Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-1
CHAPTER 3: GOVERNMENTAL OPERATING STATEMENT ACCOUNTS;
BUDGETARY ACCOUNTING
OUTLINE
Number
Topic
Type/Task
Status
(re: 17/e)
Questions:
3-1
Distinguishing characteristics of fund-based
and government-wide financial statements
Identify and describe
Same
3-2
Depreciation expense
Discuss
New
3-3
Statement of activities format
Describe
Same
3-4
Extraordinary and special items
Define and compare
New
3-5
Revenue, Other Financing Sources,
Expenditures, Other Financing Uses
Compare
Same
3-6
Program and general revenues
Compare
New
3-7
Budgetary fund balance and fund balances
Compare
New
3-8
Budgetary comparison schedules/statements
Explain
3-9
3-9
Budgetary and resource outflow accounts
Compare
3-7 revised
3-10
Allotments
Explain
New
Cases:
3-11
Revenue and expense/expenditure
classification
Research, analyze
Same
3-12
Budgetary comparison schedule
Research, analyze
Same
3-13
Estimating the required property tax rate;
economic and political considerations
Analyze, calculate,
explain
Same
3-14
National Center for Education Statistics
Research, calculate
New
Exercises/Problems:
3-15
CAFR
Examine
3-16 revised
3-16
Various
Multiple Choice
3-17, 11-15
new
3-17
Program and general revenue
Classify
3-4 revised
3-18
Expenditure classifications
Classify
3-6
3-19
Revenue classifications
Classify
3-8 revised
3-20
Recording budget and ending fund balance
Explain and calculate
3-18
3-21
Budgetary control over expenditures
Examine and analyze
3-19
3-22
Recording budget
Journal entries
3-20
3-23
Recording encumbrances
Journal entries
3-21
3-24
Recording budgetary and operating
transactions
Journal entries,
calculate
3-22
3-25
Subsidiary ledgers
Calculate
3-25 revised
3-26
Departmental budgetary comparison report
Analyze and explain
3-24 revised
3-27
Government-wide statement of activities
Prepare
3-25
3-28
Governmental fund statement and schedule
Prepare
New
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-2
CHAPTER 3: GOVERNMENTAL OPERATING STATEMENT
ACCOUNTS; BUDGETARY ACCOUNTING
Answers to Questions
3-1. The governmental fund financial statements report detailed current financial resources
information intended to help users assess current period fiscal accountability—whether
revenues were raised from authorized sources and expended for authorized purposes.
General Problem Information: Distinguishing characteristics of fund-based and
government-wide financial statements
Learning Objective: 3-1
Topic: Classification and Reporting of Expenses and Revenues at the Government-wide
Level
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
3-2. Depreciation expense can be reported as either a direct expense or an indirect expense on
the statement of activities. As a direct expense it can be reported as an expense of the
General Problem Information: Depreciation expense
Learning Objective: 3-1
Topic: Reporting Direct and Indirect Expenses
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-3
Ch. 3, Answers, Question 3-2 (Cont’d)
Level of Difficulty: Easy
3-3. GASB recommends using a “cost of programs” format for the statement of activities.
Using this format, the direct expenses of each function or program are reported on the
General Problem Information: Statement of activities format
Learning Objective: 3-1
Topic: Classification and Reporting of Expenses and Revenues at the Government-wide
Level
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
3-4 Extraordinary items are both unusual in nature and infrequent in occurrence. Until
recently, the definition of extraordinary items was the same under the GASB and the
General Problem Information: Extraordinary and special items
Learning Objective: 3-1
Topic: Reporting Special Items and Transfers
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
3-5. Revenue is defined as an increase in fund financial resources other than from financing
sources such as interfund transfers and debt issue proceeds. Transfers into a fund and the
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-4
Ch. 3, Answers, Question 3-5 (Cont’d)
General Problem Information: Revenue, Other Financing Sources, Expenditures, Other
Financing Uses
Learning Objective: 3-2
Topic: Governmental Fund Balance Sheet and Operating Statement Accounts
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
3-6. Program revenue is tied to a specific function or program of government. Generally, the
program or function helped to generate the revenue, for example, it may have applied for
and received a grant to help with its operations or to help purchase capital assets it needs.
General Problem Information: Program and general revenues
Learning Objective: 3-1
Topic: Program Revenues and General Revenues
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Communication, AICPA: FN Reporting
Level of Difficulty: Easy
3-7. Budgetary Fund Balance is a nominal budgetary account that is closed at the end of the
budgetary period. Its sole purpose is to capture the net difference between the anticipated
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-5
Ch. 3, Answers, Question 3-7 (Cont’d)
3-8. Budgetary comparison schedules (or statements) must be provided for the General Fund
and each major special revenue fund for which a budget is adopted. In order for budget to
actual comparisons to be meaningful, actual revenues and expenditures must be reported
General Problem Information: Budgetary comparison schedules/statements
Learning Objective: 3-3
Topic: Reporting Budgeted and Actual Results
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
3-9. An appropriation is an authorization by the legislative branch for administrators to incur
expenditures for specified purposes not to exceed specified amounts. Usually the
authorization is for a limited time. Expenditures and encumbrances are both charges
against appropriations. An encumbrance is a charge for an estimated amount at the time
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-6
Ch. 3, Answers, Question 3-9 (Cont’d)
General Problem Information: Appropriations, expenditures, encumbrances, and
expenses
Learning Objective: 3-4
Topic: Budgetary Accounting
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
3-10. An allotment is an internal allocation of appropriations to the functions or programs of a
government. That is, the government will only allocate or release a portion of the
General Problem Information: Allotments
Learning Objective: 3-4
Topic: Accounting for Allotments
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
Solutions to Cases
3-11. Students should easily be able to locate a city’s Web site, then explore the Finance
Department (or comparable name) link and look for links to financial reports. Responses
to each of the questions in this case will depend on how a particular city classifies its
revenues and expenses/expenditures.
