Accy 407 Final Exam

CAFR Statistical Section

-5 categories included: financial trends, revenue capacity, debt capacity, demographic and economic, operating information -most recent 10 years of data should be presented

Special Assessment Debt Service Funds

-Account for debt service for special assessment debt in a debt service fund when government is obligated for debt -If government is not obligated, a custodial fund is used to account for both debt and debt service

Accounting Characteristics of proprietary funds

-Accrual basis: Capital assets and long-term liabilities recorded within funds, depreciation expense and accumulated depreciation are reported -Flexible budget (different outputs) rather than fixed recommended: budgetary accounts not integrated into general ledger (similar to for-profits)

Internal Service Funds Accounting Procedures

-Billings to Departments = revenue (similar to Sales) -revenues/expenses closed at year-end to Excess of Net Billings to Departments over Costs (or Excess of Costs over Net Billings to Departments) rather than to Income Summary

Useful Information

-GASB Concepts Statement 3: where and how to present useful information -recognition in financial statements, disclosures in notes, presentation as required supplementary information, or presentation as supplementary information

General Long-term Liabilities

-LT liabilities that arise from governmental funds (not proprietary/fiduciary) -reported in Governmental Activities column of statement of net position -not reported as liabilities for general fund (current asset focus) -if debt reported in a proprietary or fiduciary fund, also has general obligation ("full faith and credit") backing -contingent liability should be disclosed in notes

GAAP for Nongovernmental NFPs

-NFP audit and accounting guide of the AICPA provides guidance on how to differentiate a governmental from a nongovernmental NFP -FASB = accounting standard setters for non governmental NFPs (FASB ASC Topic 958)

Joint Costs of Fundraising

-NFPs conduct activities that combine program or administrative activity with fundraising -FASB guidelines for allocating joint costs: 1. total cost of activities should be reported as fund-raising costs unless a bona fide program has been conducted in conjunction with appeal for funds 2. joint costs should be allocated between function and fundraising with equitable allocation base 3. criteria of purpose, audience, and content must be met in order to conclude that program/management and general function has been conducted in conjunction with appeal for funds

Reclassification

-Net Assets Released from Restrictions- reclassification of support with donor restrictions to support without donor restrictions when donor stipulations are met -reclassifications may be due to: satisfaction of program/purpose restrictions, satisfaction of equipment acquisition restrictions, and satisfaction of time restrictions (either actual donor or implied restrictions) -expenses decrease net assets without donor restrictions

Net assets classification

-Net Assets with Donor Restrictions: donor imposes restrictions that may be permanent or temporary (permanent restrictions = endowments; temporary restrictions = time, purpose) -Net Assets without Donor Restriction: includes Board designated Net Assets (set aside for specific purposes by governing board, not an external donor)

Investments

-Purchase investments: Acquisition price or fair value -Donated investments: Fair market value on date of donation -Reporting periods (fiscal year end): Fair market value at measurement date -Category classification: Not required -Realized and unrealized gain or loss: Reported on current period's statement of activities, Affects appropriate net asset account (net asset with donor restrictions OR net assets without donor restrictions) -Footnotes: Detailed disclosures

objectives of financial reporting for federal government

-accountability -FASAB standards are for both internal (executive branch) and external users (citizens)

Preparation of government-wide financial statements at year-end requires

-adjusting entries to record depreciation and accrual of interest receivable and payable -entries to close all revenues and expenses -entries to reclassify, as necessary, Net Position—Unrestricted to Net Position—Restricted and Net Position—Net Investment in Capital Assets

Expenses

-all expenses reported as decreases in net assets WITHOUT donor restrictions -use functional classifications: program (goods/services that help achieve the mission of NFP) and support (assist NFP in carrying out its mission- fundraising, management)

Lease Agreements

-all leases are accounted for in same way EXCEPT short-term leases (rent expense) -governmental fund lease payments: expenditures for the period -government-wide: lessees must recognize a lease liability and an intangible right-to-use lease asset

Accounting for term bonds

-amount budgeted for revenues or inter-fund transfers-in: amount needed for interest paid during year + amount budgeted for sinking fund -sinking fund investments reported at fair value at year end and changes in fair value reported as investment earnings

Collections Items

-art, historical treasures, etc. -NFPs can recognize or not recognize collections- selective capitalization not allowed -recognized: record at cost if acquired and at fair value if contributed, depreciation not recorded if estimated useful life is extraordinarily long -not recognized: assets must be held for public exhibition/education/research for public interest; protected, unencumbered, and preserved; proceeds from sale of collection are to be used to acquire other items

Restricted Assets

-assets not available for current operating purposes because donors have limited use to a long-term purpose (capital asset acquisition) are restricted -FASB: restricted assets should be classified separately from current assets on statement of financial position

Enterprise Funds - Restricted Assets

-assets whose use is restricted by contractual agreements or legal requirements -examples: Customer deposits of utilities, assets set aside for repayment of revenue bond principal, reserves for maintenance of plant, and funding of depreciation -although not required by GAAP, ideally liabilities to be paid from restricted assets should be reported separately from liabilities to be paid from unrestricted assets

