E17-3 Multiple-Choice Questions on Budgets, Expenditures, and Revenue [AICPA Adapted]

1. / c
2. / d
3. / c
4. / a
5. / b
6. / c
7. / d
8. / b
9. / c
10. / d

E17-4 Multiple-Choice Questions on the General Fund

1. / b
2. / d
3. / c / The balances in the ENCUMBRANCES CONTROL and the FUND BALANCE- ASSIGNED FOR ENCUMBRANCES accounts are the same. Therefore, an excess of one account over the other indicates a recording error.
4. / c / The following entry is made when a purchase order is approved:
ENCUMBRANCES CONTROL
BUDGETARY FUND BALANCE – ASSIGNED FOR ENCUMBRANCES
5. / b / The 60-day rule for property tax revenues states that property taxes collected within 60 days after the end of a fiscal year (within first 60 days of 2007) may be classified as revenues of the prior fiscal year (2006). The entry to record the tax levy would be:
Property Taxes Receivable / 700,000
Allowance for Uncollectible Taxes / 10,000
Revenue – Property Taxes / 600,000
Deferred Revenue (reported as a liability
on the general fund balance sheet) / 90,000
[Note: The estimated uncollectibles are on the property taxes reported as deferred revenue.]
6. / a / Upon receipt of the order, Oak would record the following entries:
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 5,000
ENCUMBRANCES CONTROL / 5,000
Expenditures Control / 4,950
Vouchers Payable / 4,950
7. / a / Johnson would record the following entry:
ESTIMATED REVENUES CONTROL / 9,000,000
ESTIMATED OTHER FINANCING SOURCE –
TRANSFER IN (Internal Service) / 1,000,000
ESTIMATED OTHER FINANCING SOURCE –
TRANSFER IN (Debt Service) / 500,000
APPROPRIATIONS CONTROL / XXXXXX
BUDGETARY FUND BALANCE – UNASSIGNED / XXX
8. / c
9. / a
10. / b

E17-5 Encumbrances at Year-End

a. / Outstanding encumbrances lapse at year-end.
(1) / Order equipment—November 3, 20X2:
ENCUMBRANCE / 21,000
BUDGETARY FUND BALANCE--ASSIGNED
FOR ENCUMBRANCES / 21,000
Order equipment and record encumbrance.
(2) / Year-end entries—December 31, 20X3:
BUDGETARY FUND BALANCE – ASSIGNED FOR
ENCUMBRANCES / 21,000
ENCUMBRANCES / 21,000
Close remaining budgeted encumbrances.
Fund Balance – Unassigned / 21,000
Fund Balance – Assigned for Encumbrances / 21,000
Reserve actual fund balance for outstanding encumbrances at year-end.
(3) / City Council accepts outstanding encumbrances—January 1, 20X3:
Fund Balance – Assigned for Encumbrances / 21,000
Fund Balance – Unassigned / 21,000
Reverse prior-year encumbrance reserve.
ENCUMBRANCES / 21,000
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 21.000
Establish budgetary control over encumbrances renewed from prior year.
(4) / Equipment received—January 18, 20X3:
BUDGETARY FUND BALANCE – ASSIGNED FOR
ENCUMBRANCES / 21,000
ENCUMBRANCES / 21,000
Remove budgetary reserve for goods received.
Expenditures / 21,800
Vouchers Payable / 21,800
Record expenditure for goods received at actual cost of $21,800.
(5) / Year-end entry—December 31, 20X3:
Fund Balance—Unassigned / 21,800
Expenditures / 21,800
Close 20X3 expenditures account.

E17-5 (continued)

b. / Outstanding encumbrances are nonlapsing.
(1) / Order equipment—November 3, 20X2:
ENCUMBRANCE / 21,000
BUDGETARY FUND BALANCE--ASSIGNED
FOR ENCUMBRANCES / 21,000
Order equipment and record encumbrance.
(2) / Year-end entries—December 31, 20X2:
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 21,000
ENCUMBRANCES / 21,000
Close remaining budgetary encumbrances.
Fund Balance – Unassigned / 21,000
Fund Balance – Assigned for Encumbrances / 21,000
Reserve fund balance for outstanding encumbrances.
(3) / Date the encumbrances from prior year—January1, 20X3::
Fund Balance – Assigned for Encumbrances / 21,000
Fund Balance – Assigned for
Encumbrances – 20X2 / 21,000
Reclassify reserve from 2002, prior year.
(4) / Equipment received—January 18, 20X3:
Expenditures – 20X2 / 21,000
Expenditures (20X3) / 800
Vouchers Payable / 21,800
Record actual expenditure for goods received.
(5) / Closing entries—December 31, 20X3:
Fund Balance – Assigned for
Encumbrances – 20X2 / 21,000
Expenditures – 20X2 / 21,000
Close expenditures account for prior year encumbrances.
Fund Balance – Unassigned / 800
Expenditures (20X3) / 800
Close expenditures for current year.

