Intro to Government Accounting
questions with actual answers.
Objectives of Financial Reporting ANS -"Accountability is the cornerstone of all financial reporting in
government... Accountability requires governments to answer to the citizenry - to justify the raising of
public resources and the purposes for which they are used."
Fund Accounting ANS -In order to achieve the goal of Fiscal Accountability, Fund Accounting is
specifically designed to help governments to ensure and demonstrate legal compliance.
Three categories of Funds ANS -Governmental Funds, Proprietary Funds, Fiduciary Funds
Governmental Funds ANS -Five basic types:
1. General Fund
2. Special Revenue Fund
3. Debt Service Fund
4. Capital Projects Fund
5. Permanent Fund
General Fund ANS -The General Fund is the governmental agency's chief operating fund. The general
fund should be used to account for and report all financial resources not accounted for and reported in
another fund.
Special Revenue Fund ANS -Special revenue funds are used to account for and report the proceeds of
specific revenue sources that are restricted or committed to expenditure for specified purposes other
than debt service or capital projects. The term proceeds of specific revenue sources establishes that one
or more specific restricted or committed revenues should be the foundation for a special revenue fund.
Debt Service Fund ANS -Debt service funds are used to account for and report financial resources that
are restricted, committed, or assigned to expenditure for principal and interest. Debt service funds
should be used to report resources if legally mandated. Financial resources that are being accumulated
for principal and interest maturing in future years also should be reported in debt service funds.
, Capital Projects Fund ANS -Capital projects funds are used to account for and report financial resources
that are restricted, committed, or assigned to expenditure for capital outlays including the acquisition or
construction of capital facilities and other capital assets. Capital projects funds exclude those types of
capital-related outflows financed by proprietary funds or for assets that will be held in trust for
individuals, private organizations, or other governments.
Permanent Fund ANS -Permanent funds should be used to account for and report resources that are
restricted to the extent that only earnings, and not principal, may be used for purposes that support the
reporting government's programs-that is, for the benefit of the government or its citizenry. Permanent
funds do not include private-purpose trust funds, which should be used to report situations in which the
government is required to use the principal or earnings for the benefit of individuals, private
organizations, or other governments.
Basis of Accounting for Governmental Fund ANS -Governmental Fund revenues and expenditures are
recognized on the modified accrual basis of accounting. Revenues are recognized in the accounting
period in which they become available and measurable. Expenditures are recognized in the accounting
period in which the fund liability is incurred, if measurable.
Governmental Fund - Common Accounting Characteristics ANS -Governmental funds are created in
accordance with legal requirements. Legal constraints on the raising of revenue and the expenditure of
revenue are, in most jurisdictions, set forth in a legally adopted budget. However, Governmental funds
account only for current financial resources - those liabilities to be paid from fund assets. The arithmetic
difference between fund assets and fund liabilities is called the Fund Balance
Proprietary Funds ANS -Two types:
1. Enterprise Fund
2. Internal Service Fund
Enterprise Fund ANS -Enterprise Funds account for operations financed and operated similar to
business activities - services rendered to the general public on a fee basis. GAAP requires the use of an
enterprise for any activity whose principal revenue sources meet the following criteria:
A. Debt backed soley by fees and charges.
B. Legal requirement to recover cost
C. Policy decision to recover cost.
questions with actual answers.
Objectives of Financial Reporting ANS -"Accountability is the cornerstone of all financial reporting in
government... Accountability requires governments to answer to the citizenry - to justify the raising of
public resources and the purposes for which they are used."
Fund Accounting ANS -In order to achieve the goal of Fiscal Accountability, Fund Accounting is
specifically designed to help governments to ensure and demonstrate legal compliance.
Three categories of Funds ANS -Governmental Funds, Proprietary Funds, Fiduciary Funds
Governmental Funds ANS -Five basic types:
1. General Fund
2. Special Revenue Fund
3. Debt Service Fund
4. Capital Projects Fund
5. Permanent Fund
General Fund ANS -The General Fund is the governmental agency's chief operating fund. The general
fund should be used to account for and report all financial resources not accounted for and reported in
another fund.
Special Revenue Fund ANS -Special revenue funds are used to account for and report the proceeds of
specific revenue sources that are restricted or committed to expenditure for specified purposes other
than debt service or capital projects. The term proceeds of specific revenue sources establishes that one
or more specific restricted or committed revenues should be the foundation for a special revenue fund.
Debt Service Fund ANS -Debt service funds are used to account for and report financial resources that
are restricted, committed, or assigned to expenditure for principal and interest. Debt service funds
should be used to report resources if legally mandated. Financial resources that are being accumulated
for principal and interest maturing in future years also should be reported in debt service funds.
, Capital Projects Fund ANS -Capital projects funds are used to account for and report financial resources
that are restricted, committed, or assigned to expenditure for capital outlays including the acquisition or
construction of capital facilities and other capital assets. Capital projects funds exclude those types of
capital-related outflows financed by proprietary funds or for assets that will be held in trust for
individuals, private organizations, or other governments.
Permanent Fund ANS -Permanent funds should be used to account for and report resources that are
restricted to the extent that only earnings, and not principal, may be used for purposes that support the
reporting government's programs-that is, for the benefit of the government or its citizenry. Permanent
funds do not include private-purpose trust funds, which should be used to report situations in which the
government is required to use the principal or earnings for the benefit of individuals, private
organizations, or other governments.
Basis of Accounting for Governmental Fund ANS -Governmental Fund revenues and expenditures are
recognized on the modified accrual basis of accounting. Revenues are recognized in the accounting
period in which they become available and measurable. Expenditures are recognized in the accounting
period in which the fund liability is incurred, if measurable.
Governmental Fund - Common Accounting Characteristics ANS -Governmental funds are created in
accordance with legal requirements. Legal constraints on the raising of revenue and the expenditure of
revenue are, in most jurisdictions, set forth in a legally adopted budget. However, Governmental funds
account only for current financial resources - those liabilities to be paid from fund assets. The arithmetic
difference between fund assets and fund liabilities is called the Fund Balance
Proprietary Funds ANS -Two types:
1. Enterprise Fund
2. Internal Service Fund
Enterprise Fund ANS -Enterprise Funds account for operations financed and operated similar to
business activities - services rendered to the general public on a fee basis. GAAP requires the use of an
enterprise for any activity whose principal revenue sources meet the following criteria:
A. Debt backed soley by fees and charges.
B. Legal requirement to recover cost
C. Policy decision to recover cost.