CAFR Financial Section

-auditor's report -management Discussion & Analysis -basic financial statements (government-wide and fund) -notes to financial statements -required supplementary information other than MD&A (including budgetary comparison schedule) -combining statements and individual fund statements/schedules

NFP Statement of Financial Position

-balance sheet -net assets must be classified as net assets WITHOUT donor restrictions or net assets WITH donor restrictions -flexibility in displaying information is allowed as long as shows total assets, total liabilities, total net assets, and totals for each net asset classifications

Enterprise Funds - Long-term Liabilities

-bonds/other debt repaid from proprietary fund resources are reported as LT debt of fund -bonds whose interest and principal are repaid from revenues of a proprietary fund are called revenue bonds -if bonds primarily or secondarily have general obligation backing, but are being serviced by a proprietary fund, they are treated as revenue bonds, general obligation contingency is disclosed in the notes to the financial statements

Buildings and Improvements Other than Buildings

-building improvements (alterations, renovations, betterments) materially extend useful life or increase value -value of donated land and building established by appraisal

General Capital Assets Financial Statements (Government-wide)

-building: Report in Governmental Activities column of statement of net position as a capital asset, net of accumulated depreciation -long-term liability: Report in Governmental Activities column of statement of net position -depreciation expense: Reported at government-wide level on statement of activities as a pro rata direct expense for each function occupying the building

Support

-category of revenue- receipt of resources in non-exchange transactions where donor derives no tangible benefit from receiver -contributions: support in form of cash, other assets or services (or cancellation of liabilities) -pledges: promise of a contribution

Non-depreciated capital assets

-certain noncapitalized works of art, historical treasures, etc. -eligible infrastructure using the modified approach

Statement of Net Position

-classified statement is prepared (current assets shown in order of liquidity) -net position divided into 3 categories: Net investment in capital assets (value of net capital assets less any outstanding debt related to capital asset acquisitions or construction), restricted (restrictions placed on asset use by external parties through contracts, legal requirements, or donor stipulation), unrestricted (residual after adjusting for the preceding two net position categories)

objectives of financial reporting for state and local governments

-compare actual financials with budgets -assess financial condition and operations -determine compliance with finance-related regulations -assist in evaluating efficiency and effectiveness

Debt margin

-difference between debt limit and amount of debt outstanding subject to the limit -self-supporting debt repaid from user charges (water/sewer) typically are not subject to limit -usually only net debt (debt minus cash available for principal repayment in a debt service fund) is subject to the limit -government may not be able to borrow because they've reached debt limit OR debt limit decreases even if borrowing doesn't change

Gifts in Kind

-donation of materials/services -unconditional gifts in kind: reported at fair value (dr. expense/noncash asset, cr. contribution revenue, ) -donated materials used/consumed in providing services should be reported as part of cost of services

Recognition and Disclosure

-elements that are measurable with sufficient reliability should be recognized in financial statements -elements defined by GASB: Assets, Liabilities, Deferred outflows of resources, Outflows of resources, Deferred inflows of resources, Inflows of resources, Net position -assets + deferred outflows -liabilities -deferred inflows = Net Position -notes should be used to support an item recognized in a financial statement or provide information that is essential to the user's understanding of the item

Capital Projects Funds

-ensure revenues & OFS dedicated to a certain purpose are only used for that purpose -continue to exist until project is completed -record debt incurred to finance project as OFS NOT LT liability -no need for appropriations or estimated revenues, but use of encumbrances is recommended

Financing Sources for General Capital Assets

-expensive acquisitions usually not financed by General/Special revenue fund -financed by tax-supported bonds, grants from other government units (federal/state grants), gifts, special assessment bonds or taxes, capital leases -capital projects fund for money restricted for purchase or construction of capital assets

Debt Service Funds

-financial resources set aside for principal and interest payments -general long-term liabilities -resources may come from Taxes levied by DSF, taxes levied by the GF and transferred to DSF, special assessments -number of DSFs should be held to a minimum (GASB recommends a single DSF for all tax-supported debt serviced by property taxes)

CAFR Introductory Section

-generally not covered by the auditor's report -may present more subjective info (prospective info- forecasts or expectations) -includes Table of contents, Letter of transmittal, Other appropriate material

Retained Percentages

-government holds portion of contractor's fee to cover construction issues (Contracts Payable - Retained Percentage) -payable is reduced when remaining percentage is paid to contractor or used to satisfy construction issues

Project authorization/ preconstruction phase

-included in multiyear capital improvement plan several years before project start -long-term financing -voter approval required for general obligation (tax-supported) bonds or special sales taxes for capital projects (memo entry only for bond/tax authorization) -obtain interim financing (complete architectural and engineering design) -apply for and obtain grants

Enterprise Funds - Plant Construction in Progress

-interest incurred on debt during construction should be capitalized - differs from interest capitalization policy for general capital assets -imputed amount equivalent to interest can be capitalized if a utility's own funds are used for construction- pay this amount for each unit you consume- legislature approves rates that are requested by utilities - may also decline the rates if the service provided isn't good enough

