Chapter One

Overview of
Financial Reporting
for Governmental
and NFP Entities
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Brainstorming Questions
What is
Accounting?
Government?
NFP Entity?
Fund
Primary Objective of Business?

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What Is a Not-For-Profit Entity?
Any organization, which is established with objective other than profit
making is referred to as Not-for-Profit Entity.

What is a Government?

A government is an organized entity that possesses sufficient

governmental characteristics and autonomy in its operations to be
considered a distinct governmental unit.
A "governmental entity" is a broad term that refers to any organization
or body that is part of a government or carries out governmental
functions.
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Government is classified as Special Purpose Government and
General Purpose Governments.

The Special Purpose Government is a government that provides

a single service or few services to the citizenry.
For Example: Transportation authorities can be taken as Special
Purpose Government Entity.

The General purpose government provides a wide collection of

services to the citizenry.
Examples: Federal government, state governments, zone
government, cities, towns, villages, etc

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Not-for-profit (NFP) Entities

Which usually arise to meet a need that society feels is vital but it is
considered that this particular need could not, should not, cannot or will
not be met by profit-seeking organizations:
Water supply
Public protection (police and defense)
Religious services
Infrastructure (roads)
Broad classification
Governmental organizations (GOs) also known as Public Sector Entities
Non-governmental organizations (NGOs) or private NFPs or Civil Societies
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 NFP entities account their resources & financial activities
under different accounting system. Every organization wants to
be successful.
“Success” must be defined in terms of goals. Then it needs
some means to measure its results against its goals.
Measuring success is often thought of in terms of effectiveness
(achieving the goal at the highest level) and efficiency
(achieving the goal through using the least amount of
resources).
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Cont….
For profit seeking organizations whose objective is to make profit, both
efficiency and effectiveness can easily be measured with their financial
Stmts.
There are certainly non financial criteria to judge success like
qualitative or quantitative measures. But regardless of what other
measures are employed, ultimately effectiveness will be measured by
the income statement.
Efficiency is evaluated by the expense section of the income
statement. If expenses are less than revenue and the organization has
earned an “acceptable” profit, then we can say it is successful in
efficiency.
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Similarities & Differences – Governmental and Other NFP
Entities

Similarities
•Lack of competitive market place .Governmental and NFP
entities operate in an environment which is difficult to set the
quality and quantity of service or product

•Use of fund accounting as a control device. Both classes of

organizations are organized and operated on a fund basis.
•Significant investment in non revenue producing activities or
assets.

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Differences
Government differs from Other NFP entities in the following manners:
•Power ultimately rests in the hands of the people – public officials are
accountable to the general public and the legislative, judicial, and executive
bodies will have an impact on their operation

•People vote and delegate that power to public officials

•Government has the power to tax citizens for revenue – citizens (tax
payers) are the providers of resources but the contribution may not be voluntary
and the tax payers have little say in deciding how to use the resources.

•The budget is an expression of public policy and method of providing

control.

•The nature of the political process has a significant influence on their operation
•They may have monopoly power on some of its services
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 Similarities and Differences of G & NFP Entities and Business
Entities

Similarities of G and NFP Entities to Business Entities

•Both are integral part of an economic system

•Both acquire resources to provide goods or services
•Both use financial management processes
•Both need financial information systems
•Both undergo cost analyses, control and evaluation techniques.
•Both may provide similar services – e.g. transportation systems;
sanitation services; utilities, stadiums, etc

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 How Do Governmental and
Not-For-Profit Organizations
Differ from Business
Organizations?
• Resource providers do not expect to receive
proportional benefits

• Lack of a profit motive

• Absence of transferable ownership rights

• Sources of financial resources

• Measurement of objectives/output
Objectives of Financial Reporting for G&NP Entities

ACCOUNTABILITY is the cornerstone of all financial reporting in government (GASB

Concepts Statement No.1, Par. 56). Accountability arises from the citizens’ “right to
know.” It imposes a duty on public officials to be accountable to citizens for raising
public monies and how they are spent.

Inter-period equity relates to accountability. Government officials are accountable and

have an obligation to disclose whether current-year revenues were sufficient to pay
for current-year benefits or not. If inter-period equity is not achieved, the current
citizens are deferring payments to future taxpayers.

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 In general, financial reports of governmental entities are used to:

•Compare actual financial results with legally adopted budget.

•Assess financial condition and results of operations.

•Assist in determining compliance with finance-related laws, rules,

and regulations.

•Assist in evaluating efficiency and effectiveness.

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 Objectives of Financial Reporting for NFP Entities

NFP financial reporting should provide information useful in:

•Making resource allocation decisions.

•Assessing services and ability to provide services.

•Assessing management stewardship and performance.

•Assessing economic resources, obligations, net resources, and changes in

them.

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 IPSAS and IFRS
 IPSAS: stands for International Public Sector Accounting Standards are a
set of accounting standards issued by the IPSASB for use by public sector
entities around the world in the preparation of Financial Statements.
IPSAS are financial reporting standards for use by public sector entities &
they are for public sector equivalent of International Financial Reporting
Standards (IFRS), which apply to private sector companies and developed
by the International Accounting Standards Board (IASB). As of October
2024 the IPSASB had issued 42 IPSAS.
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Cont. ….
 IFRS: Stands for International Financial Reporting Standards are a set of
accounting rules for the financial statements of public companies that are
intended to make them consistent, transparent, and easily comparable around
the world. It was also created to bring consistency and integrity to
accounting standards and practices, regardless of the company or the
country.
IFRS are issued by the International Accounting Standards Board (IASB).

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 CHAPTER TWO
Principles of accounting
& Financial reporting of Governmental Entities

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Activities of government

Governmental Accounting differs from corporate accounting due to its focus on

accountability and transparency rather than profitability. So, the principles and
practice help ensure accurate, transparent reporting on the usage and stewardship
of public funds.

Governmental activities are diverse and are typically grouped based on the
purpose of spending, source of funds, and the required transparency.

These activities are categorized to clarify the purpose and accountability of funds.

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Government may involve in three types of activities:

1. Governmental Activities: Although the types and levels of service

vary from government to government, most general purpose
governments provide certain core services: those related to
protection of life and property (e.g., police and fire protection), public
works (e.g., streets and highways, bridges, and public buildings), parks
and recreation facilities and programs, and cultural and social services.

Example: AA City government builds a new public library using

taxpayers fund. The expenditure for the library is categorized under
Gov’tal activities, as it provides a public service benefiting the
community.
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2. Business-Type Activities: Governments also engage in business-type activities.

These are gov’t operations that are primarily through users charges rather than taxes
and expected to be self sustaining, Similar to a private business.
These activities include, among others, public utilities (e.g., electric, water,
gas, and sewer utilities), transportation systems, toll roads, toll bridges, hospitals,
parking garages and lots, liquor stores, golf courses, and swimming pools.