E17-5 (continued)

(Note: In entry (4), the $800 excess of actual cost over the encumbered amount must be approved as part of 20X3's expenditures. Entry (4) records the City Council’s approval with a debit to Expenditures (20X3) which increases 20X3’s total expenditures. The expenditures for 20X3 are closed in entry (5). If the actual cost was less than the encumbered amount, then the difference should be closed to Fund Balance-Unassigned, although some governmental units have a policy of closing any difference between actual and encumbered amounts for prior year encumbrances to the current year's expenditures.)
c. / (1) / Outstanding encumbrances are nonlapsing; City Council cancels order—January 1, 20X3:
Fund Balance—Assigned for Encumbrances / 21,000
Fund Balance—Unassigned / 21,000
City Council cancels 20X2 order for equipment.

E17-6 Accounting for Inventories of Office Supplies

a. / Consumption method of accounting for inventories:
(1) / Purchase of supplies:
August 8, 20X2
Expenditures / 3,600
Vouchers Payable / 3,600
Acquire inventory of supplies.
(2) / Entries at end of 20X2 fiscal year:
September 30, 20X2
Inventory of Supplies / 2,800
Expenditures / 2,800
Recognize ending inventory of supplies.
Fund Balance – Unassigned / 2,800
Fund Balance – Assigned for Inventories / 2,800
Establish fund reserve for ending inventory.
Fund Balance – Unassigned / 800
Expenditures / 800
Close expenditures account.

E17-6 (continued)

(3) / Entry at end of 20X3 fiscal year:
September 30, 20X3
Expenditures / 2,800
Inventory of Supplies / 2,800
Record expenditures for inventories consumed.
Fund Balance – Assigned for Inventories / 2,800
Fund Balance – Unassigned / 2,800
Remove fund balance reserve for inventories consumed.
Fund Balance – Unassigned / 2,800
Expenditures / 2,800
Close expenditures account.
b. / Purchase method of accounting for inventories:
(1) / Purchase of supplies:
August 8, 20X2
Expenditures / 3,600
Vouchers Payable / 3,600
Acquire inventory of supplies.
(2) / Entries at end of 20X2 fiscal year:
September 30, 20X2
Inventory of Supplies / 2,800
Fund Balance – Assigned for Inventories / 2,800
Recognize ending inventory of supplies.
Fund Balance – Unassigned / 3,600
Expenditures / 3,600
Close expenditures account.
(3) / Entries at end of 20X3 fiscal year:
September 30, 20X3
Fund Balance – Assigned for Inventories / 2,800
Inventory of Supplies / 2,800
Remove fund balance reserve for inventories consumed.

P17-14 General Fund Entries [AICPA Adapted]

1. / ESTIMATED REVENUES CONTROL / 3,000,000
APPROPRIATIONS CONTROL / 2,980,000
BUDGETARY FUND BALANCE – UNASSIGNED / 20,000
Record the budget.
Taxes Receivable / 2,870,000
Allowance for Uncollectible Taxes / 70,000
Revenue from Taxes / 2,800,000
Record tax levy.
Cash / 2,810,000
Taxes Receivable / 2,810,000
Record tax collection.
Allowance for Uncollectible Taxes / 40,000
Taxes Receivable / 40,000
Record write-off of uncollectible taxes:
July 1, 20X1, taxes receivable balance / $ 150,000
20X2 tax levy / 2,870,000
Less: Taxes collected / (2,810,000)
Taxes receivable final balance / (170,000)
Taxes written off as uncollectible / $ 40,000
Cash / 130,000
Miscellaneous Revenue / 130,000
Collect miscellaneous revenue.
2. / Fund Balance – Assigned for Encumbrances / 60,000
Fund Balance – Unassigned / 60,000
Reverse prior reserve which has been renewed.
ENCUMBRANCES / 60,000
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 60,000
Renew encumbrances from prior period.
ENCUMBRANCES / 2,700,000
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 2,700,000
Record encumbrances.

P17-14 (continued)

3. / Expenditures / 142,000
Due to Other Funds / 142,000
Record liability to other funds for services received.
4. / BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 2,700,000
ENCUMBRANCES / 2,700,000
Reverse encumbrances for items received.
Expenditures / 2,700,000
Vouchers Payable / 2,700,000
Record expenditures.
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 60,000
ENCUMBRANCES / 60,000
Reverse reserve for encumbrances.
Expenditures (Prior Period) / 58,000
Vouchers Payable / 58,000
Actual expenditure for goods received.
Due to Other Funds / 210,000
Vouchers Payable / 210,000
Record approval for payment to other funds.
Vouchers Payable / 2,640,000
Cash / 2,640,000
Record voucher payments.
5. / ENCUMBRANCES / 91,000
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 91,000
Record May 10 encumbrance.