Internal Service Funds External Reporting

-internal service funds are aggregated and reported in separate column in proprietary fund financial statements -NEVER MAJOR FUNDS -government-wide financial statements: reported in Governmental Activities column—interfund activity between internal service funds and governmental funds must be eliminated

disclosures in financial statement notes

-major classes of assets (each class: provide beginning/end of year balances, accumulated depreciation, capital acquisition, sales/disposals, depreciation expense by each function) -general capital assets vs. business-type activities -general policy for capitalizing assets, estimating useful life -disclosure about assets not capitalized

Not-for-Profit Sector

-majority of NFPs are philanthropic and rely on contributions/services of volunteers -some NFPs are designed to serve interest of organizations' members -most are not governments/governmental in nature (minority of NFPs owned/operated by governments)

Popular Reporting

-many groups believe current governmental financial statements are complex and not understandable except to those knowledgeable about governmental accounting -some governments provide simplified, summary reports called "popular reports" -graphical presentation is used to a greater extent than traditional financial statements

Accounting for Debt Service Funds

-modified accrual with exception: interest and principal expenditures recognized in period when legally due -budgetary accounts: no encumbrance- no contracts

Special Assessment Projects

-only specific areas benefit from project -compulsory property tax levies made in specified areas to defray cost of improvements -construction phase of improvement project is accounted for in a CPF -LT debt issued with government commitment for debt = debt service phase is recorded in debt service fund -government is not obligated for special assessment debt issued = receivable recorded in custodial fund

GASB's Recognition and Measurement Attributes Project

-potentially a new concept statement -examines changing from "modified accrual" measurement focus for governmental funds -focus on a "near term" measurement focus

governmental entities

-power rests in hands of the people through election of public officials -empowered by and accountable to a higher level government -taxation powers

Term bonds

-principal matures in lump-sum amount at end -not used as frequently as serial bonds- disadvantages: requires sinking fund (money set aside each year to pay back principal) and investment management, accounting is more complex -bond insurance is unique to municipal bonds

Serial bonds

-principal repayable in equal annual installments over life -resources raised each year approximate debt service requirements - minimal investments, idle cash balances should be invested -self-amortizing: no sinking fund

Pledges

-promises to give an asset -unconditional pledges: depend only on passage of time or demand by promisee for performance- report as support in period the promise is made (after this much time has passed, the asset will be yours) -conditional pledges: depend on occurrence of a specified future/uncertain event to bind promissor (recipient must obtain matching gifts)- do not record these as support until conditions are substantially met

government-wide financial statements

-provide an aggregated overview of a government's net position and change in net position -assess operational accountability -focus on flow of economic resources -accrual basis

Required Supplementary Information (RSI)

-provide information that is essential -place financial statements and related notes in correct context -Examples: MD&A, budget to actual schedules and pension disclosures

Statement of Cash Flows Classifications

-receipt of gifts without donor restrictions = operating -receipt of earnings on net assets restricted for long-term purposes = financing -sale of donated financial asset with no restrictions = operating -acquisition of building/equipment using restricted net assets = investing -noncash/in-kind contributions = NONCASH investing and financing

compared to business organizations

-receive resources from providers who do not expect repayment or proportionate economic benefit back -operating purpose not to generate a profit -absence of defined ownership interests

Construction Work in Progress

-record construction expenditure on projects financed by capital project funds -not depreciated -interest costs incurred during construction not capitalized

Disposition of General Capital Assets

-remove original cost of assets disposed -if only part of a structure is demolished, remove pro-rata share of cost -record in both governmental fund and activities journals

reporting requirements unique to not-for-profits

-report net-assets in two categories (net assets without donor restrictions and net assets with donor restrictions) -report program service expenses separately from supporting service expenses

NFP Statement of Cash Flows

-reported as changes in operating, investing, and financing activities -can use indirect or direct method for operating activities (optional to provide reconciliation of change in total net assets to net cash used for operating activities under direct method)

Reporting Entity

-reporting entity consists of the primary government and all component units for which PG is financially accountable -PG: state government or general purpose local government -Component unit: legally separate organization for which elected officials of PG are financially accountable (not-for-profit organizations, for-profit firms), reported in separate column or by blending component unit's financial information with appropriate fund columns of PG

NFP Statement of Activities

-reports changes in classes of net assets and total net assets for a period of time -changes from revenues, gains, expenses, and losses -within net asset classes additional classifications can be used (operating/nonoperating, earned/unearned) -report expenses by: function (program vs. support) AND natural classification (salaries, rent) on statement of activities or in notes/separate schedule

Operating Statement

-revenues and expenses should be identified as operating or nonoperating (accrual) -operating activities relate to primary functions of proprietary fund -separate subtotals provided for operating information

Other comprehensive basis of accounting (OCBOA)

-some governments maintain internal records on an OCBOA basis -types of OCBOA: cash basis, modified cash basis, and regulatory basis -use of OCBOA does not preclude need to present information similar to that reported under GAAP

Recording Pledges

-unconditional pledges received in less than a year reported at net realizable value (at year end adjust for estimated uncollectible amount) -long-term unconditional pledges- recorded at fair value (determine present fair value of future receipts- difference between pledge amount and fair value is recorded as discount that is amortized as pledges are received)

