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explanations for Essentials of Accounting for
Governmental and Not-for-Profit
Organizations. Master fund accounting
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accounting entity - CORRECT ANSWERS--Where an entity is established for the
purpose of accounting for a certain activity or activities. See fiscal entity.
accrual basis - CORRECT ANSWERS--"Basis of accounting under which revenues are
recorded when earned and expenditures (or expenses) are recorded as soon as they
result in liabilities for benefits received, notwithstanding that the receipt of cash or the
payment of cash may take place, in whole or in part, in another accounting period."
acquisition method - CORRECT ANSWERS--"A method of accounting for mergers
among not-for-profit organizations in which the acquiring entity records the acquired
assets and liabilities at their fair values, not at the acquired entity's book values."
activity - CORRECT ANSWERS--"Specific and distinguishable line of work performed
by one or more organizational components of a governmental unit for the purpose of
accomplishing a function for which the governmental unit is responsible. For example,
"Food Inspection" is an activity performed in the discharge of the "Health" function. See
also Function. "
actuarial basis - CORRECT ANSWERS--Basis used in computing the amount of
contributions to be made periodically to a fund so that the total contributions plus the
compounded earnings thereon will equal the required payments to be made out of the
fund. The factors taken into account in arriving at the amount of these contributions
include the length of time over which each contribution is to be held and the rate of
return compounded on such a contribution over its life. Commonly used to compute
annual required contributions (q.v.) to pension and other postemployment benefit
plans.1
additions - CORRECT ANSWERS--"GASB term for fiduciary fund financial reporting,
replacing the term revenues. Additions are reported on the accrual basis."
ad valorem - CORRECT ANSWERS--In proportion to value. Basis for levy of taxes on
property.
,advance refunding - CORRECT ANSWERS--"A bond refunding (q.v.) in which the
proceeds are placed in an escrow account pending the call date or the maturity date of
the existing debt. In this case, the debt is said to be defeased (q.v.) for accounting
purposes."
advances interfund - CORRECT ANSWERS--Long-term loans between funds. A long-
term loan to another fund would be represented in the account.
adverse opinion - CORRECT ANSWERS--Audit report in which the auditor states that
the financial report "does not present fairly" due to major departures from generally
accepted accounting principles (q.v.).
agency fund - CORRECT ANSWERS--"Fiduciary fund consisting of resources received
and held by the governmental agent for others; for example, taxes collected and held by
a municipality for a school district."
agent multiple-employer defined benefit pension plan - CORRECT ANSWERS--
Statewide pension plan in which separate account balances are maintained for each
participating employer; expected to fund any deficits. Contrast with cost-sharing
multiple-employer defined benefit pension plan.
American Institute of Certified Public Accountants (AICPA) - CORRECT ANSWERS--
"Organization of Certified Public Accountants that provides auditing guidance, including
the GAAP Hierarchy (q.v.) and accounting and auditing guidance, in the case of Audit
and Accounting Guides, when approved by the FASB (q.v.) and/or the GASB (q.v.)."
annual required contributions (ARC) - CORRECT ANSWERS--"Term used by GASB to
determine the amount required by a retirement fund (including other postemployment
benefit plans) to be contributed, including normal cost and funding of past service cost.
Used in the Schedule of Employer Contributions (q.v.)."
annuity - CORRECT ANSWERS--"Series of equal money payments made at equal
intervals during a designated period of time. In governmental accounting, the most
frequent annuities are accumulations of debt service funds for term bonds and
payments to retired employees or their beneficiaries under public employee retirement
systems."
appropriation - CORRECT ANSWERS--Authorization granted by a legislative body to
incur liabilities for purposes specified in the appropriation act (q.v.).
appropriations expenditures, and encumbrances ledger - CORRECT ANSWERS--
Subsidiary ledger used by governmental funds in which a budget is recorded to track
the appropriations, expenditures, and encumbrances that apply to the subsidiary
account. Using this ledger, a department head, for example, could determine the
unencumbered balance in the department."