Example: AA City water utility department charges residents for water consumption.
The revenue generated covers operating expenses and infrastructure costs.
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3. Fiduciary Activities: Governments often act in a fiduciary capacity, either as an
agent or trustee, for parties outside the government.
 For example, a government may serve as agent for other governments in
administering and collecting taxes.
Governments may also serve as trustee for investments of other governments in
the government`s investment pool, for escheat properties that revert to the
government when there are no legal claimants or hears to a deceased individuals
estate, and for assets being held for employee pension plans, among other trustee
roles.
Example: A Country manages pension funds for its employees. The funds are held in trust, and the
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Gov’t has a fiduciary responsibility to manage them according to trust agreements.
 Summary Statement of Governmental Accounting and Financial Reporting
Principles

Accounting & Reporting Capabilities (Principle #1)

 A government accounting system must make it possible both:
To present fairly & with full disclosure the financial operation of the funds
& account groups of the governmental unit in conformity with International
public sectors Accounting standards.
To determine & demonstrate compliance with finance-related legal and
contractual provisions.
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Fund Accounting System (principle # 2)
Governmental accounting systems should be organized & operated on a fund
basis.
 “A fund is defined as a fiscal & accounting entity with a self balancing set of
accounts recording cash & other financial resources, together with all related
liabilities & residual equities and balances, & changes there in, which are
segregated for the purpose of carrying on specifies activities or attaining certain
objectives in accordance with special regulations, restrictions or limitations. ”
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 • Fund is self-balancing set of accounts, Special money
separated for special purpose under the custody of special
person
A fiscal and accounting entity with a self balancing set of account (double entry
system).
Accounting Entity refers to anything that uses a double entry
accounting entity to balance the resources with claims to
resources.
Fund is an entity with its own set of books (i.e. chart of account,
general journals , general ledgers, TB, and financial reports.
Fiscal Entity refers to any entity that is concerned with some assets set a
side for a specific purpose in specific period
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 Fund Accounting System (principle # 2)……..cont..

Example: To illustrate the concept of fund, we can consider the ministry of

education that operates on several colleges. Although all are part of the Ministry as a
whole each one is treated as a fund.
Each college will be given money that is specifically for its operations, is not to be
mixed up with other institutions.
Therefore each college will keep its own set of books, and issue its own Financial
Reports, irrespective of the performance of other individual institutions or the
ministry as a whole.
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Types of Funds (Principle # 3)

• Governmental Funds: These funds account for the basic governmental

functions like general administration, public safety, and public works.
They use a "modified accrual" accounting method, focusing on current
financial resources.
• Proprietary Funds: These funds account for government activities that
are similar to businesses, where the intent is to be self-supporting
through user charges (e.g., water utilities, public transportation). They
use the "full accrual" accounting method, similar to private businesses.
• Fiduciary Funds: These funds account for assets held by the government
in a trustee capacity for others. They can use either modified accrual or
full accrual accounting, depending on the specific type of trust fund.
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 Types of Funds (Principle # 3)

There are seven types of funds, which are subdivided into three categories:

I. GOVERNMENTAL FUNDS

1. The General Fund- to account for all financial resources except those
required to be accounted for in another funds.

2. Special Revenue Funds- to accounts for the proceeds of specific revenue

sources (Debt service or for major capital projects) that are legally restricted
to expenditure for specific purposes.
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 Types of Funds (Principle # 3)….cont.

3. Capital Project Fund- to account for financial resources to be used for the
acquisition or construction of major capital facilities (other than those
financed by proprietary & trusts funds) . An example of Capital Projects
Funds could be the construction of new building for the city government
Administration.

4. Debt Service Funds- It is for the accumulation of resources for & the
payment of general long term debt principal & interest.

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Types of Funds (Principle # 3)….cont.

5) Permanent Funds* - to account for legally restricted resources

provided by trust in which the earnings but not the principal may be
used for purposes that support the primary government’s programs
(those that benefit the government or its citizenry).

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 Types of Funds (Principle # 3)….cont.

II. PROPRIETARY FUNDS

5. Enterprise Funds- to accounts for operations where the governing body has decided that periodic
determinations of revenues earned, expenses incurred and/or net income is appropriate for capital
maintenance, public policy, management control, accountability, or other purposes

Example: water fund, Airport fund, Natural gas fund……

6. Internal Service Funds- to account for the financing of goods or services provided by one department or
agency to the another department or agency of the governmental unit, or to the other governmental units on
a cost reimbursement basis.

Example: A shared garage is a common example of an Internal Service Fund in government ministry offices.
the garage would repair all the ministries` vehicles regardless of which project, offices or funds uses them

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 Types of Funds (Principle # 3)….cont.

III. FIDUCIARY FUNDS

7. Trust And Agency Funds- To account for assets held by

governmental unit in a trustee capacity or as an agent for
individual private organizations, other governmental units & or
funds. These include: Pension trust funds and Agency funds.
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 Number of Funds (Principle # 4)

Governmental units should establishes and maintain those funds require by law
& sound financial administration. only the minimum number of funds in
consistent with legal and operating requirements should be established, however
since unnecessary funds result in inflexibility, undue complexity & inefficient
financial administration.
The seven fund types are to be used if needed by Governmental unit to
demonstrate compliance with legal requirements or if needed to facilitate sound
financial administration.
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 Accounting for fixed assets & long-term liabilities (Principle #5)

A clear distinction should be made between Fund fixed assets & general fixed assets
& Fund long-term liabilities & General long-term debt.

A. Fixed assets that related to specific Proprietary funds & trust funds should be
accounted for through those funds.

All other fixed assets of governmental units should be accounted for through the
general fixed asset account group.
General fixed assets include land, buildings, improvements other than buildings, car
& equipment's used by activities accounted by “governmental funds” .
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 Accounting for fixed assets & long-term liabilities (Principle #5)…cont.

B. Long term liabilities of proprietary funds & trusts fund should be

accounted for through those funds.

• All other unmatured general long-term liabilities of governmental

unit including special assessments debt for which the government is
obligated in some manner should be accounted for through the
general long-term debt account group.
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 Valuation of Fixed Assets (PRINCIPLE # 6)

Fixed assets should be accounted for at cost, or if the cost is

not practically determinable, at estimated cost, donated fixed
assets should be recorded at their estimated fair value at the
time received. ( IPSAS 17).

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 Deprecation of Fixed Assets (PRINCIPLE # 7)
Deprecation of general fixed assets should not be recorded in the accounts of governmental funds.

Deprecation of general fixed assets may be recorded in cost accounting systems or calculated for
cost finding analysis; & accumulated deprecation may be recorded in the General Fixed Asset
Account group.