Other Supplementary Information

-useful but not essential in understanding financial statements and notes. -most found in statistical section of CAFR

Contributions

-voluntary, unconditional, and nonreciprocal transfer of cash/asset to NFP (or settlement/cancellation of liabilities) by another entity -can be unrestricted, time restricted, or purpose restricted -increases net assets with/without donor restriction -contributed services recorded as contributions and asset/expense at fair value if services: create/enhance nonfinancial assets OR specialized skills that would need to be purchased if not donated

capital project grant approval journal entry

-when grant is approved, recognize revenue (no eligibility requirements) dr. Due from Federal Government, cr. Revenues (Program Revenues - Public Works (Capital Grants & Contributions))

Criteria to allocate joint costs (fundraising) met if

ALL 3 MUST BE MET -Purpose: joint activity helps accomplish a program purpose or a management activity -Audience: audience was selected primarily for a program or management purpose rather than ability to make a donation -Content: joint activity motivates audience to action in furtherance of the mission, or meets a management responsibility

Characteristics of useful information

Accountability = responsible Reliability = applies to estimates - should not be BIASED (does not mean that the information is free from error) Relevance = useful to decision making (can confirm that what you believe is right, doesn't necessarily have to change your opinion) Timeliness = happens in same period as current financial events Consistency = comparability over time Comparability = comparing one thing to another Understandability = financial statements should be understandable and accessible by everyone since everyone pays taxes

Accounting for serial bonds

Amount budgeted for revenues or interfund transfers-in: just what is needed that fiscal year for matured principal and interest

Bond Premiums & Discounts

Bond Premium: Government-wide (LT liability, amortized over life of bonds using effective interest method); fund level (premium used to service debt; face value of bonds - OFS in CPF; Premium - transfer to debt service fund: Due to other funds) Bond discount: Government-wide (same as corporate reporting); fund level (Discount - Due from General Fund)

General Capital Assets Financial Statements

Capital Projects Fund: -Major: Include in separate column of governmental funds financial statements -Non-major: "Other Governmental Funds," may also be reported on combining statements—balance sheet; statement of revenues, expenditures, and changes in fund balances

Debt Service Fund Financial Statements

Combining balance sheet Combining statement of revenues, expenditures, and changes in fund balances Note disclosures: future debt service requirements (both for principal and interest) for outstanding debt- Interest to be paid in future periods is not recorded as a liability

types of proprietary funds

Enterprise Funds Internal Service Funds

retained percentage journal entry

Fund & activities: dr. Contracts payable, cr. Cash (95%), cr. Contracts Payable - retained percentage

issuing bonds journal entry

Fund level: dr. Cash, cr. OFS - Proceeds of Bonds dr. OFU - interfund transfer out, cr. Due to debt service fund Activities level: dr. Cash, cr. Bonds Payable, cr. Premium on Bond Payable

receiving bill for capital asset journal entry

Fund level: dr. Encumbrances outstanding, cr. Encumbrances; dr. Construction expenditures, cr. Cash Activities: dr. Construction work in progress, cr. Cash

transfer resources at end of project journal entry

Fund: dr. Fund balance - Restricted, cr. Due to Debt Service fund dr. Due to debt service fund; cr. Cash

major funds

GASB requires separate columns for major funds and a column for "other governmental funds" (general fund, other funds of significant importance, 3-step test: element is >10% of total fund category and 5% of total combined element)

Accounting for General Capital Assets

General & Special Revenue Funds: account for capital expenditures from budget appropriations Capital Projects Fund: account for construction and major capital expenditures Government-wide activities: account for cost and depreciation of general capital assets (capitalize)

types of governmental funds

General Fund Special Revenue Funds Capital Projects Funds Debt Service Funds Permanent Funds

assigned fund balance

INTENT to be used for a specific purpose expressed by governing body or other body with authority (lowest level for all funds besides General Fund)

Accounting for financial resources to service debt

If taxes levied by: -Debt service fund: Record Estimated Revenues in budget entry, use same property tax accounting as for General Fund -General Fund transferred to debt service fund: Record Estimated OFS in budget entry, OFS - Interfund Transfers In for transfer

International Accounting Standards

International Public Sector Accounting Standards (IPSAS) are issued by the International Public Sector Accounting Standards Board (IPSASB)

Direct debt

Obligations that will be repaid by government whose debt is being evaluated

Financial benefit/burden

PG is entitled to organization's resources, is legally obligated to finance organization's deficits, provide financial support to organization, or is obligated in some other manner for organization's debt

Financially Accountable

PG is financially accountable for another organization if: -PG appoints a voting majority of the organization's governing board AND: is able to impose its will on the organization OR Potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. -organization is fiscally dependent on PG: Budget approval by PG, PG levies taxes to fund the organization

Machinery and Equipment

Purchase price and costs to make it ready for use

Enterprise Funds

Reasons for using enterprise fund (if any one of these conditions is met): 1)activity is financed with debt that is secured solely with revenues from activity 2)law/regulation requires that costs of activity, including capital costs, be recovered with revenue from activity, rather than taxes or other revenues 3)Pricing policies are designed to recover costs of the activity, including capital costs -account for services provided to the general public on a user charge basis -When governing body has determined that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes

