Question Bank Accounting for Government Organisations

Chapter 2
2.1 Amber City borrowed $ 1,000,000 secured by a 5-year mortgage note. The cash from the note was
used to purchase a building for vehicle and equipment maintenance. Show how these transactions
should be recorded in General Fund and governmental activities general journals?
2.2 Carver Township issued a 2-year, 6 percent note in the amount $ 100,000 to finance the purchase of
a vehicle for the Police Department.
Required:
a) Record the issuance of the $ 100,000 note in the General Fund and governmental general
journal.
b) Record the purchase of vehicle in the amount $ 100,000 in the General Fund and governmental
general journal.
c) Explain why the accounting treatment is different in the General Fund and governmental
activities of general journals.
2.3 From the following given information state which of the funds given below qualify for the status of
reporting as major funds by stating the reasons?
Prepare a short report to the Forest City Manager, stating which of the above funds should be
classified as major funds with recommendations assuming you as the external auditor.

Gas Tax Housing and Library All All

Revenue Urban Fund Governmental Governmental
Fund Development Funds and Enterprise
Fund Funds
$ 160,748 $ 175,111 $ 101,549 $ 1,563,867 $ 3,497,398
Total Assets
72,551 85,433 0 867,533 1,487,225
Total Liabilities
148,336 169,964 120,589 1,537,399 2,987,487
Total Revenue

Total Expenditure/ 124,225 130,583 119,812 1,496,223 2,684,531

Expenses