Governmental Accounting--Exam #1
questions & answers.
Expenditures ANS - Are the foundation of planning, authorizing, controlling, and evaluating activities of
governmental funds. It's a measure of the fund liabilities incurred (or expendable financial resources
used). Typically classified as operations, capital outlay, or debt service.
When to Recognize Expenditures ANS - In the accounting period in which the fund liability is incurred
except for unmatured interest (and principal) on long-term debt, which is recognized when due.
Inventory Expenditures ANS - May be recognized using either purchases method or consumption
method.
Prepayment Expenditures ANS - May be allocated over benefited period or accounted for only in current
period.
Pension Cost Expenditures ANS - Payments to pension plans, even self-administered ones, qualify as
expenditures; most govt's either use defined contribution or defined benefit contribution.
Defined Contribution Plan ANS - Government obligation is limited to making contributions required by
the plan; retiree benefits dependent upon contributions made and the investment performance of the
plan. Government should recognize the expenditure in the year employees earned the benefit --
underpayment is not liability of fund but a noncurrent liability.
Defined Benefit Plan ANS - Government obligation is to pay certain amount to retirees each period.
Annual required contribution (ARC) based on many actuarial assumptions.
Consumption Method for Inventory ANS - Supplies represent an expendable current financial resource -
it can be used to finance future "expenditures" for supplies.
Purchases Method for Inventory ANS - Already charged to expenditures, so it does not represent a
current financial resource.
, Consumption Method for Prepayments ANS - The prepayments account balance is reported as an asset.
Purchases Method for Prepayments ANS - The prepayments account balance is not reported as an asset,
since the amount has already been charged to expenditures.
Fund ANS - Basic classification of these are by this, but it does have other options.
Capital Leases ANS - Assets under this are recorded in General Capital Assets with corresponding entry in
General Long-Term Liabilities.
Allocation ANS - An apportionment of an appropriation made by executive branch of a legislative branch
appropriation.
Allotment ANS - Is a periodic release of an appropriation, i.e., a quarterly allotment -- helps keep
departments from spending entire budget early in the fiscal year.
Long-term Debt Service ANS - Debt service (principal and interest) not normally accrued at year-end;
governments may accrue if 2 conditions are met: 1.) debt service payment occurs early (not more than
30 days) in the next fiscal year AND 2.) dedicated financial resources must have been provided in current
fiscal year; if accrual is made, it must be for the full amount.
Short-term Debt Service ANS - Recorded as fund liabilities; accrue interest at year-end; governmental
funds borrow like this using tax anticipation notes (TANs), revenue anticipation notes (RANs), bond
anticipation notes (BANs), and other similar notes.
Contingencies ANS - Claims are against the government are called this.
Liability ANS - This is recorded if it is probable that an asset has been impaired or this has been incurred
(as of the date of the financial statements) AND it can be reasonably estimated.
Compensated Absences ANS - Vacation, sick leave, maternity leave, and other such employee benefits.
questions & answers.
Expenditures ANS - Are the foundation of planning, authorizing, controlling, and evaluating activities of
governmental funds. It's a measure of the fund liabilities incurred (or expendable financial resources
used). Typically classified as operations, capital outlay, or debt service.
When to Recognize Expenditures ANS - In the accounting period in which the fund liability is incurred
except for unmatured interest (and principal) on long-term debt, which is recognized when due.
Inventory Expenditures ANS - May be recognized using either purchases method or consumption
method.
Prepayment Expenditures ANS - May be allocated over benefited period or accounted for only in current
period.
Pension Cost Expenditures ANS - Payments to pension plans, even self-administered ones, qualify as
expenditures; most govt's either use defined contribution or defined benefit contribution.
Defined Contribution Plan ANS - Government obligation is limited to making contributions required by
the plan; retiree benefits dependent upon contributions made and the investment performance of the
plan. Government should recognize the expenditure in the year employees earned the benefit --
underpayment is not liability of fund but a noncurrent liability.
Defined Benefit Plan ANS - Government obligation is to pay certain amount to retirees each period.
Annual required contribution (ARC) based on many actuarial assumptions.
Consumption Method for Inventory ANS - Supplies represent an expendable current financial resource -
it can be used to finance future "expenditures" for supplies.
Purchases Method for Inventory ANS - Already charged to expenditures, so it does not represent a
current financial resource.
, Consumption Method for Prepayments ANS - The prepayments account balance is reported as an asset.
Purchases Method for Prepayments ANS - The prepayments account balance is not reported as an asset,
since the amount has already been charged to expenditures.
Fund ANS - Basic classification of these are by this, but it does have other options.
Capital Leases ANS - Assets under this are recorded in General Capital Assets with corresponding entry in
General Long-Term Liabilities.
Allocation ANS - An apportionment of an appropriation made by executive branch of a legislative branch
appropriation.
Allotment ANS - Is a periodic release of an appropriation, i.e., a quarterly allotment -- helps keep
departments from spending entire budget early in the fiscal year.
Long-term Debt Service ANS - Debt service (principal and interest) not normally accrued at year-end;
governments may accrue if 2 conditions are met: 1.) debt service payment occurs early (not more than
30 days) in the next fiscal year AND 2.) dedicated financial resources must have been provided in current
fiscal year; if accrual is made, it must be for the full amount.
Short-term Debt Service ANS - Recorded as fund liabilities; accrue interest at year-end; governmental
funds borrow like this using tax anticipation notes (TANs), revenue anticipation notes (RANs), bond
anticipation notes (BANs), and other similar notes.
Contingencies ANS - Claims are against the government are called this.
Liability ANS - This is recorded if it is probable that an asset has been impaired or this has been incurred
(as of the date of the financial statements) AND it can be reasonably estimated.
Compensated Absences ANS - Vacation, sick leave, maternity leave, and other such employee benefits.