Statement of Cash Flows

Similarities between GASB and FASB standards: -shows cash flows relating to operating, financing, and investing activities -both sets of standards define cash flows as cash and cash equivalents (time deposits, marketable securities, etc.) Differences between GASB and FASB: -GASB divides financing activities into noncapital, and capital and related financing -acquisition of capital assets is a capital and related financing transaction under GASB rather than an investing activity -interest expense on LT debt is a financing activity under GASB rather than an operating activity -operating activities MUST USE DIRECT METHOD

Financial Statements for NFPs

Statement of financial position, Statement of activities, Statement of cash flows, Notes to financial statements (comparative statements encouraged, not required)

Internal Service Funds Financial Statements

Statement of net position Statement of revenues, expenses, and changes in fund net position Statement of cash flows

Proprietary Fund Financial Statements

Statement of net position (balance sheet) Statement of revenues, expenses, and changes in fund net position (operating statement) Statement of cash flows (differs under GASB)

General Long-term Liabilities Examples

Tax-supported bonds, Long-term warrants, Long-term notes, Capital lease obligations, Unfunded compensated absences: (vacation and sick leave), Unfunded pension obligations, Long-term portion of judgments and claims, Pollution remediation obligations

fund

a separate set of accounts used to account for resources segregated for a particular purpose

internal service fund

account for activities in which goods or services are provided to other departments of the same government for a charge (usually reported with governmental activities in government-wide F/S)

enterprise fund

accounts for activities that involve providing goods or services to the general public for a fee (reported as business type activities)

investment trust fund

accounts for external investment pools in which assets are held for OTHER GOVERNMENTS along with funds of sponsoring government

inflow of resources

acquisition of net assets by the government in current reporting period (like revenues)

deferred inflow of resources

acquisition of net assets that applies to a future reporting period (like deferred revenues)

sinking fund investment journal entry

activities AND fund: dr. investments, cr. cash

serial bond issuance journal entry

activities level: dr. cash, cr. serial bonds payable -bonds usually issued from general fund/capital projects fund

completed building journal entry

activities: dr. Building (construction/architect fees), cr. Construction work-in-progress

property tax revenue

ad valorem (on the value) tax, non-exchange revenue

Land

all costs including taxes and liens assumed and amounts of judgment levied in damages

tax levy

amount billed to taxpayer- maximum % of property value allowed or residual source (expected expenditures - expected other revenue sources = plug- unless > maximum) **amount of revenue needed from taxes / % estimated to collect = amount of taxes to be levied

restricted fund balance

amounts that can be spent only for the specific purposes designated by external providers (creditors, federal government, grant providers), constitutionally, or through enabling legislation (from the state/local legislature)

expenditures flow

appropriations - encumbrances - expenditures - cash disbursement

interperiod equity

are current year revenues sufficient to pay current year benefits or do future taxpayers need to pay for them?

governmental fund financial statements

balance sheet- reconciliation of total fund balances to total net position statement of revenues, expenditures, and changes in fund balances (like income statement)- reconciliation of total changes in fund balances of governmental funds to total changes in net position

costs incurred after acquisition

capitalize costs of additions/betterments (do NOT capitalize replacements/maintenance- unless replacements are partly additions/betterments - prorate cost)

Debt Limit

ceiling on amount of debt that government can borrow that is a statutory % of assessed valuation of taxable property (government sets limit for itself)

encumbrances - if appropriations lapse

close out existing encumbrance accounts and re-establish them next year dr. encumbrances outstanding - 20x1, cr. encumbrances - 20x1 dr. expenditures - 20x1, dr. expenditures - 20x2, cr. cash (show that expenditures have been charged against 20x1 budget)

consumption method

consistent with accrual basis, reports amount of supplies consumed

purchases method

consistent with modified accrual basis, reports total expenditures for supplies purchased during the year, ONLY FOR GOVERNMENTAL FUNDS, typically uses periodic inventory method

committed fund balance

constraints are imposed by highest decision making authority in government (city council committing funds, rainy day/stabilization fund, contractual obligations)

outflow of resources

consumption of net assets by the government in current reporting period (like expenses)

deferred outflow of resources

consumption of net assets that applies to a future reporting period (like prepaid costs)

governmental activities

core governmental services (protection of life and property, public works, parks and recreation, social services) and general administrative support (data processing, finance, personnel)

contributed services journal entry

create/enhance assets: dr. building/equipment, cr. contributions - without donor restriction special skills: dr. salary expense, cr. contributions - without donor restriction

governmental funds common characteristics

current financial resources measurement focus modified accrual basis capital assets and long-term liabilities not recorded

types of fiduciary funds

custodial funds trust funds (pension trust fund, investment trust fund, private purpose trust fund)

program service expenses

directly related to mission of the not-for-profit (should be much greater than supporting service expenses)