,ARC - CORRECT ANSWERS--The actuarially computed annual required contribution
by an entity to pension or other postemployment benefit plans.
assessed valuation - CORRECT ANSWERS--"Valuation set on real estate or other
property by a government as a basis of levying taxes. A state government may provide
that the local governments within its jurisdiction assess property at 100 percent, 33?
percent, or other percentages of market value."
assessment - CORRECT ANSWERS--(1) Process of making the official valuation of
property for purposes of taxation. (2) Valuation placed on property as a result of this
process.
asset impairment - CORRECT ANSWERS--An unexpected decline in the usable
capacity of a capital asset. An asset is deemed to be impaired if the decline is not part
of the normal life cycle of an asset and the amount of the decline in service utility is
large.
assets whose use is limited - CORRECT ANSWERS--"Account title used by health care
organizations to indicate those assets that are unrestricted but limited by board action,
bond resolutions, or the like."
assigned fund balance - CORRECT ANSWERS--"A classification of fund balance
reported in governmental-type funds to indicate net resources of the fund that the
government intends for a specific purpose. Assigned resources differ from committed in
that constraints imposed on assigned resources are more easily modified or removed.
For governmental funds other than the General Fund, this is the category for all
(positive) residual fund balances."
attestation agreements - CORRECT ANSWERS--"Under Government Auditing
Standards (q.v.), concerns examining, reviewing, or performing agreed upon
procedures on a subject matter or an assertation about a subject matter and reporting
on the results."
audit - CORRECT ANSWERS--"Examination of documents, records, reports, systems
of internal control, accounting and financial procedures, and other evidence and the
issuance of a report relating to the examination."
auditor's report - CORRECT ANSWERS--Report included with financial statements that
expresses an opinion of the fairness of the material presented.
authority - CORRECT ANSWERS--"Governmental unit or public agency created to
perform a single function or a restricted group of related activities. Usually such units
are financed from service charges, fees, and tolls, but in some instances they also have
taxing powers."
, auxiliary enterprises - CORRECT ANSWERS--"Activities of a college or university that
furnishes services to students, faculty, or staff on a user-charge basis. Charge is directly
related to, but not necessarily equal to, the cost of the service. Examples are college
unions, residence halls, stores, faculty clubs, and intercollegiate athletics."
available - CORRECT ANSWERS--One condition that must be met before a revenue
can be recognized under modified accrual accounting. The amount must be available in
time to pay expenditures related to the current period.
balance sheet - CORRECT ANSWERS--Format where assets equal liabilities plus net
assets (fund balance). Required governmental funds basic statement; may be used as
government-wide and proprietary fund statements in lieu of Statement of Net Assets.
basic financial statements - CORRECT ANSWERS--"The primary financial statements
required by the GASB in order for state and local governments to meet GAAP. The
nature of the government (general-purpose, special-purpose) and of the governmental
activities (governmental-type, business-type, and fiduciary-type) determine which
statements are basic."
basis of accounting - CORRECT ANSWERS--"Rule (or rules) used to determine the
point in time when assets, liabilities, revenues, and expenses (expenditures) should be
measured and recorded as such in the accounts of an entity. An organization might use
the cash, modified accrual, or accrual basis of accounting."
blending, blended presentation - CORRECT ANSWERS--One method of reporting the
financial data of a component unit in a manner similar to that in which the financial data
of the primary government are presented. Under this method, the component unit data
are combined with the appropriate fund types of the primary government and reported in
the same columns as the data from the primary government. See discrete presentation.
"
bonded debt - CORRECT ANSWERS--That portion of indebtedness represented by
outstanding bonds.
bonds authorized and unissued - CORRECT ANSWERS--Bonds that have been legally
authorized but not issued and that can be issued and sold without further authorization.
Note: This term must not be confused with the term legal debt margin, which represents
the difference between the legal debt limit (q.v.) of a governmental unit and the debt
outstanding against it."
budget - CORRECT ANSWERS--"Plan of financial operation embodying an estimate of
proposed expenditures for a given period and the proposed means of financing them.