Deprecation of fixed assets accounted for in a proprietary funds should be recorded in accounts
their account

Deprecation also recognized in those trust funds where expenses, net income &/or capital
maintenance are measured.

Other fund deprecation expense record on General Fixed Assets Account Group

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 Basis of Accounting (PRINCIPLE # 8)

 The Modified Accrual or accrual basis of accounting as appropriate should be

utilized in measuring financial position & operating results.

A. Governmental fund revenues & expenditures should be recognized on the

modified accrual basis.

Revenues should be recognized in the accounting in which they become

available & measurable.

Expenditures should be recognized in the accounting period in which the fund

liability is incurred, if measurable.
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 Basis of Accounting (PRINCIPLE # 8)…cont.

B. Proprietary fund revenues & expenses should be recognized on the accrual

basis.

C. Fiduciary funds revenue and expenses should be recognized on the basis

consistent with the fund’ s accounting measurement objective.

D. Transfers of financial resources among funds should be recognized in all funds

affected in the period in which the inter-fund receivables & payable(s) arise.

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 Budget and Budgetary Accounting (Principle # 9)

 Budgeting is the process of allocating of resource to meet unlimited demands

and it is key elements of legislative control over governmental units.

1. An annual budget (s) should be adapted by every governmental units.

2. The accounting system should provide the basis for appropriate budgetary
control.

3. Budgetary comparisons should be included in the appropriate financial

statement & schedules for governmental units funds,

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 Financial Reporting (Principal # 10)

1. Appropriate interim financial statements & reports of financial position,

operating results & other pertinent information should be prepared to facilitate
management control of financial operations, legislative oversight & where
necessary or desired for external reporting purpose.

2. A comprehensive annual financial report covering all funds & account gropes of
the governmental unit including appropriate combined, combining & individual
fund statements, notes to the F .S, schedules, narrative explanations & statistical
tables should be prepared & published
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•The Conceptual Framework
for General Purpose
Financial Reporting by
Public Sector Entities
 IPSAS
• International Public Sector Accounting Standards
(IPSAS) are a set of “independently developed, high
quality, global” accounting standards for the public
sector.
• It aims to improve the transparency and
accountability of governments and their agencies
by improving and standardizing financial reporting.
• IPSAS are developed by the International Public
Sector Accounting Standards Board (IPSASB).
• For the purposes of IPSAS, the ‘public sector’ refers to
 National governments,
Regional governments (e.g., States, Zones),
Local governments (e.g., town and city), and
Other related governmental entities (e.g., agencies,
boards, and commissions).
• IPSAS doesn’t aim at public enterprises-Government
Business Enterprises (GBEs)
• IPSASB is Public Sector Accounting Standards Board
(IPSASB)
• IPSASB is based in New York
IPSASB’s Goals And Objectives
• The IPSASB aims to strengthen public financial
management and knowledge globally through the
enhancement of the quality and transparency of public
sector financial reporting by:
Developing high-quality public sector financial
reporting standards;
Developing other publications for the public sector;
and
Raising awareness of IPSAS and the benefits of their
adoption.
How Does The IPSASB Set Standards?

• The IPSASB follows a very structured and public due

process in the development of all International Public
Sector Accounting Standards (IPSAS).
 Research and Agenda setting
 Consultation Papers (CP)
 Exposure Draft (ED)
 IPSAS
• IPSASB sets:
 Conceptual framework
International Public Sector Accounting Standards
(IPSAS) and
 Recommended Practice Guidelines (RPGs)
Studies, Research and Special Report
• IPSAS is inspired by IFRS
• As a general rule, the IPSAS maintain the accounting treatment
and original text of the IFRS, unless there is a significant public
sector issue that warrants a departure.
 Broad themes of IPSAS
• Like IFRS, IPSASs deal with the four main issues of financial reporting:
recognition, measurement, presentation, and disclosure

• Recognition (Recording):
 Defines what are assets, liabilities, revenues, and expenses and when
you should record them.
• Measurement (Valuation):
 Establishes a standard method for valuing assets, liabilities, revenues
and expenses.

• Financial Reporting (presentation & disclosure):

 Prescribes the format and content of reports including the type of
disclosures that should be made in the reports in order to heighten
transparency.
 The Conceptual Framework for General Purpose Financial
Reporting by Public Sector Entities

 Conceptual Framework - It describes the objective & the concepts for

general purpose report . It is a theoretical structure of assumptions,
principles, and rules that holds together the ideas comprising a broad
concept.
 It establishes and makes explicit the concepts that are to be applied in
developing International Public Sector Accounting Standards (IPSASs)
and Recommended Practice Guidelines (RPGs) applicable to the
preparation and presentation of general purpose financial reports (GPFRs)
of public sector entities

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 Framework of IPSASB is structured into with the following topic:

1: Role and Authority of the Conceptual Framework;

2: Objectives and Users of General Purpose Financial Reporting;
3: Qualitative Characteristics;
4: Reporting Entity;
5: Elements in Financial Statements;
6: Recognition in Financial Statements;
7: Measurement of Assets & Liabilities in Financial Statements;
8:Presentation of Information in General Purpose Financial Statements

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 CHAPTER 1: ROLE AND AUTHORITY OF THE CONCEPTUAL
FRAMEWORK
Role of the Conceptual Framework
The Conceptual Framework for General Purpose Financial Reporting by Public
Sector Entities establishes the concepts that underpin general purpose financial
reporting (financial reporting) by public sector entities that adopt the accrual
basis of accounting.
 IPSASB will apply these concepts in developing International Public Sector
Accounting Standards (IPSASs) and Recommended Practice Guidelines (RPGs)
applicable to the preparation and presentation of general purpose financial
reports (GPFRs) of public sector entities.
The Conceptual Framework does not establish authoritative requirements for financial
reporting by public sector entities that adopt IPSASs, nor does it override the
requirements of IPSASs or RPGs.
The Conceptual Framework can provide guidance in dealing with financial
reporting issues not dealt with by IPSASs or RPGs.
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General Purpose Financial Reports

GPFRs are financial reports intended to meet the information needs of

users who are unable to require the preparation of financial reports tailored
to meet their specific information needs.
The scope of financial reporting is determined by the information needs of
the primary users of GPFRs and the objectives of financial reporting.

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Applicability of the Conceptual Framework

The Conceptual Framework applies to financial reporting by public sector

entities that apply IPSASs. Therefore, it applies to GPFRs of national,
state/provincial and local governments. It also applies to a wide range of other
public sector entities including:
Government ministries, departments, programs, boards, commissions, agencies

Public sector social security funds, trusts, and statutory authorities; and

International governmental organizations.

