You are on page 1of 50

Chapter 18 - Governmental Entities: Special Funds and Government-Wide Financial Statements

1 CHAPTER 18 GOVERNMENTAL ENTITIES: SPECIAL FUNDS AND GOVERNMENT-WIDE FINANCIAL STATEMENTS ANSWERS TO QUESTIONS Q18-1 A governmental entity would use a special revenue fund rather than a general fund when the resources earmarked for the fund, such as federal or state government grants or special tax levies, are restricted for specific purposes. Q18-2 Operating budgets are prepared for the general fund, special revenue funds, and debt service fund. Capital budgets are prepared for the capital projects fund. Q18-3 Interest on long-term debt is accounted for in the debt service fund for only the interest that is due and legally payable as an expenditure. Interest is not accrued on the outstanding balance of the long-term debt. Q18-4 The major differences between a special revenue fund and an enterprise fund are Special Revenue Fund Measurement focus Accounting basis Budgetary basis Long-term assets Long-term debt Encumbrances Financial statements Current financial resources Modified accrual Operating budget No No Yes Governmental type Enterprise Fund Economic resources Accrual None required Yes Yes No Commercial type

Q18-5 The basis of accounting used in the proprietary funds is the accrual basis because the focus of the governmental entity is on capital maintenance and income determination rather than budgetary spending authority. Q18-6 The financial statements that must be prepared for the governmental funds are the balance sheet and the statement of revenues, expenditures, and changes in fund balances. The financial statements that must be prepared for the enterprise funds are the statement of net assets, the statement of revenues, expenses, and changes in fund net assets, and the statement of cash flows.

18-1

Chapter 18 - Governmental Entities: Special Funds and Government-Wide Financial Statements

Q18-7 Proceeds from a bond issue are accounted for as an other financing source in the fund that issued the bonds. However, some governments have a policy that the capital projects fund may not keep any bond premium, in which case the bond premium is typically transferred to a debt service fund. Other financing sources and uses are reported separately below operations, but above special items, on the governmental funds’ statement of revenues, expenditures, and changes in fund balance. Q18-8 A permanent fund is a governmental fund for which the principal is maintained, but the income in the fund can be used by the government for its programs that benefit all of its citizens. The basis of accounting in permanent funds is the modified accrual method. Private-purpose trust funds are established to benefit specific individuals or organizations, as specified by the donor. These private-purpose trust funds may have an expendable principal, or the principal may be non-expendable. The accrual basis of accounting is used for private-purpose funds. Thus, a major difference between these funds is the specificity of who the beneficiaries of the fund are. Q18-9 GASB 34 specifies that only governmental and enterprise funds determined to be “major” funds need to be separately disclosed in their own columns in the fund financial statements. There are two tests to determine which individual governmental and enterprise funds are considered major if they meet both tests. The general fund is always considered a major fund. The first test is total assets, liabilities, revenues, or expenditures/expenses of that individual fund are at least 10 percent or more of the governmental or enterprise category. The second test is that total assets, liabilities, revenues, or expenditures/expenses of the individual governmental or enterprise fund are at least 5 percent of the total for all governmental and enterprise funds combined. Any individual funds that are not considered major are aggregated and presented in a single column. Management may, at any time, separately disclose even those non-major funds for which they feel the additional disclosure will provide information valuable to the readers of the financial statements. Q18-10 Because the measurement focus of the governmental funds is on current financial resources, revenue would be recognized in the governmental funds only if the donated items are available to finance expenditures of the current period, For example, donated land would be included in contribution revenue of a governmental fund if the land was sold, or the government has entered into a contract to sell the land, and that the proceeds from the sale will be available to finance expenditures of the current period. However, a donation to a governmental fund, in the form of financial resources or capital assets, that has a restriction imposed by the donor which makes the donation unavailable to finance current expenditures, is not included in the governmental fund’s financial statements. Of course, on the government-wide statement of activities, all donations would be shown, at fair value on a separate line below general revenues. Specifically, endowment and permanent fund principal donations are reported below general revenues and above special and extraordinary items. On the governmental funds financial statements, special and extraordinary items are reported below operations, but above the net change in fund balance line, in the statement of revenues, expenditures, and changes in fund balance. Special items are those significant transactions within the control of management that are either unusual in nature or infrequent in occurrence. Extraordinary items are transactions or events that are both unusual and infrequent in occurrence. Q18-11 Agency funds must be self-balancing with assets equaling liabilities. Therefore, agency funds do not have a net fund balance.

18-2

Chapter 18 - Governmental Entities: Special Funds and Government-Wide Financial Statements

Q18-12 Component units are separate government entities for which the primary government is financially accountable. The financial presentation of these component units is dependent on the separability from the primary government. If the component unit is virtually inseparable, then the component unit’s financial information is blended into the primary government’s financial statements. However, if the component unit is distinguishable, and has its own taxing authority, then the component unit’s financial information is presented in a separate column in the government-wide financial statements. Q18-13 Two reconciliation schedules are required by GASB 34. The first reconciles the fund balances reported in the governmental funds to the net assets of governmental activities reported on the government-wide financial statements. For example, internal service funds are not a governmental fund, but the accounts for internal service funds are blended into the governmental activities that are reported on the government-wide financial statements. The second reconciliation schedule reconciles the net change in fund balances reported in the governmental funds statements to the change in net assets reported in the government-wide financial statements. These two reconciliation schedules are required by GASB 34 to be presented either on the face of the fund financial statements or in a separate schedule immediately following the fund financial statements. Q18-14 The budgetary comparison schedule reports, for the general fund and any other governmental fund that has a legally adopted budget, the initially approved budget, the final budget of the year, and the actual amounts, for each line item in the statement of revenues, expenditures, and changes in fund balance. A variance column may also be used to compare the actual against the final budget. This budgetary comparison schedule is part of the required supplementary information (RSI) required by GASB 34. GASB 41 amended GASB 34 for those governments that do not use the general fund and special revenue fund structure specified in GASB 34 for their budgetary purposes. GASB 41 specified that those governments with significant perspective differences should provide a budgetary comparison schedule in the RSI based on the structure the government used for its legally adopted budget. Q18-15 The government-wide financial statements present the infrastructure assets, such as roads, bridges, tunnels, sewer and water systems, etc., and other long-term assets of the government entity, such as buildings, equipment, vehicles, etc. The capital assets should be reported at historical cost or fair value at the time of donation, if donated. Because the basis of accounting for the government-wide financial statements is the accrual method, depreciation is recorded on the other long-term assets and these are reported net of depreciation. For infrastructure assets, the governmental entity may elect to use a modified approach in which depreciation is not recorded. The modified approach requires an assessment of the current condition of the infrastructure assets and an estimate of the annual amount required to maintain and preserve the infrastructure assets. In addition, the government-wide financial statements present the general long-term debt obligations of the governmental entity at the present value of the debt principal and future interest, just as computed under the accrual basis of accounting that is used for commercial entities.

18-3

Chapter 18 - Governmental Entities: Special Funds and Government-Wide Financial Statements

SOLUTIONS TO CASES C18-1 Basis of Accounting and Reporting Issues a. In the accrual basis of accounting, revenue should be recognized in the accounting period in which it is earned and becomes measurable. In the modified accrual basis of accounting, revenue should be recognized in the accounting period in which it becomes both measurable and available to finance expenditures of the fiscal period. "Available" means collectible within the current period or soon enough thereafter to be used to pay current period liabilities. b. For the general fund, the modified accrual basis of accounting should be used because it is a governmental fund, which is, in essence, an accounting segregation of financial resources. For the special revenue fund, the modified accrual basis of accounting should be used because it is a governmental fund, which is, in essence, an accounting segregation of financial resources. For the enterprise fund, the accrual basis of accounting should be used because it is a proprietary fund, with activities similar to those in the commercial, profit-seeking sector.