grant amount fully received journal entry

dr. Cash, cr. Due from federal government

interfund loan journal entry

dr. Cash, cr. Interfund Loan Payable

interfund loan repayment journal entry

dr. Due to debt service fund, dr. Interfund loan payable - current, cr. Cash

closing temporary accounts journal entry

dr. Revenues, dr. OFS - bond proceeds, dr./cr. Fund balance - RESTRICTED (borrowed money - restrictions from lenders), cr. Construction expenditure, cr. OFU - interfund transfers out

write off uncollectible tax entry

dr. allowance - uncollectible delinquent taxes, cr. taxes receivable - delinquent dr. allowance - uncollectible interest & penalties, cr. interest & penalties receivable on taxes (neither income statement nor balance sheet is impacted by write offs- net effect)

fund serial bond closing journal entries

dr. appropriations, cr. estimated OFS dr. OFS - interfund transfers in, cr. expenditures - bond principal, cr. expenditures - interest

term bond debt service fund closing journal entry

dr. appropriations, dr./cr. budgetary fund balance, cr. estimated OFS, cr. estimated revenues dr. OFS - interfund transfers in, dr. revenues, dr./cr. fund balance - restricted - debt service, cr. expenditures - interest

final term bond budgetary journal entry

dr. budgetary fund balance, cr. appropriations

tax anticipation note journal entry

dr. cash, (dr. expenditures if paying for interest discount), cr. tax anticipation note payable

contribution journal entry

dr. cash, cr. contributions - without/with donor restriction -applies to grants from government

future pledge collection journal entry

dr. contribution/pledge receivable, cr. contributions - with donor restriction, cr. discount on pledge receivable

encumbrance reversal journal entry

dr. encumbrance outstanding, cr. encumbrance dr. expenditures, cr. vouchers payable

encumbrance journal entry

dr. encumbrance, cr. encumbrance outstanding

second year term bond budget journal entry

dr. estimated OFS, dr. estimated revenues (fair value increase), dr./cr. budgetary fund balance, cr. appropriations

term bond debt service fund budget journal entry

dr. estimated OFS, dr./cr. budgetary fund balance, cr. appropriations

inventory purchases method journal entry

dr. expenditures, cr. vouchers payable dr. inventory of supplies, cr. fund balance - nonspendable - inventory of supplies -ONLY GOVERNMENTAL FUND

payroll journal entry

dr. expenditures/expenses, cr. due to federal government cr. due to state government, cr. cash

remaining debt fund transfer to general fund journal entry

dr. fund balance - restricted, cr. due to general fund dr. due to general fund, cr. cash

interest & penalties on tax journal entry

dr. interest & penalties receivable on taxes, cr. allowance - uncollectible interest & penalties, cr. revenue (general revenues - interest & penalties on delinquent assets)

inventory consumption method journal entry

dr. inventory of supplies, cr. vouchers payable fund level: dr. expenditure, cr. inventory dr. fund balance - unassigned, cr. fund balance - nonspendable activities level: dr. expense, cr. inventory

sinking fund fair value entry

dr. investments, cr. revenues (general revenue - restricted for debt service)

reclassification closing journal entry

dr. net assets WITH donor restriction, cr. reclassification FROM net assets with donor restriction dr. reclassification TO net assets without donor restriction, cr. net assets WITHOUT donor restriction

pledge journal entry

dr. pledge/contribution receivable, cr. contributions - with donor restriction dr. cash, cr. contribution/pledge receivable

program expense journal entry

dr. program expense, cr. cash -if a donation can be classified as an expense by the rules: dr. program expense, cr. contributions - without donor restriction

reclassification journal entry

dr. reclassification FROM net assets with donor restriction, cr. reclassification TO net assets without donor restriction

closing operating accounts journal entry

dr. revenues & OFS, dr./cr. fund balance - unassigned, cr. expenses & OFU

tax revenue journal entry

dr. taxes receivable - current, cr. allowance - uncollectible current taxes, cr. revenue (general revenues - property taxes)

delinquent tax journal entry

dr. taxes receivable - delinquent, cr. taxes receivable - current dr. allowance - uncollectible current taxes, cr. allowance - uncollectible delinquent taxes

Proprietary Funds

enhances management of activities in which goods/services are provided on a cost-reimbursement basis to departments of same government or to general public on a user charge basis

budget revisions

error correction (budgets are legally binding), revision of estimates (unexpected circumstances)

encumbrance

estimated amount recorded for purchase orders/contracts chargeable to an appropriation (commitment to make expenditure) **encumbrance outstanding acts as a restriction on the fund balance