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 CHAPTER 2: OBJECTIVES AND USERS OF GENERAL PURPOSE
FINANCIAL REPORTING
Objectives of Financial Reporting

The objectives of financial reporting by public sector entities are to provide

information about the entity that is useful to users of GPFRs for
accountability purposes and for decision-making purposes.
Its purpose is to provide information useful to users of GPFRs

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Users of General Purpose Financial Reports
Citizens receive services from, and provide resources to, the government
and other public sector entities. Therefore, citizens are primary users of
GPFRs.
GPFRs prepared to respond to the information needs of service recipients
and resource providers for accountability and decision-making purposes
may also provide information useful to other parties and for other
purposes.
For example, government statisticians, analysts, the media, financial
advisors, public interest and lobby groups and others may find the
information provided by GPFRs useful for their own purposes.

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 CHAPTER 3: QUALITATIVE CHARACTERISTICS
GPFRs present financial and non-financial information about economic and
other phenomena.
The qualitative characteristics of information included in GPFRs are
the attributes that make that information useful to users and support the
achievement of the objectives of financial reporting.
The qualitative characteristics of information included in GPFRs of
public sector entities are relevance, faithful representation,
understandability, timeliness, comparability, and verifiability.
Pervasive constraints on information included in GPFRs are materiality,
cost-benefit, and achieving an appropriate balance between the qualitative
characteristics.

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The qualitative characteristics of information
included in GPFRs of public sector entities are
• Relevance: Information must be capable of making a difference in users'
decisions.
• Faithful representation: Information must be complete, neutral, and free from
error.
• Understandability: Information should be presented clearly and concisely.
• Timeliness: Information should be available to users in time to influence their
decisions.
• Comparability: Information should be presented in a way that allows users to
compare it with information from other entities and over different time periods.
• Verifiability: Information should be capable of being checked and confirmed by
independent observers.
Constraints on Information Included in General Purpose Financial Reports
Materiality
Information is material if its omission or misstatement could influence the
discharge of accountability by the entity, or the decisions that users make on
the basis of the entity’s GPFRs prepared for that reporting period.
Cost-Benefit
Financial reporting imposes costs. The benefits of financial reporting
should justify
Balance Between the Qualitative Characteristics
The qualitative characteristics work together to contribute to the
usefulness of information. those costs.
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 CHAPTER 4 :Reporting Entity
• A public sector reporting entity is a government or other public sector
organization, program or identifiable area of activity that prepares GPFRs.
• A public sector reporting entity may comprise two or more separate entities
that present GPFRs as if they are a single entity—such a reporting entity is
referred to as a group reporting entity.
Key Characteristics of a Reporting Entity

The Reporting Entity

Government or other public sector organization, program or identifiable area of activity that prepares
GPFRS
Key characteristics
A. Raising & Use of Resources; and
B. Service recipients or resource providers dependent on GPFRS
C. May comprise two or more separate entities
D. Separate legal identity not essential
 CHAPTER 5: ELEMENTS IN FINANCIAL STATEMENTS
CONTENTS
 Financial statements portray the financial effects of transactions and other
events by grouping them into broad classes which share common economic
characteristics. These broad classes are termed the elements of financial
statements
 The elements that are defined in this Chapter are:
● Assets;
● Liabilities;
● Revenue;
● Expense;
● Ownership contributions; and
● Ownership distributions
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 CHAPTER 6: RECOGNITION IN FINANCIAL STATEMENTS
CONTENTS

Recognition is the process of incorporating and including in amounts displayed on

the face of the appropriate financial statement an item that meets the definition of an
element and can be measured in a way that achieves the qualitative characteristics and
takes account of the constraints on information included in GPFRs.

The recognition criteria are that:

● An item satisfies the definition of an element; and

● Can be measured in a way that achieves the qualitative characteristics and takes
account of constraints on information in GPFRs
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 CHAPTER 7: MEASUREMENT OF ASSETS AND LIABILITIES IN
FINANCIAL STATEMENTS

 The objective of measurement is: To select those measurement bases that most fairly
reflect the cost of services, operational capacity and financial capacity of the entity in a
manner that is useful in holding the entity to account, and for decision-making purposes.
The following measurement bases for assets are identified: Historical cost,
Market value, Replacement cost, Net selling price, and Value in use.
The following measurement bases for liabilities are identified: Historical cost, Cost of
fulfillment, Market value, Cost of release, and Assumption price.

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Measurement of Assets
• Historical Cost
• Current Value Measurements
Market value;
Replacement cost
Net selling price; and
Value in use.
• Historical cost: The consideration given to acquire or develop an asset, which is the
cash or cash equivalents or the value of the other consideration given, at the time of
its acquisition or development. (both depreciation and impairments are considered)

• Market value for assets is the amount for which an asset could be exchanged
between knowledgeable, willing parties in an arm’s length transaction.

• Replacement cost is the most economic cost required for the entity to replace the
service potential of an asset (including the amount that the entity will receive from
its disposal at the end of its useful life) at the reporting date.
• Net selling price is the amount that the entity can obtain from sale of
the asset, after deducting the costs of sale. Net selling price differs from
market value in that it does not require an open, active and orderly
market

• Value in use is the present value to the entity of the asset’s remaining
service potential or ability to generate economic benefits if it continues
to be used, and of the net amount that the entity will receive from its
disposal at the end of its useful life.
Measurement of Liabilities
• Historical Cost;
• Cost of Fulfillment;
• Market Value;
• Cost of Release; and
• Assumption Price.
• Historical cost for a liability is the consideration received to assume an
obligation, which is the cash or cash equivalents, or the value of the
other consideration received at the time the liability is incurred.
• Cost of fulfillment is the costs that the entity will incur in fulflling the
obligations represented by the liability, assuming that it does so in the
least costly manner.
• Market value for liabilities is the amount for which a liability could be
settled between knowledgeable, willing parties in an arm’s length
transaction.
• Cost of release is the amount that either the creditor will accept in
settlement of its claim, or a third party would charge to accept the
transfer of the liability from the obligor.
• Assumption price is the amount which the entity would rationally be
willing to accept in exchange for assuming an existing liability. It refers
to the same concept as replacement cost for assets.
 CHAPTER 8: PRESENTATION IN GENERAL PURPOSE
FINANCIAL REPORTS

 Presentation is the selection, location and organization of information that

is reported in the GPFRs.
Presentation aims to provide information that contributes towards the
objectives of financial reporting and achieves the qualitative characteristics
while taking into account the constraints on information included in
GPFRs.

08/31/2025 87
 Chapter 3:

International Public Sector

Accounting Standards [IPSAS]
 Chapter Four:
Budgeting and
Performance Reporting

08/31/2025 132
 CHAPTER 5
Accounting for General and Special
Revenue Fund

08/31/2025 133
 General Fund
• The general fund should account for all financial resources for which a separate
fund is not required. All governmental entities have a general fund (GF).

