Question 1

When purchase orders are filled and the invoice amount differs from the estimated amount, the amount reversed from the encumbrance account equals the invoice amount.

Accepted Answer

When purchase orders are filled and the invoice amount differs from the estimated amount, the amount reversed from the encumbrance account equals the amount of the original purchase order. A liability will be recorded for the invoice amount.

Question 2

The Budgetary Comparison Schedule is considered a part of Required Supplementary Information in the Comprehensive Annual Financial Report.

Accepted Answer

Typically, budget-actual comparisons are schedules in RSI. Governments may also elect to provide those comparisons as one of the basic statements rather than as a schedule. The schedule must provide the original budget, the final budget and the actual amounts of revenues, expenditures and other financing sources and uses. The amounts in the actual column are to be reported on the basis required by law for budget preparation, even if that basis differs from the basis provided in the GASB standards.

Question 3

Encumbrances are recorded when a purchase order is filled or a contract is executed.

Accepted Answer

When a purchase order is filled or a contract is executed, the fund reverses the encumbrance for the original amount records an expenditure and fund liability.

Question 4

Governments may create special revenue funds whenever a tax or other revenue source is legislated to be used for a specific purpose, other than capital assets or debt service.

Accepted Answer

Governments may create special revenue funds whenever a tax or other revenue source is legislated to be used for a specific purpose, other than capital assets or debt service.

Question 5

Expenditure is a decrease in fund financial resources net of liabilities) other than through interfund transfers.

Accepted Answer

Expenditures are outflows of net financial resources from sources other than interfund transfers that are recognized when a governmental fund incurs a liability pursuant to budgetary authority provided by appropriation.

Question 6

The modified accrual accounting used in governmental accounting is essentially equivalent to the cash basis accounting used by businesses.

Accepted Answer

Modified accrual accounting is not equivalent to cash basis. Governmental funds record revenues before received and expenditures not expense) when payable.

Question 7

Encumbrances are often deemed necessary for recurring expenditures such as payroll.

Accepted Answer

Encumbrances are used to record commitments of the government to purchase capital assets, goods or services. Encumbrances are not recorded for recurring expenditures such as regular salaries.

Question 8

The modified accrual basis is a distinct system of accounting that contains financial statement elements that appear nowhere else. Among these are expenditures and fund balances.

Accepted Answer

Revenues follow different recognition criteria between the two bases. There are additional differences; unlike accrual accounting, modified accrual accounting does not recognize long-term assets and long-term liabilities. Modified accrual basis is a distinct system of accounting that contains financial statements elements that appear nowhere else. Expenditures and fund balance are two examples. Expenses are not recorded.

Question 9

Expenditure classification by character includes current, capital outlay, and debt service.

Accepted Answer

Within the General Fund, expenditures are typically classified by character and function. Character classification separates expenditures by the fiscal period they are assumed to benefit and include current, capital outlay and debt service.

Question 10

Modified accrual accounting records encumbrances when goods are ordered and a liability when goods are received and the government is obligated to pay vendors and accrual accounting does not record encumbrances and records a liability when goods are received.

Accepted Answer

Modified accrual accounting records encumbrances while accrual accounting does not. Both methods record a liability when goods are received.

Question 11

Transfers from one fund to another are classified as expenditures in the fund making the transfer.

Accepted Answer

Expenditures are outflows of net financial resources from sources other than interfund transfers that are recognized when a governmental fund incurs a liability pursuant to budgetary authority provided by appropriation.

Question 12

Revenues for governmental funds should be recognized when measurable and earned.

Accepted Answer

Revenue recognition occurs when the resulting resources are deemed to be both measurable and available to finance expenditures of the current period.

Question 13

When purchase orders are filled and the invoice amount differs from the estimated amount, the amount recorded as an expenditure corresponds to the invoice amount.

Accepted Answer

Expenditures should be recorded at the actual amount the government is obligated to pay the purchase order.

Question 14

"Unexpended Appropriations Balance" may be interpreted as how much a government may continue to spend and remain within its budget.

Accepted Answer

"Unexpended Appropriations Balance" may be interpreted as how much a government may continue to spend and remain within its budget. An appropriations budget, when enacted into law, is the legal authorization for the government to make expenditures for specific purposes. The amount expended may not exceed the amount appropriated for each purpose. A government budget has the effect of law by limiting spending to approved levels

Question 15

GASB requires a reconciliation between the amount shown as GAAP expenditures in the basic financial statements and the amount shown in the budgetary comparison schedule.

