Government & Not-for-Profit Accounting Exam #1

Government & Not-for-Profit Accounting Exam #1 How do Government & Not-for-Profit practices differ from business practices? - Correct Answers - Different purposes in society - Management has special duty to be accountable for how resources are used in providing services - Financed by providers who do not expect benefits proportional to the resources they provide. What are the two type of governments and what services do they provide? - Correct Answers 1) General Purpose - Federal, state, and local governments 2) Special purpose - School systems, public colleges, universities, hospitals, fire protection districts, etc. Characteristics of Government and Not-for-Profit Organizations - Correct Answers - Organization lacks profit motive - Absence of Transferable Ownership Rights Characteristics of Government - Correct Answers - Power rests in the hands of the people - People delegate power to public officials through elections - Empowered by and accountable to a higher level government - Power to tax FASAB - Correct Answers Financial Accounting Standards Accounting Board - Federal Government and its agencies and departments GASB - Correct Answers Governmental Accounting Standards Board - State and local governments and governmental not-for-profits FASB - Correct Answers Financial Accounting Standards Board - Business organizations and non-governmental not-for profits Accountability - Correct Answers The requirement of governments to answer to citizens to justify the raising of public resources and the purposes for which they are used. Inter-period Equity - Correct Answers A government's obligation to disclose whether current-year revenues were sufficient to pay for current-year benefits or will future taxpayers be required to pay for them instead? What are governmental financial reports primarily used for? - Correct Answers - To COMPARE actual financial results with the legally adopted budget - To ASSESS financial conditions and results of operations - To ASSIST in determining compliance with finance-related laws, rules, and regulations. - To EVALUATE efficiency and effectiveness What are the two types of governmental financial statements? - Correct Answers 1) Government Wide - Aggregate Overview of Net Position and Change in Net Position 2) Fund - Detailed Financial Information Characteristics of Government Wide Financial Statements - Correct Answers - Operational Accountability: Whether the government has used its resources efficiently and effectively in meeting service objectives. - Focuses on flow of economic resources - Uses the accrual basis of accounting Characteristics of Fund Financial Statements - Correct Answers - Fiscal Accountability: Whether the government raised and spend financial resources in accordance with budgetary legal and regulatory constraints. - Uses the modified accrual basis of accounting Modified Accrual - Correct Answers - Revenues recognized when measurable and available for spending - Expenditures recognized when an obligation is incurred that will be paid from currently available financial resources. CAFR - Correct Answers Comprehensive Annual Financial Report - Provides more detail than required - Prepared in conformity with GASB What are the three sections of the CAFR and what does each section contain? - Correct Answers 1) Introductory - Title Page - Table of Contents - Letter of Transmittal 2) Financial - Auditor's Report - Management's Discussion and Analysis (MD&A) - Required Supplementary Information - Combined and Individual Fund Statements and Schedules Activities of Government - Correct Answers - Governmental Activities - Business-Type Activities - Fiduciary Activities Net Position - Correct Answers = Assets + Deferred Outflows - Liabilities - Deferred Inflows - Assets provide service today - Deferred outflows are not assets but function like them - Deferred inflows are not liabilities but function like them Government Wide Financial Statements - Correct Answers Statement of Net Position - Year-End Financial Position - Comparable to a Balance Sheet Statement of Activities - Reports expenses and revenues classified by program or function - Uses separate columns for government activities, business-type, and component units Types of Fund Categories - Correct Answers 1) Governmental - Fiscal Accountability - Current Financial Resources - Modified Accrual 2) Proprietary - Operational Accountability - Flow of Economic Resources - Accrual Basis 3) Fiduciary - Operational Accountability - Flow of Economic Resources - Accrual Basis Fund Concept - Correct Answers - Separate fiscal entities - Have their own resources (assets, liabilities, etc. Governmental Funds Include: - Correct Answers - General - Special Revenue - Debt Service - Special Projects