Solution Manual Advanced Accounting 12e Beams Ch 19
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Advanced Accounting (AKK302)
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Airlangga University
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Advanced Accounting
Solution manual for questions, exercises, and problems of Advanced Accounting 12e by Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, and Kenneth A. Smith.
Test Bank - Advanced Accounting 13th Edition by Floyd Beams All Chapters Covered ,Latest Edition, ISBN:9780134472140
Test Bank - Advanced Accounting 13th Edition by Floyd Beams, All Chapters Covered ,Latest Edition, ISBN:9780134472140
Test Bank for Advanced Accounting 13th Edition by Floyd Beams, Joseph Anthony, Bruce Bettinghaus, Kenneth Smith, All Chapters |Complete Guide A+
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Chapter 19
AN INTRODUCTION TO ACCOUNTING FOR STATE AND LOCAL
GOVERNMENTAL UNITS
Questions
1 The Governmental Accounting Standards Board has primary responsibility for setting standards that
provide GAAP for state and local governmental units. The most authoritative literature includes GASB
Statements of Standards and GASB Interpretations. The second level of authoritative literature includes
GASB Technical Bulletins and those AICPA audit and accounting guides and statements of position that
the AICPA intended to make applicable to governments and that the GASB has cleared.
Before 1984, the Municipal Finance Officers Association (MFOA) and its National Committee on
Governmental Accounting provided guidance via the publication of Municipal Accounting and Auditing
in 1951 and Governmental Accounting, Auditing, and Financial Reporting (GAAFR) in 1968. Since
1974, the AICPA has also issued industry audit guides for audits of state and local governmental units.
2 The Municipal Finance Officers Association (MFOA), now referred to as the Government Finance Officers
Association (GFOA), first issued Governmental Accounting, Auditing, and Financial Reporting
(GAAFR) in 1968. For many years, this resource book – often referred to as the Blue Book due to its
distinctive blue cover - constituted the most complete frameworks of accounting principles specific to
governmental units, and provided standards for preparing and evaluating the financial reports of
governmental units. Updated periodically to reflect changes to governmental accounting, the 2012 GAAFR
is the most recent version.
3 According to the AICPA’s Audit and Accounting Guide, a governmental entity is generally created for the
administration of public affairs and has one or more of the following characteristics:
▪ Popular election of officers or appointment (or approval) of a controlling majority of the
members of the organization’s governing body by officials of one or more state or local
governments;
▪ The potential for unilateral dissolution by a government with the net position reverting to a
government; or
▪ The power to enact or enforce a tax levy.
An organization may also be classified as a governmental entity if it possesses the ability to issue debt that
is exempt from federal taxation.
4 A fund is a separate fiscal and accounting entity with a self-balancing set of accounts, “segregated for the
purpose of carrying on specific activities or attaining certain objectives in accordance with special
regulations, restrictions, or limitations.” [GASB Codification] Fund accounting facilitates budgetary
control.
A governmental unit may have hundreds of funds, but only eight fund types. The Codification
discusses three fund categories (governmental, proprietary, and fiduciary) and eight fund types (general,
special revenue, permanent, capital projects, debt service, internal service, enterprise, and trust and agency
funds).
, 19-2 An Introduction to Accounting for State and Local Governmental Units
Fiduciary funds are used to account for assets held by the governmental unit as trustee or agent
for individuals, private organizations, and other governmental units. Fiduciary funds include trust funds
(pension, investment, and private purpose) and agency funds.
6 The five types of governmental funds are the general fund, permanent funds, special revenue
funds, capital projects funds, and debt service funds. Each is a working capital entity, therefore,
each is used to account for a portion of a government’s general government working capital. They
are distinguished by the purpose for which the resources of each fund may (must) be used.
Working capital to be used for construction/acquisition of major general government fixed assets
should be accounted for in capital projects funds; that to be used to pay principal and interest on
general long-term debt should be accounted for in debt service funds. Special revenue funds are
used to account for portions of working capital to be used for other specific general operating
purposes. Permanent funds report resources that are legally restricted to the extent that only
earnings, and not principal, may be used for purposes that support the reporting government’s
programs—that is, for the benefit of the government of its citizenry.
7 The governmental fund accounting equation is:
Current Assets - Current Liabilities = Fund Balance
8 The two types of proprietary funds are enterprise funds and internal service funds. Both charge
fees for their services that are intended to recover part, if not all, of the costs of providing goods or
services. The key distinction between the two is that the predominant customers of internal service
funds are other departments or agencies of the government, whereas the predominant customers of
enterprise funds are outside entities or individuals.
9 The accounting equation for a proprietary fund is essentially the business accounting equation—
Current + Noncurrent – Current – Noncurrent = Net Position
assets assets liabilities liabilities
10 GAAP guidelines for state and local governments include the following, listed in descending order
of authority:
a. GASB statements and interpretations. The statements and interpretations are semi
annually incorporated into the Codification of Governmental Accounting and Financial
Reporting Standards.
b. GASB technical bulletins. This category also includes AICPA industry audit and
accounting guides and statements of position if specifically made applicable to state and
local governments by the AICPA and cleared by the GASB.
c. Consensus positions of GASB’s Emerging Issues Task Force (EITF) and AICPA practice
bulletins if specifically made applicable to state and local governments by the AICPA
and cleared by the GASB. (No GASB EITF exists currently.)
d. Implementation guides published by the GASB staff and industry practices that are
widely recognized and prevalent in state and local governments.
11 Modified accrual accounting is the system of accounting in which revenues are recognized in the
accounting period in which they become available and measurable and expenditures are recognized in the
accounting period in which the related fund liability is incurred and objectively measurable. Unmatured
interest on general long-term debt is an exception for which the expenditure is recognized when due.
Modified accrual accounting applies to governmental funds (general fund, special revenue funds,
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