18-4

Chapter 18 - Governmental Entities: Special Funds and Government-Wide Financial Statements

C18-2 Capital Projects, Debt Service, and Internal Service Funds a. Capital projects funds account for the acquisition or construction of major capital facilities or improvements. A separate capital projects fund is created at the time the project is approved and ceases at the completion of the project. Accounting for capital projects funds is similar to accounting for the general fund. The modified accrual basis of accounting is used; no fixed assets, depreciation, or long-term debt is recorded in these funds. The bond proceeds are not revenue to the capital projects fund; they are reported as Other Financing Sources. A premium on the sale of bonds is transferred to the debt service fund. When the expenditure is recorded, Contract Payable is credited for the current portion due and Contract Payable-Retained Percentage is credited for the amount held back to ensure that the contractor fully completes the project to the satisfaction of the governmental entity. The financial statements for capital projects funds are a balance sheet and a statement of revenues, expenditures, and changes in fund balance. No budget versus actual is required because capital projects funds use a capital budget rather than an operating budget. b. Debt service funds account for the accumulation and use of resources for the payment of general long-term debt principal and interest. Accounting for the debt service fund is similar to accounting for the general fund. The modified accrual basis of accounting is used; no fixed assets or long-term debt is recorded; only current maturities are recorded in the fund. The bond premium received from the capital projects fund is recorded as an other financing source – transfer in. The matured portion of a serial bond is recognized as an expenditure and Matured Bonds Payable is credited. Interest legally due and payable is recorded as an expenditure and Matured Interest Payable is credited. The financial statements of the debt service fund are a balance sheet and a statement of revenue, expenditures, and changes in fund balance. c. Internal service funds account for the financing of goods or services provided by one department to other departments on a cost-reimbursement basis. Separate internal service funds are established for each type of service. Accounting for internal service funds is the same as for enterprise funds or commercial entities. The accrual basis is used; these funds record fixed assets, depreciation, and long-term debt. The internal service fund may be started with a transfer in from the general fund. The billings are recorded in "Due from" accounts and the revenue account, Charges for Services. The closing entries involve a Profit and Loss Summary or Excess of Net Revenues over Costs account. The financial statements of an internal service fund are a statement of net assets; a statement of revenues, expenses, and changes in fund net assets; and, a statement of cash flows.

18-5

The Dispositions of the Budget Surplus presents the changes in assets and liabilities during the years reported. agencies.Chapter 18 . by major type. The material deficiencies are listed in the auditor’s report. (2) Statements of Operations and Changes in Net Position.S. and financial reporting. 9. by major type. 1. The Statements of Net Cost present the costs and revenue for the major departments. 18-6 . 4. and (5) Balance Sheets. Major footnotes include a stewardship report on the resources held by the U. both historical and projected. The Reconciliation of Net Operating Revenue (Cost) to the Budget Surplus presents the increases or decreases in major cost programs. (3) Reconciliations of Net Operating Revenue (Cost) to the Budget Surplus (unaudited).S. The Management’s Discussion and Analysis presents comparative historical information for operations and financial position along with budget information. The following five statements are presented: (1) Statements of Net Cost.Governmental Entities: Special Funds and Government-Wide Financial Statements C18-3 Discovery Case Summary of major information items in the Financial Report of the United States Government. government. and reconciles to the net position of the U. the liabilities.S. and other entities within the federal government. 7. and the net operating revenue (cost) for each year. commissions. along with the amount of capitalized fixed assets by major agencies of the federal government. For several years. 6. 2. documentation. The Statement of Operations and Changes in Net Position presents the revenues by type. 5. the Comptroller General has disclaimed an opinion on the consolidated financial statements because of the material deficiencies in the government’s systems. and other units of the federal government. (4) Dispositions of the Budget Surplus (unaudited). 8. 10. commissions. The report is prepared by the Secretary of the Treasury. 3. The Comptroller General of the United States heads the General Accountability Office (GAO) who is the auditor for the U. and a large number of notes to the financial statements that report on specific items related to agencies. recordkeeping. government. The Balance Sheets present the assets. the total costs. government.

The footnotes’ discussions regarding the governmental funds and their use of the financial resources measurement focus and modified accrual basis of accounting reinforce what the students learned from the text. Students should read the MD&A to get familiar with the governmental entity. Students should be aware of the reporting of major funds in the financial statements of governmental and proprietary funds. b. the services usually consist of police and fire protection. One item of information disclosed in the notes is a description of the measurement focus and basis of accounting used by the governmental funds. street maintenance. Listing the financial statements that use the economic resources measurement focus and accrual basis of accounting reinforces the coverage in the text. The auditor’s opinion is usually unqualified. many governments now provide their CAFRs online.) a. You might select the local city or county in which the university is located or a large city close to the university town. c. students should have little problem identifying the existence of component units. One of the items contained in the MD&A is information on the nature of the services performed by the government. and other services typically the responsibility of the local government. county or state will show if your selection provides an online copy of its CAFR. Students should become familiar with the types of information found in the notes. 18-7 . At the local government level. Because many component units are reported discretely. Or.Chapter 18 . Because there is so much information contained in a CAFR. It is beneficial for the student to see which fund types are used and which ones are not used by a government. The auditor does not audit the MD&A and other RSI and does not express an opinion on this information. d. In their evaluation.Governmental Entities: Special Funds and Government-Wide Financial Statements C18-4 Becoming Familiar With a Local Government’s Comprehensive Annual Financial Report (CAFR) (Note to the instructor: Most local governments now produce a comprehensive annual financial report. g. A web search using “CAFR” and the name of your city. e. This question emphasizes that the reporting entity for the government may be larger than the local governmental if the local government has fiscal accountability over other governmental entities. f. students should remember that the governmental fund financial statements are the only ones prepared using the current financial resources measurement focus and the modified accrual basis of accounting. it is important to see what information is covered by the auditor’s opinion. The auditor reads the MD&A and other RSI to determine if the information contained therein is reasonable. you may do a web search using “CAFR” and then select one of the government units that provide an online copy of its CAFR and then provide that link to your students or insert that link into your online syllabus. Alternatively. Printed copies of the CAFR may be obtained directly from that governmental entity and you could place these copies on reserve in your university library for use by your students. A general purpose government will have most fund types. recreation.

expenditures. The first section deals with revenues. The purpose of this question is to have students examine the items reported in other financing sources and uses. Students will discover that taxes are generally not the only source of revenue. Students may expect governments to report expenditures by object. and changes in fund balance. k. which are reported according to source. the change in fund balance for the year.l is to help students understand the format of the statement of revenues. Another goal for this question is for students to see that fund balance is separated into two components: (1) assigned and (2) unassigned. However. expenditures. This should reinforce what they learn in the text when they read the section dealing with interfund transfers. and changes in fund balance: special items. students should see the change in fund balance for the year being added to the beginning fund balance to produce ending fund balance. and changes in fund balance. This question covers the last items reported on the statement of revenues. expenditures. The purpose of this question is for students to become acquainted with the balance sheet equation for the governmental funds: Assets = Liabilities + Fund Balance. however. Students should not expect to see any special items since their occurrence is rare. l.Chapter 18 . 18-8 .Governmental Entities: Special Funds and Government-Wide Financial Statements C18-4 (continued) h. j. The purpose behind questions i . The objective of this question is to get students to understand how governments report expenditures. i. and the ending fund balance at the end of the most recent year. expenditures are not reported this way on the statement of revenues.