• Although it may be called the Operating fund, the general fund will exist as long
as the entity exists. A governmental entity will have only one general fund.

• The general fund of a state or local government unit is the entity that accounts
for all the assets & resources used for financing the general administration of the
unit & the traditional services provided to the people.

08/31/2025 134
 Special Revenue Fund
• Special revenue fund (SRF) in contrast to GF are used to account for resources,
which are collected for a specified purpose.

• When a governmental unit availing itself of that source may create a Special Revenue
Fund in order to be able to demonstrate that all revenue from the source was used for
the specified propose.

• State taxes on diesel fuel that is required to be used only for road maintenance, tax on
hotel rooms to be used to improve tourist facilities, traffic violation fines are
examples of governmental units revenues that may be accounted for in a separate
special revenue fund.
08/31/2025 135
 COMPARISON
• The general fund should account for all financing sources for which a separate
fund is not required. Special revenue funds are necessary when they are required
by law or contract. A governmental entity will have several special revenue funds at
any time & these funds are opened & closed according to need.

• The general funds and the special revenue funds have different purposes, but
they are both revenue funds, and the accounting and reporting procedure is the
same for both. They are similar in that all or almost all of their resources are
expended each year. They are then filled up (replenished) again for the next year .

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 ACCOUNTING CHARACTERISTICS
• Fixed assets are not capitalized in either fund. Their purchase is considered as expenditure, the
same as for salaries or utilities.

• The arithmetic difference between the amount of financial resources and the amount of
liabilities recorded in the fund is fund equity.

• Residents of the governmental unit have no legal claim on any excess of liquid assets over
current liabilities . The portion of equity available for appropriation is disclosed in an account
called Fund Balance.

• General funds & special revenue funds account for financial activates during a fiscal year in
accounts classified as Revenues, Other Financing Sources, Expenditures & Other Financing
Uses
08/31/2025 137
 Cont. ….
• Revenue: - is the increase in the fund financial resources other than from inter fund
transfers & debt issue proceeds.

• Other financing sources- are classified as an increase in the fund financial resources
as a result of operating transfers into a fund and debt issue proceeds received by a fund.

• Expenditure is defined as decrease in fund financial resources other than through inter
fund transfers, operating transfers out of a fund and debt issue proceeds are classified
as other financing uses.

• Other Financing uses - a decrease in the fund financial resources as a result of

operating transfers out of a fund.
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 BUDGET & BUDGETARY ACCOUNTS
• Budgeting is the process of allocating scarce resources to unlimited
demands budgeting has a great role in governmental accounting than in
profit making business. Budgeting is a key elements of legislative control
over governmental units.

• The two classifications of budget for governmental units are the same as
those for business enterprises. Annual budgets and long term or capital
budgets.

08/31/2025 139
 Cont. ….
• There are three general ledger control accounts are needed to provide budgetary control;
Estimated Revenue, Appropriations and Encumbrances.

• Estimated Revenues – resources expected to be received

• Appropriations – is both an authorization to spend and limitation of spending.

• Encumbrances – Purchase orders(P.O.) in governmental entities have the function of

keeping track of coming expenditures so that the budget is not exceeded. this is done by
actually recording the P .O in the ledger account as an Encumbrance

• All the three must be supported by subsidiary ledger accounts whatever detail is required by
law or by sound financial administration.
08/31/2025 140
 Recording the Budget
• At the beginning of the budget period, estimated revenue control account is debited
for the total amount of revenues expected to be recognized as provided in the
revenues budget and the limitation of spending or authorized expenditures will be
recorded with a credit in the appropriations control account.

• The entry to record the budget is simple. It is normally done on the first day of the
fiscal year . Estimated revenue is debited, Appropriations is credited, and fund
balance is debited or credited for the difference. Appropriation could be further
subdivided - by month or other periods; this subdivisions are called Allotments.

08/31/2025 141
 Cont. ..
• Recording encumbrance helps the one managing the finances to know that money has
been committed to some purpose and is no longer available for expenditure. There is
often a delay between placing the purchase order and receiving the goods ordered.

• To ensure that outstanding purchase orders are not overlooked in the on going
commitment of resources, purchase orders are recorded in the Encumbrance account.

• An encumbrance differs from an expenditure in that the encumbrance is an estimate of

liability to be incurred while expenditure is an actual liability which has been incurred .

08/31/2025 142
 Cont. ..
• Example- when a purchase orders for goods or services is issued to a supplier by one of those funds:

Encumbrance 150,000

Fund Balance Reserved for Encumbrances 150,000

• When the suppliers invoice for the ordered merchandise or services is received by the governmental unit,

Expenditures 180,500

Vouchers payable 180,500

Fund Balance reserved for Encumbrances 150,000

Encumbrances 150,000

To reverse encumbrance for purchase order

08/31/2025 143
 Cont. ..
• Estimated Revenues and Estimated Other financing Sources ledger account may be
considered Asset controlling accounts because they reflect resources expected to be
received by the General Fund during the fiscal year.

• These accounts are Not actual assets because they do not fit the accounting definition of an
Asset as a probable economic benefit obtained or controlled by a particular entity as a
result of past transactions or events.

• The Estimated other Financing source ledger accounts includes the budgeted amounts of
such non Revenue items as proceeds from the disposal of plant assets and operating
transfers from other funds
08/31/2025 144
 Cont. ..
• The Appropriations and Estimated Other Financing Uses Ledger Account
may be considered Liability controlling accounts because they reflect the
legislative body’s commitment to expend General fund resources as authorized in
the Annual Budget.

• These accounts are not genuine liabilities because they do not fit the definition of
a liability as a probable future sacrifice of economic benefits arising from present
obligation of a particular entity to transfer assets to provide services to other
entities in the future as a result of past transactions or events .
08/31/2025 145
Example Recording the Budget

• At the beginning of fiscal year 2016, it is necessary to record the budget

(assuming that all legal requirements have been met). If the total estimated
revenue budget is $6,200,000, the total appropriations are $5,200,000, the total
planned transfer to debt service funds is $204,000, and a planned transfer to
establish an internal service fund is $596,000.

Required : The necessary entry to record the budget ?

keeping in mind that appropriate subsidiary ledger detail would be required in

actual situations.
08/31/2025 146
Example Recording the Budget cont. …

Debits Credits

Estimated Revenues Control . . . . . . . . . . . . . . . . . . 6,200,000

Appropriations Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,200,000

Estimated Other Financing Uses Control . . . . . . . . . . . . . . . . . 800,000

Budgetary Fund Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000

08/31/2025 147
Classification of Estimated Revenues

 Taxes
 Licenses & permits
 Inter governmental revenues
 Grant
 Shared revenues
 Entitlement
 Charges for services
 Fines & forfeits
 Miscellaneous revenues
- Sales of fixed assets
- Insurance claim
- Contribution from private individuals
08/31/2025 148
Classification of Appropriations

General government
Public safety
Public works
 Health and Welfare
Culture - recreation
Conservation of natural resources
Debt service
Intergovernmental expenditures
 Miscellaneous

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INTERFUND TRANSACTIONS AND TRANSFERS

1. Inter fund loans & advances

Often funds sometimes loan or advance money to each other in order to use idle cash
effectively. Short Period (one year or less is commonly used), the borrowing is called a
loan; For longer periods, the borrowing is called an advance.

