Financial Information Questions! Trivia Quiz

The correct answer is "MEASUREMENT FOCUS: Current financial resources BASIS OF ACCOUNTING: Modified accrual". This means that the governmental fund financial statements should focus on the current financial resources and use the modified accrual basis of accounting. The modified accrual basis recognizes revenues when they become available and measurable and recognizes expenditures when they are incurred. This approach is used because it provides a more conservative and reliable representation of the financial position and results of operations of the governmental fund.

Under the modified accrual basis of accounting, revenues are recognized when current financial resources become measurable and available to pay current-period obligations. This means that revenues are recognized when the government has the ability to collect and use the funds to meet its current obligations. This differs from the accrual basis of accounting, where revenues are recognized when they are earned, regardless of when the cash is received. The modified accrual basis is commonly used in governmental accounting to ensure that revenues are recognized when they can be used to meet current obligations.

Under the modified accrual basis of accounting, revenues should be recognized when they are measurable and available. This means that the amount of revenue can be reasonably estimated and the funds are likely to be collected in the near future. The recognition of revenue is not dependent on whether it has been earned or collected in cash, but rather on its measurability and availability. The budget ordinance is not a determining factor for revenue recognition under the modified accrual basis.

A fund is a fiscal and accounting entity that has a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances and changes therein. These resources, related liabilities, and residual equities or balances and changes therein are segregated for the purpose of carrying out specific activities or attaining certain objectives. Therefore, all of the statements regarding the definition of a fund are true.

The fiduciary fund financial statements are used to report the assets and liabilities of activities where the government is acting in either an agency or trustee capacity for individuals, organizations, or other governments. These statements provide information about the resources that the government holds and manages on behalf of others. The government-wide financial statements, on the other hand, report the financial activities of the government as a whole and do not include fiduciary activities. Therefore, the correct answer is the fiduciary fund financial statements.

An enterprise fund is the most appropriate choice for accounting for an activity that provides goods or services to the public for a fee that is intended to make the activity self-supporting. This is because an enterprise fund is specifically designed to account for activities that operate in a manner similar to a business, generating revenue through the sale of goods or services. The funds collected from the fees charged to the public can be used to cover the costs of the activity and any excess revenue can be reinvested back into the activity.

Fiscal accountability in the reporting of governmental activities is demonstrated through governmental fund financial statements. These statements provide detailed information about the financial transactions and balances of specific funds, such as the general fund, special revenue funds, and debt service funds. They focus on the inflows and outflows of financial resources and help assess the financial position and performance of the government's various funds. Government-wide financial statements, on the other hand, provide a broader overview of the government's financial activities, including both governmental and business-type activities. However, fiscal accountability is primarily demonstrated through the specific fund financial statements.

A fund, as described by GASB standards, is not a segregated quantity of cash and other financial resources on deposit with a designated trustee. Instead, a fund is an accounting entity that represents a fiscal entity and is a self-balancing set of accounts.

The modified accrual basis is required for governmental funds only in accounting for state and local governments. This basis of accounting recognizes revenues when they become both measurable and available to finance current expenditures. It also recognizes expenditures when the related liability is incurred. Governmental funds include general funds, special revenue funds, capital projects funds, and debt service funds. Proprietary funds, on the other hand, use the accrual basis of accounting, while fiduciary funds use the full accrual basis. Therefore, the correct answer is governmental funds only.

The correct answer states that information about business-type activities should be reported in both the government-wide and proprietary fund financial statements using the same basis of accounting for both. This means that financial information for business-type activities should be presented consistently in both the overall financial statements of the government and the specific financial statements for proprietary funds. This ensures that there is uniformity and comparability in reporting financial information for these activities.

A major fund must have total assets, liabilities, revenues, or expenditures/expenses equaling at least 10% of the total governmental or enterprise fund amount for the same element, and at least 5% of the combined governmental and enterprise fund total amount for the same element. The General Fund meets these criteria and therefore must be reported as a major fund.

Capital assets used for governmental activities, such as those of the police department, should be reported in government-wide financial statements only. This is because government-wide financial statements provide a comprehensive view of the government's financial position, activities, and results, including all assets, liabilities, revenues, and expenses. Governmental fund financial statements, on the other hand, focus on short-term financial resources and do not include capital assets. Therefore, capital assets used for governmental activities are not reported in governmental fund financial statements.

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The General Fund and Library Fund should be reported as major funds because they have significant total assets compared to the other funds. The General Fund has a total asset of $18,400,000 and the Library Fund has a total asset of $2,900,000, which makes them the two largest funds among the given options. The Debt Service Fund, on the other hand, has a lower total asset of $2,600,000. Therefore, only the General Fund and Library Fund meet the criteria to be reported as major funds.

The correct answer is "All of the above". This means that all three statements provided are true regarding the basic financial statements of a state or local government. The first statement states that separate columns should be provided in the government-wide financial statements for governmental activities and business-type activities. The second statement states that governmental fund and proprietary fund financial statements should provide a separate column for each major fund. The third statement states that aggregate information about all non-major governmental funds or non-major enterprise funds should be reported in a single column of the governmental fund or proprietary fund financial statements. Therefore, all three statements are true.

Financial information about an internal service fund should be reported in the proprietary fund financial statements and either the Governmental Activities column or the Business-type Activities column of the government-wide financial statements, depending on whether the internal service fund predominantly serves governmental activities or business-type activities. This means that the financial information of the internal service fund will be included in the appropriate column based on its primary function.

Depreciation expense is not appropriate to record in a Special Revenue Fund because Special Revenue Funds are used to account for specific revenue sources that are legally restricted for specific purposes, such as grants or donations. These funds are typically not used for acquiring long-term assets, such as buildings or equipment, which are subject to depreciation. Therefore, there would be no need to record depreciation expense in a Special Revenue Fund.

The correct answer is that reporting fund financial information in separate columns for each major fund and aggregate information for non-major funds is required by GAAP for state and local governments. This means that government entities are obligated to follow this reporting method in order to comply with accounting standards set by the Governmental Accounting Standards Board (GASB). This requirement ensures transparency and consistency in financial reporting for these entities.