meetings to discuss the issues. and presents relevant research. and presents this analysis to the members of the Board who often make their own review of the comments. a task force is formed shortly after the Board agrees to place the project on its agenda. 18-9 . The Board may have several. 5. A PV puts forth the Board’s consensus at an early stage in the process. In order to find this information on the revised website. A majority of the Board must approve the issuance of a PV. 9.gasb. In many cases. Preliminary Views (PV). the accounting and reporting issues. This council is composed of about 25 persons from a diverse background in government accounting and finance. Invitation to Comment (ITC). 6. The staff performs an analysis of the submitted comments. looking for information and good arguments on the issues. the GASB’s presentation of its decision-making process was found on their web site at www. and explains the basis for the Board’s conclusions regarding the issues covered by the ED.org/cs/ContentServer?c=Page&pagename=GASB%2FPage %2FGASBSectionPage&cid=1176156714607 7. http://www. and arguments both for and against each alternative. 8. Task Force. The DM is normally prepared by the staff and defines the problem(s). Public Hearing. Meetings of the Board. 2. An ITC is sometimes issued when the GASB seeks more input on one or more of the issues.gasb.gasb. Discussion Memorandum (DM). the proposed effective date and method of transition. background information. A public hearing is typically scheduled to provide the Board with an opportunity to hear the viewpoints of the public as well as to allow the Board to raise questions to the staff regarding written or oral comments received on the project. although observers are not allowed to participate in the discussions. including any submissions at the public hearing. The Governmental Accounting Standards Advisory Council (GASAC).gasb. An ED presents the proposed new standards. Exposure Draft (ED). alternative solutions to the issues.org/cs/ContentServer?c=Page&pagename=GASB%2FPage %2FGASBSectionPage&cid=1176156714567 4.org/cs/ContentServer?c=Page&pagename=GASB%2FPage %2FGASBSectionPage&cid=1176156714627 3.org/jsp/GASB/Page/GASBSectionPage&cid=1176156714545 ) 1.Chapter 18 . the Board receives concerns about current governmental accounting needs from other persons and groups who work in governmental accounting or auditing.Governmental Entities: Special Funds and Government-Wide Financial Statements C18-5 The GASB’s Decision-Making Process Until recently.gasb. http://www. Board meetings on the project are open to the public. The Board solicits comments on the PV. the scope of the project. (http://www. Analysis of Oral and Written Comments. A task force is comprised of persons who know the project’s subject matter and provides expertise and advice to the GASB as it focuses on the critical issues and determine if a new standard is necessary. it is necessary to go to the link entitled “How Standards Are Set” in the “Education” tab. The answers to this question and the next two are covered in this website: http://www. Written comments are solicited and in many cases a public hearing is scheduled to discuss the DM.org/ under GASB FACTS on the link entitled Facts About the GASB: The Mission and Structure of the Board. This council provides suggestions for topics to be considered by the GASB. and An Open Decision-Making Process. In addition. or many.

the Board continues to work on the next project! 18-10 . And then. but rather give guidance for dealing with problems that arise on an issue. A majority of the Board must vote in favor of adopting a pronouncement.Governmental Entities: Special Funds and Government-Wide Financial Statements http://www. The Board receives comments on the ED and discusses the comments to determine if any modifications are needed in the proposed standard. Further Deliberations by the Board. 11. Statements of Standards establish new accounting or reporting requirements.org/cs/ContentServer?c=Page&pagename=GASB%2FPage %2FGASBSectionPage&cid=1176156714567 10. Statements of Concepts do not create new standards. Statements of Governmental Accounting Standards or Statements of Governmental Accounting Concepts.gasb.Chapter 18 .

These projects are in various stages of progress. Click on the “Current Projects” link in the Projects tab of the GASB’s home page to see information on the status of current GASB projects. new GASB Statement. given the dynamic nature of governmental accounting and reporting. and some of the current projects may be discontinued or included within a larger project the board is studying. some may become new GASB Statements! 18-11 . and postemployment benefit accounting and reporting. economic condition reporting. Students can learn about some of the specifics of an expected. derivatives. And. Of course. GASB projects include a conceptual framework.Chapter 18 .Governmental Entities: Special Funds and Government-Wide Financial Statements C18-6 Summarizing a Recent GASB Exposure Draft Note to the Instructor: This case provides your students with the opportunity to be on the leading edge of a proposed governmental accounting or reporting standard. but as of late 2010. it is expected that new projects will be added. The most recent ED on the web page will be dependent on future actions of the GASB.

839.Governmental Entities: Special Funds and Government-Wide Financial Statements SOLUTIONS TO EXERCISES E18-1 Multiple-Choice Questions on Government Financial Reporting 1. d 3.150. b 4. c $8. c 10.000 = capital assets (net) of $12. a 2. c 9.035. and d each include a fiduciary fund which is not a major fund) 18-12 .Chapter 18 .150.000.000 minus $654.350. a 6. a 5.000 = assets of $14. d 12.000 $7.000 $1.839. a 8.000 minus liabilities of $6.000 minus $7.839. b 7.000 = net assets of $8.000 minus long-term debt of $5.000 (answers b.500. a 11. c.

a 4. b 8. d 3. d 2. 7. c 9. c 6. c 18-13 . b 5. b E18-3 Multiple-Choice Questions on Proprietary Funds [AICPA Adapted] 1. c 6.Chapter 18 . c 5. c Prepaid insurance would be reported as an asset. b 3.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-2 Multiple-Choice Questions on Governmental Funds [AICPA Adapted] 1. d 4. b 2.

Chapter 18 .000 75.000 $100. This is an example of an interfund services provided or used transaction.000 75. The enterprise fund would debit operating expenses.000 75.000 75. The contribution is reported as an addition -contributions. The net assets would be for the $600.000 of income for the period. The entries in the trust fund to record the resources spent would appear as follows: Deductions .000 of interest earned.000) (40.000 7. c The assets at June 30. 18-14 .000 (45.000 $713.investment earnings include the $50.000 transfer in plus the $10. d d Income is determined as follows: Revenue – Charges for Services Operating Expenses Depreciation Expense Interest Expense Income 5.000 610. The general fund would debit expenditures. b a b $ 96. 4. c The additions . 8.000 of dividends and the $35. a This is an example of an interfund services provided or used transaction.000 2.Benefits Vouchers Payable Vouchers Payable Cash 3.000) $ 10.000) (5. 7.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-4 Multiple-Choice Questions on Various Funds 1. 20X7 appear as follows: Cash Due from Other Funds Computer Equipment (net) Total Assets 6.

000 + $20.000.000 interest .$5.000 + $60.000 – $350.000 deduction for investment revaluation the net assets of internal service funds are included in governmental activities 18-15 .Governmental Entities: Special Funds and Government-Wide Financial Statements E18-5 Multiple-Choice Questions on Financial Reporting Issues for Government-wide and Fund-Based Financial Statements 1. c 3.000. d $150. c 2.$600.$20. c 8.000 = $1.000 – $8.000 + $300.035.000 = $25.Chapter 18 . a 6. d 4.000 .000 .000 = $1.000 = $500.$40.000 $660.000 $1. d 7.000 $37.000 benefits paid . d 5.