Due from SRF xxx

Cash xxx

Cash xxx
Due to the GF xxx

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INTERFUND TRANSACTIONS AND TRANSFERS

2) Quasi –external transaction

• These are transactions that would be treated as Revenue, Expenditures or Expenses if
they involved organizations external to the governmental unit.
• They are the type of interfund transactions which are considered as revenue &
expenditure within the entity.
Some example of quasi external transactions
GF  ISF billings to other fund for service
Expenditure xxx provided
Due to ISF xxx  Routine employe contributions from the
GF to a pension fund.
ISF  Routine service charges for service
Due from GF xxx provided by an agency to another agency.
Revenues xxx

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INTERFUND TRANSACTIONS AND TRANSFERS

3) Reimbursements
Are transactions that reimburse a fund for expenditures made by it on behalf of another fund i.e.
one fund pays a bill on behalf of another & is then reimbursed.

Expenditure xxx
Cash xxx
= To record payment of bill on behalf of ---

Cash xxx
Expenditure xxx
= To record reimbursement
08/31/2025 152
INTERFUND TRANSACTIONS AND TRANSFERS

4) Residual Equity transfers

Residual Equity transfers are non-recurring or non-routine transfers of equity between
funds made in connection with the formation, expansion, contract or discontinue of a fund.

Equity transfer out xxx

Due to ISF xxx

Due from GF xxx

Equity transfer in xxx

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INTERFUND TRANSACTIONS AND TRANSFERS

5) Operating transfers
Operating transfers are made in connection with the normal operation of the recipient fund. They are
legally authorized transfers from a fund, which receives revenue to the fund through which the
resources are to be expended.
These transfers are other financing source of the receiving fund, other financing uses of the paying
fund.

Other Financing Uses-Operating Transfers Out xxx

Due to DSF xxx

Due from GF xxx

Other Financing Sources-Operating Transfers In xxx
08/31/2025 154
21) All of the following correctly state the objectives of financial reporting by
public sector entities in IPSAS conceptual framework except

• A) To provide useful information for accountability purposes and for decision-

making purposes.

• B) To provide information about the entity that is useful to users of General

Purpose Financial Reports (GPRS)
C
• C) To provide information about the entity that is useful to users of special
Purpose Financial Reports (SPFRs)

• D) The objective is determined by reference to the users of General purpose

financial reports, and their information need
• 56) Resources that are held in trust for the benefit of the
government's own programs or its citizenry should be accounted for
using which of the following?

• a. Governmental fund

• b. Enterprise fund.
D
• c. Proprietary fund

• D. Fiduciary fund
24) Which one of the following fund type is classified under Proprietary
Fund?

• A. Debt service fund

• B. Internal service fund B

• C. Capital project fund

• D. General fund.
2) Which of the following funds would account for pass-through
grants to a not-for profit organization assisting low income individual

• A. Special revenue fund.

• B. Agency fund.
D
• C. Permanent fund

• D. Private-purpose trust fund

74) Which of the following is the about the focus of governmental
financial reporting except

• A. Information about net income.

• B. A government's stewardship of public resources.

A
• c. Ongoing ability to raise taxes and manage resources

• d. Compliance with legal spending limits

22) Expenses that are specifically identified with a program or function are
reported in the government-wide statement of activities as

• A) Direct expenses. Direct expenses are those that can be clearly linked to a
specific program or function within the government.

They are directly associated with the service or activity

• B). Specific expenses. being delivered.

• C) Incremental expenses.

• D). Program expenses.

A
26) If taxes for payment of interest and principal on long-term debt
are recorded directly in the debt service fund, they are budgeted as
what of the debt service fund?

• A). Inter-fund transfers in

• B) As estimated revenues. B
• C). Revenues

• D). Estimated other financing source

28) Which of the following Proprietary fund is used to account for the
production and distribution of centralized goods and services that are
provided to agencies of the government

• A) Internal service Fund

• B) General Fund A
• C) Debt service Fund.

• D) Enterprise Fund
42) Which of the following is a reason for Capital project fund-used?

• A. For the financing of goods or services provided by one department or

agency to other fund.

• b. Used to account for assets held by a governmental unit in a trustee

capacity.

• C. Used to report any activity for which a fee is charged to external users
for goods or services

• d. To be used for the acquisition or construction of major capital facilities

D
44) Which of the following funds follow accounting and financial reporting
principles that are similar to those for commercial business entities

• A) Government Fund

• B) Proprietary fund B
• C) Permanent Fund

• D) Fiduciary Fund
47) Which of the following organizations best meet the criteria to be
classified as a governmental not-for-profit organization?

• A) A religion affiliated university.

• B) A Church
D
• C) A privately founded museum.

• D). A public school district.

81) All of the following are fiduciary funds except:

• a. Pension trust fund.

• b. Permanent fund. B
• c. Investment trust fund.

• d. Agency fund.
1) As a general rule, debt service expenditures in a Debt Service Fund are
recognized

• A) When resources to be used for the repayment are made available to a

Debt Service Fund

• B) When due for principal repayments but on an accrual basis for interest
C
• C) When the debt service payment is due.

• D) In accordance with the requirements of the original bond order that

specifies the basis of expenditure recognition
2) Which of the following characteristics best distinguishes a government entity from a
business entity?

• A. Governments operate in a very small section of the economy while businesses

operate globally.

• B. Cost analysis and other control and evaluation techniques are essential to ensure
that resources are used economically and efficiently.

• C. Those contributing resources to the entity do not necessarily receive a direct or

proportionate share the services.

• D. Businesses must acquire and convert scarce resources while governments can
C
demand whatever they need.
3) A primary characteristic that distinguishes government from not-for-profits is

• a. The need to generate revenues equal to or more than expenditures/expenses.

• b. The ability to levy taxes.

• c. The need to provide goods or services.

• d. The correlation between revenues generated and demand for goods or services.
B
4) One of the following is not the characteristics of Government Business
Enterprise within the meaning of IPSASs.

• A. It is reliant on continuing government funding to be a going concern

• B. it has been assigned the financial and operational authority to carry on a
business
• C. it sells goods and services, in the normal course of its business, to other
entities at profit full cost recovery
• D. is an entity with the power to contract in its own name
A
The definition of GBEs requires that the entity is not reliant on “continuing
government funding” to be a going concern (continuing government funding
excludes purchases of outputs at arm’s length).
5) Which of the following statements is FALSE regarding the definition
of a fund?