Used without any modifier, usually indicates a financial plan for a single fiscal year."
budgetary accounts (federal) - CORRECT ANSWERS--"Accounts that provide a record
by which federal expenditures can be traced back to the budgetary authority granted by
explanations for Essentials of Accounting for
Governmental and Not-for-Profit
Organizations. Master fund accounting
today!
accounting entity - CORRECT ANSWERS--Where an entity is established for the
purpose of accounting for a certain activity or activities. See fiscal entity.
accrual basis - CORRECT ANSWERS--"Basis of accounting under which revenues are
recorded when earned and expenditures (or expenses) are recorded as soon as they
result in liabilities for benefits received, notwithstanding that the receipt of cash or the
payment of cash may take place, in whole or in part, in another accounting period."
acquisition method - CORRECT ANSWERS--"A method of accounting for mergers
among not-for-profit organizations in which the acquiring entity records the acquired
assets and liabilities at their fair values, not at the acquired entity's book values."
activity - CORRECT ANSWERS--"Specific and distinguishable line of work performed
by one or more organizational components of a governmental unit for the purpose of
accomplishing a function for which the governmental unit is responsible. For example,
"Food Inspection" is an activity performed in the discharge of the "Health" function. See
also Function. "
actuarial basis - CORRECT ANSWERS--Basis used in computing the amount of
contributions to be made periodically to a fund so that the total contributions plus the
compounded earnings thereon will equal the required payments to be made out of the
fund. The factors taken into account in arriving at the amount of these contributions
include the length of time over which each contribution is to be held and the rate of
return compounded on such a contribution over its life. Commonly used to compute
annual required contributions (q.v.) to pension and other postemployment benefit
plans.1
additions - CORRECT ANSWERS--"GASB term for fiduciary fund financial reporting,
replacing the term revenues. Additions are reported on the accrual basis."
ad valorem - CORRECT ANSWERS--In proportion to value. Basis for levy of taxes on
property.
,advance refunding - CORRECT ANSWERS--"A bond refunding (q.v.) in which the
proceeds are placed in an escrow account pending the call date or the maturity date of
the existing debt. In this case, the debt is said to be defeased (q.v.) for accounting
purposes."
advances interfund - CORRECT ANSWERS--Long-term loans between funds. A long-
term loan to another fund would be represented in the account.
adverse opinion - CORRECT ANSWERS--Audit report in which the auditor states that
the financial report "does not present fairly" due to major departures from generally
accepted accounting principles (q.v.).
agency fund - CORRECT ANSWERS--"Fiduciary fund consisting of resources received
and held by the governmental agent for others; for example, taxes collected and held by
a municipality for a school district."
agent multiple-employer defined benefit pension plan - CORRECT ANSWERS--
Statewide pension plan in which separate account balances are maintained for each
participating employer; expected to fund any deficits. Contrast with cost-sharing
multiple-employer defined benefit pension plan.
American Institute of Certified Public Accountants (AICPA) - CORRECT ANSWERS--
"Organization of Certified Public Accountants that provides auditing guidance, including
the GAAP Hierarchy (q.v.) and accounting and auditing guidance, in the case of Audit
and Accounting Guides, when approved by the FASB (q.v.) and/or the GASB (q.v.)."
annual required contributions (ARC) - CORRECT ANSWERS--"Term used by GASB to
determine the amount required by a retirement fund (including other postemployment
benefit plans) to be contributed, including normal cost and funding of past service cost.
Used in the Schedule of Employer Contributions (q.v.)."
annuity - CORRECT ANSWERS--"Series of equal money payments made at equal
intervals during a designated period of time. In governmental accounting, the most
frequent annuities are accumulations of debt service funds for term bonds and
payments to retired employees or their beneficiaries under public employee retirement
systems."
appropriation - CORRECT ANSWERS--Authorization granted by a legislative body to
incur liabilities for purposes specified in the appropriation act (q.v.).
appropriations expenditures, and encumbrances ledger - CORRECT ANSWERS--
Subsidiary ledger used by governmental funds in which a budget is recorded to track
the appropriations, expenditures, and encumbrances that apply to the subsidiary
account. Using this ledger, a department head, for example, could determine the
unencumbered balance in the department."