20X2 .000 182. 20X2 Other Financing Uses – Transfer Out to Debt Service Fund Cash Transfer premium to debt service fund.000 18-16 .Governmental Entities: Special Funds and Government-Wide Financial Statements E18-6 Capital Projects Fund Entries a..000 6.000 182.000 6.500 50.500 5.000 182.000 182.000 150.000 189. Expenditures—Capital Outlay Vouchers Payable Establish vouchers payable for added carpeting. 20X2 BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Expenditures—Capital Outlay Contract Payable Establish contract payable for walkway.000 6.000 150.1. 20X2 Cash Other Financing Sources – Bond Issue Other Financing Sources – Bond Premium Sale of $150.000 189. Entries for capital projects fund during 20X2: 1.000 6.000 5.Chapter 18 .000 50.000 par bonds at 104.500 189.000 206. 2. January 1. 20X2 ENCUMBRANCES BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES August 8. Close nominal accounts: Revenue – County Grant Other Financing Sources – Bond Issue Other Financing Sources – Bond Premium Fund Balance – Unassigned 50. November 3. Entries to record and pay for construction: April 5. 3. 20X2 Contract Payable Vouchers Payable Cash Pay contract payable and vouchers payable. Cash Revenue – County Grant Receipt of grant from county.000 156. sale of bonds and transfer of premium. January 1.000 5. Receipt of grant. November 3.500 194.

and Changes in Fund Balance For Fiscal Year Ended December 31. Transfer of ending balance and close transfer account: Other Financing Uses – Transfer Out to Debt Service Fund Cash Record transfer of remainder to Debt Service. December 31.Chapter 18 .500) ) $156.500 $(144. Revenue: County Grant Expenditures: Capital Outlay Deficiency due to excess of Expenditures over Revenue Other Financing Sources (Uses): Proceeds of Bond Issue Transfer Out to Debt Service Fund--Premium Transfer Out to Debt Service Fund--Remainder Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance.500 6.000) (5. 20X2 $ 50.000 194.500 -0-0$ -0$ 18-17 . 20X2 City of Waterman Capital Projects Fund Statement of Revenues.500) 144. Fund Balance – Unassigned Other Financing Uses – Transfer Out to Debt Service Fund Close transfer out against unassigned fund balance.500 194.000 5.500 b. Expenditures. 200.500 5.000 (6. 20X2 Fund Balance.500 5. January 1.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-6 (continued) Fund Balance – Unassigned Expenditures Other Financing Uses – Transfer Out to Debt Service Fund 4.500 5.

000 15.Chapter 18 .Governmental Entities: Special Funds and Government-Wide Financial Statements E18-7 Debt Service Fund Entries and Statement a.000 15.700 1.000 15. Cash Other Financing Sources – Transfer in from Capital Projects Fund Receive bond premium. Vouchers Payable Cash Pay approved vouchers.000 30. Matured Bonds Payable Matured Interest Payable Cash Pay matured principal and interest.200 18-18 . Entries for debt service fund during 20X2: 1. 35.000 5. 3.000 6.000 35.000 36. Expenditures Vouchers Payable Record other expenditures.000 35.000 30. Property Taxes Receivable Allowance for Uncollectibles Revenue – Property Tax Record tax levy.000 5.000 6.000 34.000 Property Taxes Receivable — Delinquent 5.000 4. Expenditures Matured Bonds Payable ($150.10 interest) Record matured principal and interest.000 x 0.000 15. Cash Property Taxes Receivable Record tax collections.000 Property Taxes Receivable Allowance for Uncollectibles – Delinquent Revenue – Property Tax Revise estimate of uncollectibles and reclassify remaining receivables.000 1. 6.000 1. 40.200 1.000 Allowance for Uncollectibles 4.000 2. ESTIMATED REVENUES CONTROL ESTIMATED OTHER FINANCING SOURCES – TRANSFER IN APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE Record budget.700 1.000 x 1/10 due) Matured Interest Payable ($150.000 3.

300 $ 500 34.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-7 (continued) 4.000 11.800 31.800 18-19 .000 39. 18.000 5.500) Fund Balance – Assigned for Debt Service Expenditures Close nominal accounts. and Changes in Fund Balance For Fiscal Year Ended December 31.800 -0$18.700 $ 7.500 18.500 Other Financing Sources – Transfer In From Capital Projects Fund 5. b. 20X2 $39. 20X2 Revenue: Property Taxes Expenditures: Principal Retirement $15.700 Total Expenditures Excess of Revenue over Expenditures Other Financing Sources (Uses): Transfers In From Capital Projects Fund Net Change in Fund Balance Fund Balance. Revenue – Property Tax Other Financing Sources – Transfer in from Capital Projects Fund ($6.300 11.Chapter 18 . Expenditures.300 4.700 Assets: Cash Property Tax Receivables (net) Total Assets Liabilities: Vouchers Payable Fund Balance: Spendable: Assigned to: Debt Service Total Liabilities and Fund Balance c.300 City of Waterman Debt Service Fund Statement of Revenues. 5.500 Record transfer of unspent funds in capital projects fund to debt service fund. APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE ESTIMATED REVENUES CONTROL ESTIMATED OTHER FINANCING SOURCES – TRANSFER IN Close budgetary accounts.000 + $5. City of Waterman Debt Service Fund Balance Sheet December 31.000 35.800 $19.000 31.000 Miscellaneous 1. January 1.500 $18.000 6. Cash 5. 20X2 Fund Balance.000 $19. December 31. 20X2 $15.000 Interest 15.

000 12.000 30. Plant and Equipment Contracts Payable Record extension of water and gas lines.000 30.000 75.400 Vouchers Payable 325.000 32.000 Interest Payable 30. 4.000 3. and payment to central stores.000 30.000 30.300 6. 420.400 Record payment of approved vouchers.000 15.000 432. Supplies Expense Inventory of Supplies Adjust for supplies on hand. Contracts Payable Cash Record payment for extended lines.Chapter 18 .300 32. Depreciation Expense Accumulated Depreciation Adjust for depreciation for period. Entries for enterprise fund: 1.000 Cash 367.000 Due to Central Stores Fund 12. 5. 75.000 12.200 18-20 .400 328. Cash Accounts Receivable Record collections on account.400 328.200 15. 6. Accounts Receivable Revenue Record charges to customers. Inventory of Supplies Operating Expenses Interest Expense Due to Central Stores Fund Vouchers Payable Interest Payable Record expenses.000 75.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-8 Enterprise Fund Entries and Statements a. Revenue Allowance for Uncollectibles Reduce revenue for uncollectible accounts.000 420.000 75. interest. 2.000 432. Cash Due to General Fund Receive loan from general fund.

000 30.500 8.500 $138.200 120. Net of Related Debt 43.300) $555.000 443.000 $ 63.000 net capital assets (Land + Plant & Equipment) less $500.000 500.000 32.000 15.500 Assets: Cash Accounts Receivable Less: Allowance for Uncollectibles Inventory of Supplies Land Plant and Equipment Less: Accumulated Depreciation Total Assets Liabilities: Vouchers Payable Due to General Fund Bonds Payable.000 $686.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-8 (continued) Closing entries: Revenue Operating Expenses Interest Expense Depreciation Expense Supplies Expense Profit and Loss Summary Close nominal accounts. 20X1 $111.700 328.000 Record increase in net assets-invested: $43. Profit and Loss Summary Net Assets – Unrestricted Close profit and loss summary.000 $548.000) 18-21 . 413. net of Related Debt Unrestricted Total Net Assets $ 13.700 5.000 related debt minus $20.500 $ 18.Chapter 18 .000 (112.000 beginning balance in net assets-Invested in capital assets net of related debt b.000 75.600 6.000 = Ending balance of $563.200 8.500 Net Assets – Unrestricted 43.000 Net Assets – Invested in Capital Assets.000 (6. Augusta MUD Enterprise Fund Statement of Net Assets December 31. 6% Total Liabilities Net Assets: Invested in Capital Assets.500 8.000 30.