A. A fund is an accounting entity that is used for one year only and each
year a new set of funds must be established.

B. A fund is a fiscal entity used to account for a subset of an organization's

resources that is to be used for a specific purpose.

C. A fund has a self-encompassing, self-balancing accounting equation.

D. A fund is an accounting entity for which financial statements can be

prepared. A
• 7) Agency funds report

• A) Only assets and liabilities.

• B) Assets, liabilities, and fund balance

• C) Assets, liabilities, fund balance, revenues, and expenditures

A
• D) Only revenues and expenditures.
8) Which of the following is not an operational accountability measure for
a government?

• A. Economic cost of providing services.

• B. Net income.

• C. Assessment whether a government raised sufficient revenues each

period to cover the cost of providing services. B
• D. Assessment whether services are being provided economically and
efficiently.
• 9) Which of the following statement is FALSE about a public sector reporting
entity

• A) it is an entity that raises and uses resources.

• B) It is an entity having Service recipients or resource providers dependent on
general purpose financial reports.
• C) it may comprise two or more separate entities.
• D) it is an entity where a separate legal identity is essential.
The Reporting Entity

Government or other public sector organization, program or identifiable area of activity that
prepares GPFRS
Key characteristics
A. Raising & Use of Resources; and
B. Service recipients or resource providers dependent on GPFRS D
C. May comprise two or more separate entities
D. Separate legal identity not essential
10) The City of Turkana arranged for a 10-year, Birr 40 million loan
to finance construction of a toll bridge.

If the toll bridge is accounted for as an Enterprise Fund activity and

a certain portion of the tolls collected is required to be set aside for

maintaining the bridge, these resources should be accounted for in

A. the Toll Bridge Enterprise Fund

A
B. the General Fund

C. a Capital Projects Fund

D. a Debt Service Fund

11) Which of the following is not a characteristic of a fund?

• A. Fiscal entity.

• B. Separate legal entity.

B
• C. Accounting entity.

• D. Contains self-balancing set of accounts.

12) The City of San Jose built a new city hall and financed construction by
issuing bonds due in installments over the next 30 years. The bond principal
and interest will be paid by a special tax levied on property in the city. The
revenue received from this special tax should be accounted for in which of
the following funds?

• a) General fund.
D
• b) Special revenue Fund

• c) Capital projects fund.

• d) Debt service fund.

13) The state collects a gasoline tax that must be used to support highway

construction and maintenance. The gasoline tax revenue should be accounted

for in which of the following funds?

• a) General fund.

• b) Special revenue fund.

B
• c) Debt service fund.

• d) Internal service fund

14) Which one does not go with the others?

• A) Pension trust fund

• B) Capital projects fund A

• C) Permanent fund

• D) Special revenue fund

15) To fulfill the printing needs of its various departments and agencies, the City
has established a Central Print Shop, which bills the various departments and
agencies of the city for printing services rendered. The Central Print Shop should
be accounted for in which of the following funds.

• a) Internal service fund.

• b) Enterprise fund.

• c) General fund.
A
• d) Special revenue fund
16) Which of the following funds is accounted for on the modified accrual
basis of accounting?

• a) General fund.

• b) Internal service fund.

• c) Proprietary fund.
A
• d) Pension trust fund.
17) The General Fund transferred $700,000 to a Debt Service Fund. The
Debt Service Fund would report this transactions as

• A) Other financing source.

A
• B) A deferred inflow of resources.

• C) A revenue

• D) Contributed capital
19) Which of the following items would typically not need an
encumbrance?

• A) New Building

• B) Regular Salaries

• C) New Computer B
• D) Office Equipment
20) Encumbrance accounting is not typically used for:

• A. General Funds.

• B. Debt Service Funds.

• C. Capital Projects Funds. B

• D. Special Revenue Funds.
21) In a budgetary entry, if Estimated Revenues Control exceeds

Appropriations Control, the excess would be:

• A) credited to Fund Balance-Unreserved.

Estimated Revenue ……XXX
• B) debited to Fund Balance-Unreserved. Appropriation …XXX
Fund Balance ..XXX

• C) debited to Budgetary Fund Balance.

D
• D) credited to Budgetary Fund Balance.
22) A certain government passed its budget for the fiscal year ended December 31, 2015.
Estimated Revenues amounted to $13,000,000; Appropriations amounted to $12,000,000;
Estimated Other Financing Uses amounted to $700,000; and Estimated Other Financing
Sources amounted to $200,000. In the budgetary entry (combining entry):

• A) Budgetary Fund Balance would be credited for $500,000.

• B) Budgetary Fund Balance would be debited for $500,000.

• C) Budgetary Fund Balance would be debited for $1,000,000.

• D) Budgetary Fund Balance would be credited for $1,500,000

Estimated Revenue …….…13,000,000
Other Financing Sources…200,000
A Appropriation …………..12,000,000
Other Financing Uses..700,000
Fund Balance ……………...500.000
24) Which one of the followings is a proprietary fund?

• A) Permanent fund

• B) Capital projects fund C

• C) Internal service fund

• D) Special revenue fund

25) Which feature is not typical to for-profit businesses?
• a. Operating purposes that are other than to provide goods or services
at a profit or profit equivalent
• b. Fund providers expect economic return from the fund they provide
• c. They not operate in a competitive market place
• d. There is a defined ownership interest that entitles owners to a share
of residual distributions
•a. Operating purposes that are other than to provide goods or
services at a profit or profit equivalent: While profit is the primary
goal, for-profit businesses can also have secondary objectives like social
responsibility or environmental sustainability. They can still aim to make
C a profit while fulfilling these secondary goals.
•b. Fund providers expect economic return from the fund they
provide: This is a core feature. Investors, shareholders, or lenders in a
for-profit business expect a return on their investment in the form of
dividends, stock appreciation, or interest.
•d. There is a defined ownership interest that entitles owners to
a share of residual distributions: This refers to profits. Owners have
26) One of the followings is not typical feature of Governmental and
not for profit organizations

• A) The ultimate power is in the hands of voters

• B) They do not have equity owners

• C) They face virtually no threat of liquidation

D
• D) They operate in a competitive market place
28) From the following one is not objectives of public enterprises.
• A. To ensure balanced regional development
• B. To prevent the growth of monopoly
• C. To channelize resources
• D. To increase inequalities in income distribution
•A. To ensure balanced regional development: This is a common objective
of public enterprises. They can invest in underdeveloped regions to create jobs
and boost economic activity.
D •B. To prevent the growth of monopoly: Public enterprises can act as
competitors in key industries to prevent monopolies from forming and
controlling prices.