Impairment Restoration cost approach

estimated cost to restore asset's utility (physical damage)

impairment deflated depreciated replacement cost approach

estimated current cost of a replacement asset with similar depreciation and adjusted for inflation (change in manner or duration of use)

budgetary accounts

estimated revenues (debit) estimated other financing sources (debit) appropriations (credit) estimated other financing uses (credit) encumbrances (debit) encumbrances outstanding (credit) **only adjusted at the beginning of the year and closed out at the end of the year

budgetary fund balance

estimated revenues + estimated OFS - appropriations - estimated OFU (plug number for difference between estimated inflows and estimated outflows)

governmental fund financial statement focus

fiscal accountability flow of current financial resources modified accrual basis

governmental fund

focus on short-term flow of current financial resources, fiscal accountability, modified accrual basis

general fund transfer journal entry

fund level: dr. cash, cr. OFS - interfund transfer in

sale of general capital assets journal entry

fund level: dr. cash, cr. OFS/revenues - miscellaneous activities level: dr. cash, dr. accumulated depreciation, dr./cr. gain/loss, cr. equipment

serial bond interest and principal payment

fund level: dr. expenditure - interest, dr. expenditure - bond principal, cr. cash activities level: dr. interest expense, dr. serial bonds payable, cr. cash

accounting for leases journal entry

fund level: dr. expenditures, cr. OFS - lease agreements activities level: dr. right-to-use asset, cr. lease obligations payable

acquisition of general capital assets journal entry

fund level: dr. expenditures, cr. cash activities level: dr. equipment, cr. cash

disposal of general capital assets journal entry

fund level: dr. expenditures, cr. cash activities level: dr. loss on disposal, dr. accumulated depreciation, cr. buildings, cr. cash

general fund transfer approval journal entry

fund: dr. estimated OFS, cr. appropriations

interfund loan journal entries

general fund: dr. interfund loan receivable - current, cr. cash IFS: dr. cash, cr. interfund loan payable - current

integrated reporting model for government-wide statements

governmental activities- governmental funds + internal service fund business activities- enterprise funds *NO fiduciary activities

general capital assets at the different levels

governmental activities: capitalized and generally depreciated (may choose to not to capitalize art, historical treasures) governmental fund: debited to Expenditures in appropriate fund

fiduciary activities

governments often act either as an agent or trustee for parties outside the government (only private-purpose custodial and trust relationships) -may be agents that collect taxes for federal government

Asset Impairments

impairments from unexpected circumstances (physical damage, obsolescence, environmental factors) usually considered permanent (can't write it back up)

accountability

imposes a duty on public officials to be accountable to citizens for raising public funds and how they are spent (citizens' right to know) (means responsibility)

nonspendable fund balance

includes amounts that are not in spendable form or legally required to remain intact (inventories, permanent fund)

Revenues

increases in net assets that arise from exchange transactions- party receives direct tangible benefits equal with resources provided (membership dues, program service fees, sales of supplies/services, investment income, some grants)

business-type activities

intended to be self-supporting by charging users for the services they receive (operating subsidies may come from general revenue taxes)

inter-activity transaction

interfund loans/transfers between governmental fund (including internal service fund) and enterprise fund ("internal balances" on government-wide statement of net position, "transfers" on statement of activities)

Intangibles

lack physical substance, non-financial and amortized (easements, water rights)

budgets

legally binding on administrators- integrate budgetary accounts for each operating account into general ledgers of each fund that requires a budget (ONLY EXIST AT FUND LEVEL- not activities level)

not-for-profit organizations

legally separate organizations which are usually exempt from federal, state, and local taxation (private schools, religious groups)

tax anticipation notes

line of credit to meet short-term cash needs of local government (secured by collateral of government's taxing power)

General Capital Assets

long-lived assets used in GOVERNMENTAL FUND activities (does not include proprietary/fiduciary funds)

3 features of government-wide financial statements

measurement of economic resources accrual basis OPERATIONAL accountability

bond interest journal entry

modified accrual: dr. interest expenditure, cr. cash (only record it when actually paid) accrual: dr. interest expense, cr. cash/interest payable

additional costs for rework journal entry

money paid to new contractor for rework OR money sent back to old contractor: dr. Contracts payable - retained percentage, cr. Cash

natural expense

nature like salaries, rent, etc. for not-for-profits

interfund transfers

nonreciprocal activity in which financial resources are transferred between funds with no intention of repayment

types of fund balance

nonspendable restricted committed assigned unassigned

indirect expense

not directly related to a function or program (interest charge)

general revenue

not directly related to a program or function (ALL TAXES ARE GENERAL REVENUE)

budget deficits and surpluses

not poor financial management if it is at a target ratio (10-25%) of cushion to cover shortfalls

Overlapping debt

obligations of other governments that also have the power to tax property located in jurisdiction of government whose debt is being evaluated- obligations supported from same sources as government's direct debt (in a given city property owners might be taxed by the city, a county government, and an independent school district)

federal financial reporting

occurs at government-wide level and for major agencies and departments

general fund

only one per government, most financial transactions related to general government operating activities are recorded here

supporting service expenses

overhead and fundraising expenses

consolidated report

plain language citizen's guide management's discussion & analysis financial statements supplementary information on budgetary and proprietary activities **not audited

impairment service units approach

portion of estimated service utility life lost (environmental factors)

functional expense

program and supporting for not-for-profits

general purpose governments

provide a broad array of services

Objectives of Financial Reporting for NFPs

provide information useful in: -make resource allocation decisions -assess services and ability to provide services -assess management stewardship and performance- are they fulfilling their mission? -assess economic resources, obligations, net resources, and changes in them

fund financial statements

provide more detailed financial information about the government

Comprehensive Annual Financial Report (CAFR)