000 $138.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-8 (continued) c.500 [Note that interest expense on capital-related debt is a non-operating expense.700 $328. January 1 Net Assets.200 $ 38.000 15.500 130. December 31 375.000 $ 8. 20X1 $413.200 Revenue: Revenue from Services Expenses: Operating Depreciation Supplies Operating Income Nonoperating Expense: Less: Interest on Capital-Related Debt Change in Net Assets Net Assets.500 30. Augusta MUD Enterprise Fund Statement of Revenue. Expenses.Chapter 18 . and Changes in Fund Net Assets For Fiscal Year Ended December 31.] 18-22 .000 32.

Governmental Entities: Special Funds and Government-Wide Financial Statements E18-8 (continued) d.] 18-23 .000 (325.000) (12.500 $ 32.800 18.000 30.000 2. 20X1 $ 432.300 3.000) (75.Chapter 18 .400) Cash Flows from Operating Activities: Cash Received from Customers Cash Payments for Goods and Services Cash Paid to Internal Service Fund for Supplies Net Cash Provided by Operating Activities Cash Flows from Noncapital Financing Activities: Cash Received from General Fund for Noncapital Loan Net Cash Provided by Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities: Interest on Capital-Related Debt Extension of Service Lines Net Cash Used for Capital and Related Financing Activities Cash Flows from Investing Activities Net Increase in Cash Cash at Beginning of Year Cash at End of Year Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation Change in Assets and Liabilities: Decrease in Inventory and Supplies Decrease in net Accounts Receivable Increase in Vouchers Payable Total Adjustments Net Cash Provided by Operating Activities $ 94.000) -0$ 19. Augusta MUD Enterprise Fund Statement of Cash Flows For the Year Ended December 31.000 $(30.000) (105.100 $ 94.600 92.600 [Note that interest paid on capital-related debt is reported in cash flows from capital and related financing activities and not in the operating activities.000 56.600 $ 30.600 $ 38.000 $111.

20X8. 20X8.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-9 Interfund Transfers and Transactions General Fund 1. 20X8. a. March 1.400 4. Transfer out: Other Financing Uses – Transfer Out to Debt Service Fund Cash June 30.000 b. a. 2. 20X8. Transfer out: Other Financing Uses – Transfer Out to Building Maintenance Fund Cash June 30.Chapter 18 .400 b.000 8.000 2.000 b.400 2. Closing entry: Fund Balance – Unassigned Other Financing Uses – Transfer Out to Debt Service Fund May 5. June 30. Closing entry: Fund Balance – Unassigned Expenditures 12. 825 825 825 825 825 825 18-24 . 8. Interfund services provided or used: Expenditures Due to Transportation Service Fund Due to Transportation Service Fund Cash b. 3.000 12. Closing entry: Fund Balance – Unassigned Other Financing Uses – Transfer Out to Building Maintenance Fund April 1. 20X8 April 15. 20X8. Financing transaction: Due from Building Maintenance Fund Cash Shown on the general fund balance sheet on June 30. a. 12. 2. 20X8.400 2. a. 20X8.000 12.

Financing transaction: Cash Due to General Fund 8. April 1. Transfer in: Cash Transfer In from General Fund June 30.Unrestricted 825 825 825 825 825 825 18-25 . Other Fund Building Maintenance Internal Service Fund a.000 8. 2.000 12.400 2. 20X8. 20X8. 20X8. Closing entry: Other Financing Sources – Transfer In from General Fund Unassigned Fund Balance 2.400 2. Interfund services provided or used: Due from General Fund Revenue from Billings Cash Due from General Fund b. Debt Service Fund a. Transfer in: Cash Other Financing Sources – Transfer In from General Fund June 30.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-9 (continued) 1. 20X8.000 b. May 5.400 b.000 3. March 1.Chapter 18 . 12. June 30. 20X8.400 4. 20X8. Transportation Service Fund a. 20X8.000 2. Building Maintenance Fund a. Closing entry: Revenue from Billings Net Assets .000 12. Closing entry: Transfer In from General Fund Net Assets 12. April 15.

Governmental Entities: Special Funds and Government-Wide Financial Statements E18-10 Internal Service Fund Entries and Statements a. furniture. Depreciation Expense Accumulated Depreciation Record depreciation for period.000 27.300 Reclassify net assets as of end of period: $18. Inventory of Supplies 96.000 23.300 287.600 23. Profit and Loss Summary Net Assets – Unrestricted Close profit and loss summary. including closing entries: 1. Entries for 20X2. Vouchers Payable Cash Pay approved vouchers.000 38. Due from Other Funds Billings to Departments Record billings for jobs completed.300 Net Assets .300 = (ending balance of $191.000 92.700 net capital assets less $0 related debt ) less $210. 18-26 .000 beginning balance in net assets invested.000 27.300 204. Costs of Printing Jobs Operating Expenses Inventory of Supplies Vouchers Payable Record costs of printing jobs.000 243.000 Furniture and Equipment 4.000 100. Closing entries: Billings to Departments Costs of Printing Jobs Operating Expenses Depreciation Expense Profit and Loss Summary Close nominal accounts. 292.000 27. Net of Related Debt 18.000 243. and office equipment. Cash Due from Other Funds Record collections on billings.000 287.000 38.Unrestricted 18. 292.000 204.700 2.700 Vouchers Payable Record acquisitions of supplies.000 292.000 23.400 149.Chapter 18 .000 Net Assets – Invested in Capital Assets.

000 18-27 .400 191.000 $ 27.300 Assets: Cash Due from Other Funds Inventory of Supplies Furniture and Equipment Less: Accumulated Depreciation Total Assets Liabilities: Vouchers Payable Total Liabilities Net Assets: Invested in Capital Assets.300 $ 19.700 $294.300 $191.900 20.000 $204.000 Revenue: Billings to Departments Expenses: Costs of Printing Jobs Operating Depreciation Income Net Assets. and Changes in Fund Net Assets For Fiscal Year Ended December 31.000 248. Bellevue Printing Shop Fund Statement of Net Assets December 31. Net of Related Debt Unrestricted Total Net Assets $264.Chapter 18 .300 $275.000 38.000) $ 19. December 31 265.000 23.300 13.700 (73. 20X2 $292.000 c.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-10 (continued) b. Bellevue Printing Shop Fund Statement of Revenue.000 $275. 20X2 $ 68. January 1 Net Assets.700 83. Expenses.

000 (4.600 $68.000 $49.300 (238.000 $ 23. Bellevue City Internal Service Fund – Printing Shop Statement of Cash Flows For the Year Ended December 31.300 24.300) Cash Flows from Operating Activities: Cash Received from Customers Cash Payments for Printing Jobs Net Cash Provided by Operating Activities Cash Flows from Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities Acquisition of Capital Assets (furniture and copier) Net Cash Used for Capital and Related Financing Activities Cash Flows from Investing Activities Net Increase in Cash Cash at Beginning of Year Cash at End of Year Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income Adjustments to Reconcile Operating Income to Net Cash Used by Operating Activities: Depreciation Change in Assets and Liabilities: Increase in Due from Other Funds from Billings Increase in Inventory of Supplies Increase in Vouchers Payable Total Adjustments Net Cash Provided by Operating Activities $49.700) (3.Chapter 18 .000 -0- $ (4.000 18-28 .300 22.700) -0$44.600) 7. 20X2 $ 287.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-10 (continued) d.700) (4.900 $27.