,ARC - CORRECT ANSWERS--The actuarially computed annual required contribution
by an entity to pension or other postemployment benefit plans.
assessed valuation - CORRECT ANSWERS--"Valuation set on real estate or other
property by a government as a basis of levying taxes. A state government may provide
that the local governments within its jurisdiction assess property at 100 percent, 33?
percent, or other percentages of market value."
assessment - CORRECT ANSWERS--(1) Process of making the official valuation of
property for purposes of taxation. (2) Valuation placed on property as a result of this
process.
asset impairment - CORRECT ANSWERS--An unexpected decline in the usable
capacity of a capital asset. An asset is deemed to be impaired if the decline is not part
of the normal life cycle of an asset and the amount of the decline in service utility is
large.
assets whose use is limited - CORRECT ANSWERS--"Account title used by health care
organizations to indicate those assets that are unrestricted but limited by board action,
bond resolutions, or the like."
assigned fund balance - CORRECT ANSWERS--"A classification of fund balance
reported in governmental-type funds to indicate net resources of the fund that the
government intends for a specific purpose. Assigned resources differ from committed in
that constraints imposed on assigned resources are more easily modified or removed.
For governmental funds other than the General Fund, this is the category for all
(positive) residual fund balances."
attestation agreements - CORRECT ANSWERS--"Under Government Auditing
Standards (q.v.), concerns examining, reviewing, or performing agreed upon
procedures on a subject matter or an assertation about a subject matter and reporting
on the results."
audit - CORRECT ANSWERS--"Examination of documents, records, reports, systems
of internal control, accounting and financial procedures, and other evidence and the
issuance of a report relating to the examination."
auditor's report - CORRECT ANSWERS--Report included with financial statements that
expresses an opinion of the fairness of the material presented.
authority - CORRECT ANSWERS--"Governmental unit or public agency created to
perform a single function or a restricted group of related activities. Usually such units
are financed from service charges, fees, and tolls, but in some instances they also have
taxing powers."
, auxiliary enterprises - CORRECT ANSWERS--"Activities of a college or university that
furnishes services to students, faculty, or staff on a user-charge basis. Charge is directly
related to, but not necessarily equal to, the cost of the service. Examples are college
unions, residence halls, stores, faculty clubs, and intercollegiate athletics."
available - CORRECT ANSWERS--One condition that must be met before a revenue
can be recognized under modified accrual accounting. The amount must be available in
time to pay expenditures related to the current period.
balance sheet - CORRECT ANSWERS--Format where assets equal liabilities plus net
assets (fund balance). Required governmental funds basic statement; may be used as
government-wide and proprietary fund statements in lieu of Statement of Net Assets.
basic financial statements - CORRECT ANSWERS--"The primary financial statements
required by the GASB in order for state and local governments to meet GAAP. The
nature of the government (general-purpose, special-purpose) and of the governmental
activities (governmental-type, business-type, and fiduciary-type) determine which
statements are basic."
basis of accounting - CORRECT ANSWERS--"Rule (or rules) used to determine the
point in time when assets, liabilities, revenues, and expenses (expenditures) should be
measured and recorded as such in the accounts of an entity. An organization might use
the cash, modified accrual, or accrual basis of accounting."
blending, blended presentation - CORRECT ANSWERS--One method of reporting the
financial data of a component unit in a manner similar to that in which the financial data
of the primary government are presented. Under this method, the component unit data
are combined with the appropriate fund types of the primary government and reported in
the same columns as the data from the primary government. See discrete presentation.
"
bonded debt - CORRECT ANSWERS--That portion of indebtedness represented by
outstanding bonds.
bonds authorized and unissued - CORRECT ANSWERS--Bonds that have been legally
authorized but not issued and that can be issued and sold without further authorization.
Note: This term must not be confused with the term legal debt margin, which represents
the difference between the legal debt limit (q.v.) of a governmental unit and the debt
outstanding against it."
budget - CORRECT ANSWERS--"Plan of financial operation embodying an estimate of
proposed expenditures for a given period and the proposed means of financing them.
Used without any modifier, usually indicates a financial plan for a single fiscal year."
budgetary accounts (federal) - CORRECT ANSWERS--"Accounts that provide a record
by which federal expenditures can be traced back to the budgetary authority granted by