provides more detail than minimum requirements for general purpose financial reporting- conforms to GASB standards (introductory, financial, statistical)

interfund transfer journal entry

receiving: dr. cash, cr. OFS - interfund transfers in giving: dr. OFU - interfund transfers out, cr. cash

tax revenue (modified accrual)

recognized when LEVIED (fees for permits, fines, forfeits recognized on cash basis) **No matching principle

cost principle

record asset at invoice/historical cost with other necessary and reasonable costs to place asset into use (may include freight, exclude foregone cash discounts and financing charges)

accounting for donated assets

record at fair value on date of the gift- may require appraisal (fair value = book value if traded in liquid market)

accounting for donated interfund transfers

record at lower of book value or fair value

encumbrances - if appropriations do not expire at year end

related encumbrances and encumbrances outstanding accounts stay in existence

proprietary fund

report on business-like activities of the government

fiduciary fund

report on trust and custodial activities of the government

statement of activities

reports expenses and revenues classified by program or function (separate columns for governmental activities, business-type activities, and component units)

statement of net position

reports year end financial position (like balance sheet)

Performance and Accountability Report (PAR)

required by major federal agencies and departments

unassigned fund balance

residual classification for GENERAL fund that includes amounts available for any purpose (other governmental funds only report negative fund balance)

program revenues

revenues linked to a specific function or program (charge for services, operating grants/contributions, capital grants/contributions)

modified accrual basis

revenues recognized when measurable and available for spending and expenditures recognized when obligation is incurred that will be paid from currently available financial resources

general fund transfer to debt service fund journal entry (needed for early in the next year)

right before 12/31/19- dr. cash, cr. OFS- interfund transfers in

Federal Accounting Standards Advisory Board (FASAB)

sets standards for federal government and its agencies/departments

Governmental Accounting Standards Board (GASB)

sets standards for state and local governmental units and governmental non-profits

Enterprise Funds - Special Current Liabilities

special current liability accounts: -Customers Advances for Construction: Usually up-front deposits required to be made by builders to provide all or part of the cost of connecting new structures to utility lines, May or may not be refunded in part upon completion, Retained balance shown as contribution from customers in statement of R,E,C -Customer Deposits: Usually reported as Liabilities Payable from Restricted Assets, Even if not refundable until service is terminated, AICPA guidance defines this as a current liability

fiduciary fund financial statements

statement of fiduciary net position statement of changes in fiduciary net position

not-for-profit financial reporting

statement of financial position (balance sheet) statement of activities (income statement) statement of cash flows **show relationship between functional and natural expenses

Infrastructure

stationary in nature and preserved for longer (can choose not to depreciate if specified conditions met)

direct expense

those associated with a specific function or program

pension fund

to account for financial resources in which the government acts as a trustee for government employees to provide retirement benefits

private-purpose trust fund

to account for financial resources in which the government is acting in a trustee capacity for private individuals, organizations, or other governments (scholarship funds for special groups)

debt service fund

to account for financial resources segregated for making principal and interest payments on general long-term debt

capital project fund

to account for financial resources segregated to pay for purchase or construction of long-lived general capital assets

permanent funds

to account for resources provided by trust for which the principal is not spendable and earnings (interest) on the principal are required to be used for a public purpose (endowment to provide art for public buildings)

Objectives of Government Financial Reporting

to provide information that can be used to assess accountability and to assist users in making economic, social, and political decisions

objectives of financial reporting for non-profits

to provide useful financial information to resource providers such as donors, members, and creditors (resource providers need this info to assess services provided by non-profit and management's stewardship of resources)

government-wide statement of activities

top section: NET EXPENSE or revenue for each function or program (first column is expense, net column is revenue related to that expense) bottom section: general revenues, extraordinary/special/unusual items, transfers

internal exchange transactions

transactions between two funds similar to those involving the government and an external entity (recognize a revenue and an expenditure)

dual track approach

transactions have different effects on governmental funds and activities at government-wide level- each transaction is recorded separately in fund and activities journals

other financing sources

transfers into a fund and the proceeds of debt issues and sales of general government assets (inflow- issuing general long-term debt)

other financing uses

transfers of financial resources from one fund to another fund (outflow)

Modified Approach

used for certain infrastructure assets- asset management system: up-to-date inventory, condition assessments & summary of results on a measurement scale, estimates of annual amount needed to maintain/preserve assets at established condition, documents that assets are preserved at established condition

special revenue fund

used when revenues are restricted or committed for specified operating purposes, such as maintenance of roads and bridges and operation of a library

custodial funds

used when the government oversees cash or other assets for external parties (no net position- assets = liabilities)

special purpose governments

usually provide only one or just a few services (schools, hospitals)

special revenue fund (operating grant) journal entry

when granted: dr. cash, cr. deferred revenue when spent: dr. expenditures, cr. cash when earned: dr. deferred revenue, cr. revenue

operational accountability

whether the government has used resources efficiently and effectively in meeting operating objectives

fiscal accountability

whether the government raised and spent financial resources in accordance with budgetary, legal, and regulatory constraints