5. 2.000 .450.Chapter 18 . 4. 6. ($1.Governmental Entities: Special Funds and Government-Wide Financial Statements E18-11 Multiple-Choice Questions on Government-wide Financial Statements 1.450.000) .$120. 10. The interest adjustment is from the modified accrual basis ($30. 9.000) to the accrual basis of measurement ($25.000 . 8.000] 18-29 .$780. 7. 3.000).$120. c a b c c d c b c b For the amount of the bond issue proceeds.000) [($1. Note that no repayments of debt were made during the year.

Bonds Payable Buildings Correct for bonds used to construct buildings.000 300.000 22.000 22. 4.000 1. Other Financing Uses – Transfer Out to Debt Service Fund Debt Service from Current Funds Correct for transfer to debt service fund. 300. ENCUMBRANCES BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES Correct for unrecorded encumbrances. Expenditures Inventory of Supplies Correct for supplies used in period.000 130. 2. Fund Balance – Unassigned Fund Balance – Assigned for Inventory Correct for reserve for ending inventory.000 1.Chapter 18 . 4.950 5. Expenditures Capital Outlays (equipment) Correct for expenditures for playground equipment.000 2.800 4. 3. Expenditures Buildings Correct for state grant expended for buildings.800 2.000. No entry required.500 18-30 .950 6.000 130.000.Governmental Entities: Special Funds and Government-Wide Financial Statements SOLUTIONS TO PROBLEMS P18-12 Adjusting Entries for General Fund [AICPA Adapted] Adjusting entries to correct the general fund: 1.500 6.

000 3. Capital Projects 72. 3.Chapter 18 .000 3.000 3.000 5.000 5.000 3.000 6. General Fund Capital Projects Fund Debt Service Fund 24. 50.000 5. General Other Financing Uses – Transfer Out to Internal Service Fund Cash Cash Transfer In from General Fund Cash Other Financing Sources – Bond Issue Due from General Fund Other Financing Sources – Transfer In from General Fund Debt Service Fund General Special Assessments Receivable Revenue – Special Assessments Other Financing Uses – Transfer Out to Capital Projects Fund Due to Capital Projects Fund Due to Capital Projects Fund Cash Cash Due from General Fund Cash Special Assessments Receivable 390.800 50.000 5. General Fund General Fund PrivatePurpose Trust Fund Journal Entries ESTIMATED REVENUES CONTROL 400.000 394.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-13 Entries for Funds [AICPA Adapted] Fund 1.000 72.000 3.000 3.500 5.000 6.000 Internal Service Fund 5.000 18-31 .000 382.000 24.000 3.200 7.000 5.000 24.000 APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE – UNASSIGNED Taxes Receivable – Current Revenue – Taxes Allowance for Uncollectibles – Current Investments Contributions Cash Additions – Interest 4.500 2.000 3.000 24.

900 75.000 75.900 9.800 500.000 15.800 Cash Other Financing Sources – Bond Issue BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Cash 11.000 500.000 15.000 BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Contracts Payable Contracts Payable Cash 8. 393.000 75.Chapter 18 . Internal Service Fund General Fund Inventory of Supplies Cash (or Vouchers Payable) Cash Taxes Receivable – Current Revenue – Licenses and Fees Allowance for Uncollectibles – Current Revenue – Taxes Estimate Actual Correction 10.000 1.000 7.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-13 (continued) Fund 7.000 15.800 3.000 75. Capital Projects Fund Journal Entries ENCUMBRANCES 75. 15.000 75.000 386.000 75.800 (4.000 75.000) $3.000 18-32 .000 3.000 1. Capital Projects Fund General Fund $7.

000. 20X1.100 Record encumbering of appropriations for purchase orders outstanding on June 30. Revenue 27. Revenue 21.000 Record liability to capital projects fund for cash obtained from sale of special assessment bonds.000 Due to Water Utility Fund 1. 18-33 .000 Remove accounts belonging only in the government-wide financial statements. Fund Balance – Unassigned Fund Balance – Assigned for Encumbrances – 20X0 Record purchase orders outstanding on June 30.000 Record tax anticipation notes payable and liability to water utility fund for funds obtained from sale of scrap. 5. Excess of $600 actual cost over estimate is approved and charged to current year expenditures.800 Reclassify purchases of supplies chargeable to prior year's appropriations.200 Fund Balance – Unassigned 2. 3.800 General Fund 2. 6. Adjusting entries: 1.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-14 Entries to Adjust Account Balances [AICPA Adapted] a.000 Donated Land 27. 20X0.100 BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES 2. ENCUMBRANCES 2.000 Due to Capital Projects Fund 100.800 Other Expenditures 8. Allowance for Uncollectibles – Delinquent 2. 8.Chapter 18 .200 Reduce estimated losses on prior year's taxes to amount of receivables of $8.000 Tax Anticipation Notes Payable 20. 4. Expenditures – 20X0 8.800 8. Special Assessment Bonds Payable 100.

000 310.000 8. 348.000 16.Chapter 18 .100 2.000 Other Financing Sources – Bond Issue 100.000 31. Due from General Fund 100.000 2.200 50.800 8.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-14 (continued) Closing entries: APPROPRIATIONS CONTROL ESTIMATED REVENUES CONTROL BUDGETARY FUND BALANCE – UNASSIGNED BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Fund Balance – Unassigned Fund Balance – Assigned for Encumbrances Revenue Fund Balance – Unassigned Other Expenditures Expenditures – Building Addition Constructed Expenditures – Serial Bonds Paid Fund Balance – Assigned for Encumbrances – 20X0 Expenditures – 20X0 b.100 271.000 Record receivable due from general fund for proceeds of sale of bonds.800 18-34 .200 2.000 Record receivable from general fund for cash obtained from sale of scrap.100 2.100 306.000 Revenue – Miscellaneous 1.000 38. Adjusting Journal Entries: Capital Projects Fund: 5. Water Utility Fund: 6. Due from General Fund 1.

000. CPF Cash Other Financing Sources – Bond Issue Other Financing Sources – Bond Premium Other Financing Uses – Transfer Out to Debt Service Fund Cash DSF Cash Other Financing Sources – Transfer In from Capital Projects Fund 2.000.000 1.000 1.000 45.000 (Note: It is not necessary to first establish.000.500.000 80.000 4.) 3.000 2.000 80.000 80.000 4.500.000 45.000 45.080.000 80.000. CPF ENCUMBRANCES 4.000 2.000 1.000 80.000. CPF Expenditures Vouchers Payable Vouchers Payable Cash 5.500.800.000 45.000 2.045. 2.000 2.000 2.955.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-15 Capital Projects Fund Entries and Statements a.000 BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES CPF BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Expenditures Contracts Payable Contracts Payable – Retained Percentage CPF Contracts Payable Cash Closing entries for Capital Projects Fund: Other Financing Sources – Bond Issue Other Financing Sources – Bond Premium Expenditures Other Financing Uses – Transfer Out to Debt Service Fund Fund Balance – Unassigned BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES 5. and then immediately reverse an encumbrance account.Chapter 18 .000 5.800.800.000 200. Journal entries: 1.500.000 80.000 2.000 18-35 .000 80.