•C. To channelize resources: Public enterprises can be used to direct

resources towards specific goals, like infrastructure development or social
welfare programs.

•D. To increase inequalities in income distribution: Public enterprises

typically aim for the opposite, promoting policies that reduce income inequality
29) The issuance of bonds to provide resources to construct a new
courthouse should be recorded in a Capital Projects Fund by crediting which
of the following accounts?

• A) Bonds payable
B
• B) Other financing source long-term debt issued

• C) Fund balance

• D) Revenues-bands
30) General Fund resources were expended in the amount of $185,000 to
purchase a new fire truck. The General Fund would debit:
A
• A) Expenditures Control.

• B) Capital assets -Motor Vehicles.

• C) Both (a) and (b) above.

• D) None of the above; no entry is made in the General Fund when a motor
vehicle is purchased because only current financial resources are recorded
in the General Fund.
32) Which of the following statements is true for both
governmental organizations and for-profit organizations?

A. Revenue may be earned through exchange transactions.

B. Absence of owners.
C. Lack of a profit motive.
D. Resources are provided by individuals and entities that may
not directly benefit from the use of the resources

A
33) Which of the following would not be
considered a government or nonprofit
organization?

A. A software company that sells software

exclusively to state and local governments.
B. A public elementary school.
C. A church.
D. A private trust organized for charitable
purposes.
A
36) Which of the following is true regarding capital projects funds?
A) Capital projects funds are considered to be governmental funds.
B) Capital projects funds use the economic resources measurement focus
and accrual basis of accounting.
C) Encumbrance accounting is not used.
D) Fixed assets are depreciated in capital projects funds.

A
• 37). Which of the following types of funds recognize its long-term debt as a
liability and settles it?
• A. Debt Service Fund
• B. Capital Projects Fund
• C. Enterprise Fund
A
• D. Special Revenue Fund
• E. All
• F. None
38) A fund that is used to account for assets held by a government
temporarily for one or more other governments units or for individuals or
private organizations is a(n):
• A) Agency fund
• B) Private-Purpose Trust Fund
• C) Investment Trust Fund
• D) Pension Trust Fund
A
39) Which of the following accounts typically would be
used by an Agency Fund?

A. Revenue
C
B. Bonds payable Agency funds are used to account for
C. Cash assets held by the government as an
agent for individuals, private
organizations, other governments,
D. Notes receivable and/or other funds.
40) Central City was awarded two state grants during its fiscal year ending September 30, 2020: a

Birr 2 million block grant that can be used to cover any operating expenses incurred during fiscal

2021, and a Birr 1 million grant that can be used any time to acquire equipment for its police

department.

For the year ending September 30, 2020, Central City should recognize in grant revenue in its fund

financial statements (in millions):

A. Birr 2 million
B
B. Bir 1 million

C. Birr 0

D. Birr 3 million
41) The repayment of bond principal should be reported
in the fund statements of a debt service fund as

A. A reduction of bonds payable

B. An expenditure

C. A direct charge to fund balance B

D. An "other financing use

27) Which of the following is true with respect to Special revenue funds?

• A) Special revenue funds are used when it is desirable to provide separate

reporting of resources that are restricted or committed as to expenditure for
special purposes other than debt service or capital projects.

• B) Special revenue funds are used when it is desirable to provide separate

reporting of resources that are designated for specific purposes.

• C) Special revenue funds are used when it is desirable to provide separate

reporting for funds provided by other governments toA
support capital projects.

• D) Both B and C
28) The Town of Little River expects to collect $90,000 in sales tax from the state government
within 30 days of the end of fiscal year 2015 for retail sales taking place in fiscal year 2015. What
entry, if any, would Little River make at the end of 2015?

• A) Taxes receivable – current 90,000

• Deferred Inflows 90,000

• B) Taxes receivable – deferred 90,000

• Revenues control 90,000

• C) Taxes receivable – current 90,000

• Due from state government 90,000

• D) Due from state government 90,000 D

• Revenues control 90,000
31) Which of the following is a source of funding for capital projects

fund?

• A. Gifts from individuals and corporations.

• B. Proceeds from issuance of Long-term debt.

D
• C. Grants.

• D. All of the answer choices.

• 62). International Public Sector Accounting Standard 17 deals with

• A. Presentation of general purpose financial statement

• B. Accounting policies, changes in accounting estimates and errors
• C. Property, plant and equipment
• D. Revenues from non-exchange transactions
• E. All
C
• F. None
25) Purchase orders for items ordered by the General Fund totaled $
205,000. Upon receipt, invoices for these items totaled $200,000. Which of
the following will take place on the date the goods are received.

• A) An encumbrance is debited for $205,000.

• B) Budgetary Fund Balance -- Reserve for Encumbrances is credited for

Purchase order
Encumbrance ……………….205,000
$200,000. Reserved for encumbrance….205000
Received the product
• C) An expenditure is credited for $205,000. Reserved forEncumbrance
encumbrance….200,000
……………….200,000
Expenditure ……………………..200,000
• D) A liability is credited for $200,000 Account Payable ……………200,000

D
26) The Revenues account of a government is credited when:

• A) the budget is recorded in the accounts.

• B) property taxes are collected.

• C) property taxes are levied.

C
• D) budgetary accounts are closed at the end of the year
33) During the current fiscal year, the Gateway City government recorded a $15,000 transfer
from the General Fund to an internal service fund, a $25,000 transfer from the General Fund
to an enterprise fund, a $10,000 transfer from an enterprise fund to an internal service fund,
and a $5,000 transfer from an enterprise fund to the General Fund. In the Business-type
Activities column of the government-wide financial statements, Gateway City should report:

Enterprise fund
A. Net transfers out of $5,000.
+25000 -10000-5000
B. Net transfers in of $10,000. = 10000

C. Net transfers in of $25,000.

B
D. Net transfers in of $35,000.
34) During the year an enterprise fund purchased $232,000 worth of
equipment. The equipment was acquired with a cash down payment of
$30,500 and a $201,500 loan. A partial year of depreciation on the equipment
A
was taken in the amount of $22,500. What is the net effect of this transaction
on the net position accounts of the enterprise fund?

A. Net investment in capital assets is increased by $8,000.

B. Net investment in capital assets is increased by $30,500.

Net assets = (Total Fixed Assets) + (Total Current Assets) - (Total Long-term Liabilities) - (Total Short-
term Liabilities).
C. Net investment in capital assets is increased by $209,500.
Net assets of the enterprise shows what will be left for the owners in case of liquidation.
Given that the equipment costs $232,000 and loan is of $201,500
D. Net investment in capital assets is increased by $232,000.
The increase in capital assets, net of related debt is of $8,000 ($232,000-22,500 - $201,500)