds should be prepared using
a)
the cash basis.
b)
the full accrual basis.
c)
the modified accrual basis.
d)
the modified cash basis.
12. In the fund financial statements, the
statements for the fiduciary funds should be prepared using
a)
the cash basis.
b)
the full accrual basis.
c)
the modified accrual basis.
d)
the modified cash basis.
13. Per Statement No. 34, the GASB requires that
governments present their budget versus actual comparisons on a __________ and
include a schedule that reconciles the actual amounts per the budgetary
comparison with the GAAP amounts per the financial statements.
a)
full accrual basis
b)
modified accrual basis
c)
cash basis
d)
budgetary basis
14. How many government-wide statements is a
municipality required to prepare?
a)
One.
b)
Two.
c)
Eight.
d)
Ten.
15. The Basic Financial Statements of a city do
not include which of the following?
a)
Government-wide Statement of Net Assets.
b)
Government-wide Statement of Activities.
c)
Government-wide Statement of Cash Flows.
d)
Balance Sheet for each governmental and proprietary fund.
16. Which of the following would
NOT be found in the business-type activity column of the government-wide
Statement of Net Assets of the City of Smithville?
a)
Cash.
b)
Inventory.
c)
Capital assets.
d)
Receivable from general fund.
17. Which of the following would
NOT be found in the Statement of Net Assets of Teton City?
a)
Cash.
b)
Capital assets.
c)
Receivable from special revenue fund.
d)
Inventories.
18. The focus of the
Statement of Activities of the city of West Hills is on which of the following?
a)
Determining the total expenses by natural classification.
b)
Determining the total expenses by function.
c)
Determining the total revenues by function.
d)
Determining the net cost of functions.
19. Under the new GASB reporting model for
governmental entities, which of the following is required?
a)
Only one set of financial statements, prepared on the full accrual basis
of accounting.
b)
Only one set of financial statements, prepared on the modified accrual
basis of accounting.
c)
Two sets of financial statements, one similar to the pre-GASB #34
reporting requirements using the current financial resources measurement focus
and modified accrual basis of accounting and one that combines all governmental
activities in one column and all business-type activities in another column
using the full accrual basis of accounting for both columns.
d)
Two sets of financial statements, one exactly like the pre-GASB #34
reporting requirements using the current financial resources measurement focus
and modified accrual basis of accounting and one that combines all governmental
activities in one column and all business-type activities in another column
using the full accrual basis of accounting for both columns.
20. Under the new GASB reporting model for
governmental entities, the entity-wide balance sheet will display which of the
following?
a)
Assets, Liabilities, and Net Assets.
b)
Assets, Liabilities, and Fund Balances.
c)
Assets, Liabilities, and Fund Equity.
d)
Assets, Liabilities, and Owner’s Equity.
21. Under the new GASB reporting model for
governmental entities, the focus of the entity-wide activity/operating
statement is on which of the following?
a)
Program revenues and expenditures.
b)
Program revenues and expenses.
c)
Net income.
d)
Net program revenues/expenses.
PROBLEMS (CHAPTER
3)
1. Listed below are the names of the two
government-wide financials statements and the seven fund statements that should
be included in the government’s basic financial statements. Identify each as either a government-wide
statement, a governmental funds statement, a proprietary funds statements, or a
fiduciary funds statement.
________________ (a) Statement of Activities
________________ (b) Statement of Fiduciary Net Assets
________________ (c) Statement of Cash Flows
________________
(d) Statement of Revenues, Expenses, and
Changes in Fund Net Assets
________________
(e) Statement of Revenues, Expenditures,
and Changes in Fund Balance
________________ (f) Balance Sheet
________________ (g) Statement of Net Assets (or a Balance Sheet)
________________ (h) Statement of Net Assets
________________ (i) Statement of Changes in Fiduciary Net Assets
2. Listed below are the names of the two
government-wide financials statements and the seven fund statements that should
be included in the government’s basic financial statements. Identify the appropriate basis of accounting,
either modified accrual or full accrual, that should be used to prepare that
statement.
________________ (a) Statement of Activities
________________ (b) Statement of Fiduciary Net Assets
________________ (c) Statement of Cash Flows
________________
(d) Statement of Revenues, Expenses, and
Changes in Fund Net Assets
________________
(e) Statement of Revenues, Expenditures,
and Changes in Fund Balance
________________ (f) Balance Sheet
________________ (g) Statement of Net Assets (or a Balance Sheet)
________________ (h) Statement of Net Assets
________________ (i) Statement of Changes in Fiduciary Net Assets
3. Listed below are the names of the two
government-wide financials statements and the seven fund statements that should
be included in the government’s basic financial statements. Identify the appropriate measurement focus,
either economic resources or current financial resources, that should be
followed to prepare that statement.
________________ (a) Statement of Activities
________________ (b) Statement of Fiduciary Net Assets
________________ (c) Statement of Cash Flows
________________
(d) Statement of Revenues, Expenses, and
Changes in Fund Net Assets
________________
(e) Statement of Revenues, Expenditures,
and Changes in Fund Balance
________________ (f) Balance Sheet
________________ (g) Statement of Net Assets (or a Balance Sheet)
________________ (h) Statement of Net Assets
________________ (i) Statement of Changes in Fiduciary Net Assets
ESSAYS (CHAPTER 3)
1. Concerning the government-wide statement of
net assets, describe what information is included in the governmental
activities column, the business-type activities column, and the column for the
total primary government.
2. The activities of an internal service fund
are presented on the Statement of Revenues, Expenses, and Changes in Fund Net
Assets in the fund financial statements.
Why? Where are the activities of
an internal service fund presented on the Government-wide Statement of
Activities? Why?
3. Contrast the reporting of major funds in the
governmental funds financial statements versus that of nonmajor funds.
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