080. 20X2 Fund Balance.000.000 West City Capital Projects Fund Statement of Revenues.045. Expenditures. 20X3 Expenditures: Capital Outlays: Building Removal Building Construction Total Expenditures Deficiency of Revenues over Expenditures Other Financing Sources (Uses): Proceeds of Serial Bonds Transfer Out to Debt Service Fund Total Other Financing Sources (Uses) Net Change in Fund Balance Fund Balance.000 18-36 . June 30.000 $ 2. $2.000 $ 3.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-15 (continued) Fund Balance – Unassigned Fund Balance – Assigned for Encumbrances 2.000 $ 200.000 $(2. West City Capital Projects Fund Balance Sheet June 30.000 (80. July 1.500.000) 5.000 Liabilities and Fund Balance Contracts Payable – Retained Percentage Fund Balance: Spendable: Assigned to: General Government Services Unassigned Total Liabilities and Fund Balance c.000 2.000 b.155.000 455.500.155.Chapter 18 .000 2.000 $ 3.045.155.500. 20X3 Cash Total Assets Assets $ 3.955.000) $ 5.000.955. and Changes in Fund Balance For Fiscal Year Ended June 30.000 $ 2.000 -0$ 2. 20X3 $ 45.955.000 2.

000 103.000 800. 103.000 18-37 . BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES One-third of the project was completed during 20X8.000 109.000 Expenditures 103. Entries made in the special revenue fund for 20X8: ESTIMATED REVENUES CONTROL APPROPRIATIONS CONTROL BUDGETARY FUND BALANCE – UNASSIGNED Record the budget for 20X8. ENCUMBRANCES BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES Contractor’s bid is accepted. 112.000 103. Expenditures Contracts Payable Actual construction cost incurred in 20X8. Vouchers Payable Cash Paid expenditures.000 109.000 4.000 108.000 250. 2.000 800. Cash Revenues Collected hotel room taxes. Entries made in the capital projects fund for 20X8: Cash Other Financing Sources – Bond Issue Issued $800.000 246.000 Vouchers Payable Incurred expenditures for general promotion and motor vehicle.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-16 Recording Entries in Various Funds [AICPA Adapted] 1.Chapter 18 .000 250.000 750.000 246.000 750.000 of bonds at their face value.

Adjusting entry in the general fund for 20X8: Fund Balance – Assigned for Inventories 3.500 83.500 313.000 313. 83.500 313.500 313.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-16 (continued) 3.000 Reserve actual fund balance for encumbrances expected to be honored in 20X9.500 13.000 18-38 .Chapter 18 . 20X8.000 Fund Balance – Assigned for Encumbrances 83.000 Fund Balance – Unassigned 83. Expenditures – Interest Matured Interest Payable Record interest legally due and payable.500 300. Closing entries in the general fund for 20X8: BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES ENCUMBRANCES Close outstanding encumbrances at year-end.000 300.500 13. 3.000 300.500 313. Entries made in the debt service fund for 20X8: Cash Other Financing Sources – Transfer In from General Fund Record transfer of resources from general fund. 5. Expenditures – Principal Matured Bonds Payable Record principal legally due and payable. 4. Entry made in the general fund for 20X8: Other Financing Uses – Transfer Out to Debt Service Fund Cash Record transfer of resources to debt service fund.000 Inventory of Supplies Adjust inventory of supplies to balance at December 31. Matured Bonds Payable Matured Interest Payable Cash Record payment of matured bonds and interest.000 13.

8. 10. 6. 7. 4.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-17 Matching Questions Involving Various Funds 1. 5. 2. L C R M I G Q A O F 18-39 . 9.Chapter 18 . 3.

$6. $181.000 was expended.) (Item #2 states that $109.000 18-40 .) (Stated in item #3.000 is assigned for encumbrances.000 reserve for the ending inventory.000 of construction expenditures in the period.000 (Stated in item #3.) (Item #1 states that $600.000 6.) 5. $104.) (Item #6 states encumbrances of $190.) (Item #3 states a reduction in long-term debt principal of $100.) (Item #6 states that $181.000 10.000. $190. To this is added the $42.500 2.000.Chapter 18 .000 3. $236.000 9.500 7. $104. $386.000 plus item #2 states a motor vehicle purchase of $22. $125.000.000 and $22.000 of bond proceeds were received in the capital project fund.000 8.000 was used to purchase supplies during the period. $100.000 tax revenues were received from which $81.) (Item #5 states that $83. less $364.000 4.) (Item #1 states construction expenditures of $364.) (Stated in item #4. $17.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-18 Questions on Fund Transactions [AICPA Adapted] 1.

Chapter 18 . 7. C A C A E A C B B C A E D D C Matching Questions Involving the Statement of Cash Flows for a Proprietary Fund 18-41 . 14. 3. 4. 9. 11. 8. 10. 6. 13. 2. 5.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-19 1. 15. 12.

9. 3. 11. 10. 6. 5. 12. 7. 13. C D C C B A C D A C B B D 18-42 . 8. 4.Chapter 18 . and Changes in Fund Balance for a Capital Projects Fund and a Debt Service Fund 1.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-20 Matching Questions Involving the Statement of Revenues. 2. Expenditures.

3. 11. 8. 20. G K L L E J D A F B b. 13. 10.Chapter 18 . 1. 7. 17. B and J F and J C and J J B and J G and J A D I and J H and J 18-43 . 19. 4. 15. 2. 14. 9. 18.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-21 Question on Fund Transactions [AICPA Adapted] a. 12. 6. 5. 16.

71% 5.Chapter 18 .92%* Revenues $618.68% 0.94% Permanent 11.07%* 33.12%* 54.19% Expenditures $5.700 62.24%* Expenses $543.32% General fund – is always a major fund Special Revenue 1.000 45.400 Liabilities $951.30%* Capital Project – Arena 1.08%* 37.28%(a) Capital Project – Library 21.28% = $27.000 66.400 * Meets the 10 percent criterion test 18-44 .000 5.800 5.65%* Enterprise fund type: Percent of: Enterprise – Electric Enterprise – Water (a) Assets $3.80% 7.112.300 2.00% 3.99% 5.65% 7.39% 0.93%* Liabilities $2.790.00% 0.12% 0.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-22 Major Fund Tests Step 1: 10 percent criterion tests Denominators for 10 percent tests are the total of each of the four items for that fund type (for governmental and then for enterprise) 10 percent criterion tests: Governmental fund type: Percent of: Assets $2.72% 0.94% 0.000 / $2.900.88%* 1.76%* 53.33% Debt Service 1.659.996.112.00% Revenues $5.000 46.99% 1.

996.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-22 (continued) Step 2: 5 percent criterion tests The 5 percent criterion test is applied only to those funds that met the 10 percent criterion test.000 Combined $6. and changes in fund balance.37%(a)** 4.408.000 2.202.17% 4.56%** 7.700 618.29% 3.13%** 6.20%** 0.00% 46.74%** 0.852. 18-45 .000 543.852.18%** 0. (1) General fund – is always a major fund (2) Capital Projects – Library fund – assets (both 10% and 5% criterion tests) (3) Enterprise – Electric – assets and liabilities (both 10% and 5% criterion tests) (4) Enterprise – Water – assets.900.400 $3.) Computation of denominators for 5 percent governmental and enterprise fund types: Revenue Expenditures/ Assets Liabilities s Expenses Governmental fund types $2. an individual fund must meet both the 10 percent and the 5 percent major fund criteria in at least one financial statement item.000 $5. (For each of the four 5 percent tests.800 5 percent criterion tests: Assets Percent of combined amount of: Governmental fund type: General fund – is always a major fund Capital Project – Library Permanent Enterprise type funds: Enterprise – Electric Enterprise – Water (a) Liabilities $3.000 Expenditures/ Expenses $6.03% 43.000 Revenues $6.000 / $6.99% 0.790.51% 5.108.108.202. liabilities. Each major fund is presented in a separate column on the fund-based financial statements presented as part of the comprehensive annual financial report for the governmental entity.659.37% = $450.95% 4.300 $5.400 ** Meets the 5 percent criterion test To be a major fund.400 7. the denominator is the combined amount of that item from the governmental funds plus the enterprise funds.80% 7.800 Enterprise fund types 3. revenues (both 10% and 5% criterion tests) The other governmental funds must be aggregated and reported in a single column in the governmental funds balance sheet and statement of revenues. expenditures.22%** 22.800 $6.000 $6.108.000 $6.Chapter 18 .112.400 $ 951.408.75%** 28.