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-7
Ch. 3, Solutions, Case 3-11 (Cont’d)
General Problem Information: Revenue and expense/expenditure classification
Learning Objective: 3-1, 3-2
Topic: Classification and Reporting of Expenses and Revenues at the Government–
wide Level; Structure and Characteristics of the General Fund and Other
Governmental Funds
Bloom’s Taxonomy: Analyze
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Research
Level of Difficulty: Medium
3-12. Again the responses to individual questions will depend on the practices of the particular
city selected. Some general expectations for each question include:
a. Detail can be the same between the statement and the schedule. However, in some
instances more detail is provided for revenues and expenditures in the budgetary
comparison schedule. The reason for including more detail in the budgetary
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-8
Ch. 3, Solutions, Case 3–12 (Cont’d)
e. Although a variance column is not required by GASB standards, it is difficult to
3-13. a. The estimated amount of the required property tax levy is calculated, in good form,
as follows:
University City
General Fund
Estimate of Amount to be Raised by Property Taxes
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-9
Ch. 3, Solutions, Case 3–13 (Cont’d)
c. Yes it will violate the mandate. From an economic viewpoint, the city manager
should have little difficulty selling the city council on the required one-half cent tax
3-14. The purpose of this exercise is to familiarize the students with the government Web
site and the abundance of data and information that is available through federal
government Web sites. Not only is information available about public schools but
there is also information available about post-secondary education on the site.
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-10
Ch. 3, Solutions, Case 3–14 (Cont’d)
(different areas of the country have historically spent more on public education), and different
socio-economic areas.
General Problem Information: National Center for Education Statistics
Learning Objective: 3-6
Topic: Accounting for Public School Systems
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: BB Industry
Level of Difficulty: Medium
Solutions to Exercises and Problems
3-15. Each student should have a different governmental annual report, so will have different
General Problem Information: CAFR
Learning Objective: 3-1, 3-2, 3-3
Topic: Classification and Reporting of Expenses and Revenues at the Government-wide
Level; Structure and Characteristics of the General Fund and Other Governmental Funds;
Reporting Budgeted and Actual Results
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
3-16. 1. c. 5. a. 9. c. 13. d.
General Problem Information: Various
Learning Objective: 3-1, 3-2, 3-3, 3-4, 3-5
Topic: Various Chapter Topics
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-11
Ch. 3, Solutions, Exercise 3-17 (Cont’d)
General Problem Information: Program and general revenues
Learning Objective: 3-1
Topic: Program Revenues and General Revenues
Bloom’s Taxonomy: Remember
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
3-18. 1. OU – organization unit. 6. C & O – both character and object.
General Problem Information: Expenditure classifications
Learning Objective: 3-4
Topic: Classifications of Appropriations and Expenditures
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
3-19. 1. T – taxes . 6. M – miscellaneous revenue.
General Problem Information: Revenue classifications
Learning Objective: 3-4
Topic: Classifications of Estimated Revenues and Revenues
Bloom’s Taxonomy: Understand
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting
Level of Difficulty: Easy
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-12
Ch. 3, Solutions (Cont’d)
3-20.
Debits Credits
a. ESTIMATED REVENUES 32,150,000
b. The answer is no to both parts of the question. Any fund balances, other
than nonspendable and those subject to minimum fund balance
c. Fund Balance—Unassigned at September 30 after all closing entries will be
$505,000, as shown below:
SPENDABLE FUND BALANCES
Fund Balance—Unassigned (beginning balance) $ 500,000
General Problem Information: Recording budget and ending fund balance
Learning Objective: 3-5
Topic: Budgetary Accounting
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Reporting,
Decision Making
Level of Difficulty: Medium
Chapter 03 – Governmental Operating Statement Accounts; Budgetary Accounting
3-13
Ch. 3, Solutions (Cont’d)
3-21. TOWN OF EVERGREEN
a. No, not in the Equipment account. After receiving the item on January 30,
b. This answer depends upon the legal level of budgetary control established
by the town. If the legal level is at the account level, then excess
General Problem Information: Budgetary control over expenditures
Learning Objective: 3-5
Topic: Budgetary Control of Encumbrances and Expenditures
Bloom’s Taxonomy: Analyze
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Decision
Making
Level of Difficulty: Medium
3-14
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3-22. TOWN OF WILLINGDON
General Ledger Subsidiary Ledger
Debits Credits Debits Credits
ESTIMATED REVENUES 16,650,000
BUDGETARY FUND
BALANCE 50,000
APPROPRIATIONS 16,600,000
Estimated Revenues Ledger:
Appropriations Ledger:
General Problem Information: Recording the budget
Learning Objective: 3-5
Topic: Recording the budget
Bloom’s Taxonomy: Apply
Accreditation Skills tag: AACSB: Knowledge Application, AICPA: FN Measurement
Level of Difficulty: Easy