Accepted Answer

If the budget and actual columns of the budget-actual comparison schedule differ from GASB standards, the amounts in the actual column of the budgetary comparison schedule must be reconciled with the amounts shown in the Combined statement of Revenues, Expenditures and Changes in Fund Balances prepared in conformity with GAAP. This may be done on either the face of the budgetary comparison schedule or in a separate schedule.

Question 16

The Budgetary Comparison Schedule requires a column for the original budget, a column for the final revised budget, and a column for actual figures, computed on the accrual basis.

Accepted Answer

Typically, budget-actual comparisons are schedules in RSI. Governments may also elect to provide those comparisons as one of the basic statements rather than as a schedule. The schedule must provide the original budget, the final budget and the actual amounts of revenues, expenditures and other financing sources and uses. The amounts in the actual column are to be reported on the basis required by law for budget preparation, even if that basis differs from the basis provided in the GASB standards.

Question 17

The journal entry to record a purchase order in the General Fund would be a debit to Encumbrances Control account and credit to Accounts Payable.

Accepted Answer

The journal entry to record a purchase order in the General Fund would be a debit to encumbrances control account and credit to Budgetary Fund Balance - Reserve for Encumbrances.

Question 18

Budgetary accounts begin each year with a zero balance and are closed at the end of each year.

Accepted Answer

All budgetary accounts are closed at year end.

Question 19

An Appropriations budget is the legal authorization for administrators of governmental unit to incur liabilities for purposes specified and to not exceed the amount specified.

Accepted Answer

An appropriations budget, when enacted into law, is the legal authorization for the government to make expenditures for specific purposes. The amount expended may not exceed the amount appropriated for each purpose.

Question 20

An appropriations budget is authorization for administrators to incur specified amounts of liabilities on behalf of the government for specified purposes.

Accepted Answer

An appropriations budget, when enacted into law, is the legal authorization for the government to make expenditures for specific purposes.

Quiz 3: Modified Accrual Accounting: Including the Role of Fund Balances and Budgetary Authority

When purchase orders are filled and the invoice amount differs from the estimated amount, the amount reversed from the encumbrance account equals the invoice amount.

The Budgetary Comparison Schedule is considered a part of Required Supplementary Information in the Comprehensive Annual Financial Report.

Encumbrances are recorded when a purchase order is filled or a contract is executed.

Governments may create special revenue funds whenever a tax or other revenue source is legislated to be used for a specific purpose, other than capital assets or debt service.

Expenditure is a decrease in fund financial resources net of liabilities) other than through interfund transfers.

The modified accrual accounting used in governmental accounting is essentially equivalent to the cash basis accounting used by businesses.

Encumbrances are often deemed necessary for recurring expenditures such as payroll.

The modified accrual basis is a distinct system of accounting that contains financial statement elements that appear nowhere else. Among these are expenditures and fund balances.

Expenditure classification by character includes current, capital outlay, and debt service.

Modified accrual accounting records encumbrances when goods are ordered and a liability when goods are received and the government is obligated to pay vendors and accrual accounting does not record encumbrances and records a liability when goods are received.

Transfers from one fund to another are classified as expenditures in the fund making the transfer.

Revenues for governmental funds should be recognized when measurable and earned.

When purchase orders are filled and the invoice amount differs from the estimated amount, the amount recorded as an expenditure corresponds to the invoice amount.

"Unexpended Appropriations Balance" may be interpreted as how much a government may continue to spend and remain within its budget.

GASB requires a reconciliation between the amount shown as GAAP expenditures in the basic financial statements and the amount shown in the budgetary comparison schedule.

The Budgetary Comparison Schedule requires a column for the original budget, a column for the final revised budget, and a column for actual figures, computed on the accrual basis.

The journal entry to record a purchase order in the General Fund would be a debit to Encumbrances Control account and credit to Accounts Payable.

Budgetary accounts begin each year with a zero balance and are closed at the end of each year.

An Appropriations budget is the legal authorization for administrators of governmental unit to incur liabilities for purposes specified and to not exceed the amount specified.

An appropriations budget is authorization for administrators to incur specified amounts of liabilities on behalf of the government for specified purposes.