Chapter 18 .$18. Thus.000 (460.000 in capital assets. Long-term liabilities.000 .400 18-46 .000) $4.000 = $4. Net assets of governmental activities $ 888.000) (5.329.000 = $6. Interest in the governmental funds is recognized under the modified accrual basis.000 37.000). The internal service fund reported $18.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-23 Reconciliation Schedules a. Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Assets: City of Sycamore Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Assets Fund balances reported in the governmental funds Amounts reported for the governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds.$1. ($4. The assets and liabilities of the internal service fund and are Included in governmental activities In the statement of net assets.771. are not due and payable in the current period and therefore are not reported as liabilities in the governmental funds. but under the accrual basis for the government-wide financial statements.400 4.000 .000) Internal service funds are used by management to charge costs of certain activities.311.311. the amount of the adjustment Is for the capital assets not reported in just the governmental funds. Net assets are adjusted for interest ($5. including bonds payable.

000 $153.000) (5.400 18-47 .000 ($46.400 100.000) Bond proceeds provide current financial resources for the governmental funds.000) 9.000 . Accrual interest revenue exceeded modified accrual interest revenue recognized in the governmental funds by $1.000) exceeded depreciation of the governmental assets ($187. and Changes in Fund Balances of Governmental Funds to the Statement of Activities: City of Sycamore Reconciliation of the Statement of Revenues. Revenues and expenses in the statement of activities are recorded on the accrual basis. However.$40. and Changes in Fund Balances of Governmental Funds to the Statement of Activities Net change in fund balances – governmental funds Governmental funds report capital outlays as expenditures.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-23 (continued) b. Internal service funds are used by management to charge the costs of certain services.000.000).000. Expenditures. The net revenue (expense) of the internal service funds is reported with governmental activities. the costs of those assets is capitalized and depreciated over their estimated useful lives. in the statement of activities. However. This is the amount by which capital outlays in the governmental funds ($287. Accrual interest expense exceeded modified accrual interest expense by $6. Interest in the governmental funds is recorded on the modified accrual basis.000 (460. Bond proceeds of $460.Chapter 18 . Change in net assets of governmental activities $509. Reconciliation of the Statement of Revenues. The net interest adjustment is $5. Expenditures. the issuance of debt increases long-term liabilities in the statement of net assets.000 are not reduced because there is no repayment of principal during the year.

or expenditures/expenses of the individual governmental or enterprise fund are at least 5 percent of the total for all governmental and enterprise funds combined. net of related debt. T F 11. bond proceeds would be subtracted because they were included as other financing sources in the governmental funds. for which separate disclosure is required in the government-wide financial statements are: (a) total assets. F T F F A component unit is financially accountable to the primary government. such as straight-line or an accelerated method. or enterprise fund. liabilities. 2. 14. but are an addition to liabilities in the government-wide financial statements.Governmental Entities: Special Funds and Government-Wide Financial Statements P18-24 True/False Questions 1. Management’s Discussion and Analysis is a required supplementary information disclosure in the new government reporting model. F F 15. and changes in fund balances. expenditures. liabilities. In the reconciliation schedule for the statement of revenues. Depreciation on fixed assets of a government entity may be computed by any method deemed appropriate. restricted by outside donors in specific funds. 3. T F 13. 8. The budgetary comparison schedule requires both the initial budget and the final budget. F 6. 7. but would be separately reported in the fiduciary funds section of the fundbased financial statements. but depreciation of fixed assets is not equal to the expenditures for fixed assets made in the governmental funds. Fiduciary funds are not part of the government-wide statement of net assets. The tests for a major governmental. and. 4. or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent or more of the governmental or enterprise category. 5.Chapter 18 . The net assets in the government-wide statement of net assets would be categorized by: invested in capital assets. 10. 9. unrestricted. and (b) total assets. revenues. T 18-48 . revenues. T T F The internal service fund is blended into the governmental activities columns of the government-wide financial statement of net assets and statement of activities. 12.

3.000.000 82.100.000 $4.Governmental Entities: Special Funds and Government-Wide Financial Statements 11P18-25 Determining Whether a Special Revenue Fund Is a Major Fund Test 1: 10% criterion: Are the assets.500.500.7%) (10% test met) Revenues 70. Totals for Governmental and Enterprise Funds $37.000.000 ( 9. 18-49 .000 (10.8%) (10% test met) 1.000 6.000.000 (10.000 ( 8. The 5% criterion test is met if at least one of the items that met the 10% criterion first test is at least 5% of the respective amounts for all governmental and enterprise funds.000 (17.000.6%) (10% test failed) Expenditures 60.9%) 2. liabilities.2%) (10% test failed) Liabilities 22.5%) 6.000 ( 7.000.Chapter 18 . or expenditures of the special revenue fund at least 10% of their respective totals for all governmental funds? Totals for Amount Reported by Items Tested Governmental Funds Special Revenue Fund Assets $50.900. 2.700. Items Tested Liabilities (5% test met) Expenditures/expenses (5% test met) Conclusion: The special revenue fund should be reported as a major fund on the financial statements of the governmental funds for 20X2 because both its expenditures and liabilities met the 10% and the 5% tests.900. 4. Test 2: 5% criterion: Two items met the 10% criterion test--liabilities and expenditures.000 6. revenues.000.000 Amount reported by Special Revenue Fund $3. 4.000 3.

Governmental Entities: Special Funds and Government-Wide Financial Statements P18-26 Preparation of a Statement of Net Assets for a Governmental Entity Gibson City Statement of Net Assets December 31. *** The unrestricted net assets amount is plugged in to make the total net assets equal assets minus liabilities.500 80.000 $ 4.000 $175.000 $ 93.000 2.000 15.000 60.000 $ 32.000 150.Chapter 18 .000 5.000 $162.000 52.000 $190.000 12.000 7. 20X2 Governmental Activities $ 68.000 50.000 56.000) 10.500 $ 15.000 12.000.000 1.000 of capital assets minus $80. The internal balances amount of $5.000 is the amount that the governmental activities owe to business-type activities.000 60.500 $367.000 3.500 Assets Cash and cash equivalents Taxes receivable (net) Accounts receivable (net) Internal balances Inventories Investments Capital assets: Land Infrastructure Other depreciable assets (net) Total assets Liabilities Vouchers payable Accrued interest payable Revenue bonds payable General obligation bonds payable Total liabilities Net assets Invested in capital assets. net of related debt Restricted Unrestricted Total net assets $ 86.000 75.000 $547.500 Computation notes: * $235.000 60. 18-50 .000 40.000 $ 36.000 of general obligation bonds equals $175.000 61.000 117.000.500 Business-type Activities $ 28.000* 55.000 (5.000 25.000 80.000*** $ 76.000 52.000 $385.000 60.000 $179.500*** $291.500 60.000 of capital assets (net) minus $60.000 120.000 Total $ 96.000 of revenue bonds equals $15.000 17.000 45.000** 5. ** $95.000 100.