P17-15 General Fund Entries and Statements

a. / Entries for 20X2 budget and transactions:
1. / ESTIMATED REVENUES CONTROL / 1,877,000
APPROPRIATIONS CONTROL / 1,840,000
ESTIMATED OTHER FINANCIAL
USES – TRANSFER OUT / 37,000
Record budget.
ENCUMBRANCES / 21,000
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 21,000
Renew encumbrances from prior period.
Fund Balance – Assigned for Encumbrances / 21,000
Fund Balance – Unassigned / 21,000
Reverse reserve for renewed encumbrances.
Property Tax Receivable – Current / 1,600,000
Allowance for Uncollectibles – Current / 16,000
Property Tax Revenue / 1,584,000
Record property tax levy.
2. / Cash / 1,590,000
Property Taxes Receivable – Current / 1,507,000
Property Taxes Receivable – Delinquent / 83,000
Collect property taxes.
Allowance for Uncollectibles – Delinquent / 9,000
Property Taxes Receivable – Delinquent / 7,000
Property Tax Revenue / 2,000
Write off remaining delinquent property taxes.
Property Taxes Receivable – Delinquent / 93,000
Allowance for Uncollectibles – Current / 16,000
Property Taxes Receivable – Current / 93,000
Allowance for Uncollectibles – Delinquent / 16,000
Reclassify remainder of uncollected 20X2 property taxes.
Cash / 333,000
Sales Tax Revenue / 284,000
Miscellaneous Revenue / 39,000
Due to Motor Pool Fund / 10,000
Other cash receipts.

P17-15 (continued)

3. / ENCUMBRANCES / 1,800,000
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 1,800,000
Record purchase orders.
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 1,773,000
ENCUMBRANCES / 1,773,000
Reverse reserve for items received.
Expenditures / 1,788,000
Vouchers Payable / 1,788,000
Actual expenditures for items received.
Vouchers Payable / 1,793,000
Cash / 1,793,000
Vouchers paid.
4. / Due from Central Stores Fund / 13,000
Other Financing Uses – Transfer Out / 37,000
Cash / 50,000
Other cash payments and transfer.
b. / Pine Ridge
General Fund
Preclosing Trial Balance
December 31, 20X2
Debit / Credit
Cash / $ 191,000
Property Tax Receivable – Delinquent / 93,000
Allowance for Uncollectibles – Delinquent / $ 16,000
Due from Central Stores Fund / 13,000
Vouchers Payable / 26,000
Due to Motor Pool Fund / 10,000
Fund Balance – Unassigned / 161,000
Property Tax Revenue / 1,586,000
Sales Tax Revenue / 284,000
Miscellaneous Revenue / 39,000
Expenditures / 1,788,000
Other Financing Uses – Transfer Out / 37,000
ESTIMATED REVENUES CONTROL / 1,877,000
APPROPRIATIONS CONTROL / 1,840,000
ESTIMATED OTHER FINANCING USES– TRANSFER OUT / 37,000
ENCUMBRANCES / 48,000
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 48,000
$4,047,000 / $4,047,000

P17-15 (continued)

c. / Closing entries:
APPROPRIATIONS CONTROL / 1,840,000
ESTIMATED OTHER FINANCING
USES – TRANSFER OUT / 37,000
ESTIMATED REVENUES CONTROL / 1,877,000
Close budgetary accounts.
BUDGETARY FUND BALANCE – ASSIGNED
FOR ENCUMBRANCES / 48,000
ENCUMBRANCES / 48,000
Close remaining encumbrances.
Fund Balance – Unassigned / 48,000
Fund Balance – Assigned for
Encumbrances / 48,000
Reserve fund balance for outstanding purchase orders.
Property Tax Revenue / 1,586,000
Sales Tax Revenue / 284,000
Miscellaneous Revenue / 39,000
Expenditures / 1,788,000
Other Financing Uses – Transfer Out / 37,000
Fund Balance – Unassigned / 84,000
Close operating statement accounts.
d. / Pine Ridge
General Fund
Balance Sheet
December 31, 20X2
Assets
Cash / $191,000
Property Tax Receivables – Delinquent / $ 93,000
Less: Allowance for Uncollectibles – Delinquent / (16,000) / 77,000
Due from Central Stores Fund / 13,000
Total Assets / $281,000
Liabilities and Fund Balance
Vouchers Payable / $ 26,000
Due to Motor Pool Fund / 10,000
Fund Balance:
Spendable:
Assigned to:
General Government Services / $ 48,000
Unassigned / 197,000 / 245,000
Total Liabilities and Fund Balance / $281,000

P17-15 (continued)

e. / Pine Ridge
General Fund
Statement of Revenues, Expenditures, and Changes
in Fund Balance
For Fiscal Year Ended December 31, 20X2
Revenue:
Property Taxes / $1,586,000
Sales Taxes / 284,000
Miscellaneous / 39,000
Total Revenue / $1,909,000
Expenditures:
Current / $1,746,000
Capital Outlay – Furniture
Total Expenditures / 42,000
$1,788,000
Excess of Revenue over Expenditures / $ 121,000
Other Financing Sources (Uses):
Transfer Out / (37,000)
Change in Fund Balance / $ 84,000
Fund Balance, January 1, 20X2 / 161,000
Fund Balance, December 31, 20X2 / $ 245,000

[Note that the $42,000 expenditure for the office furniture capital outlay is reported separately. The theoretical support for this is that the expenditure will also benefit future periods. Some governmental entities report capital outlays made in the general fund with current expenditures because current financial resources were expended. Some governments integrate capital outlay expenditures into the appropriate functional categories (e.g., fire protection, government administration, or streets and highways) rather than separately report the expenditures for capital outlays. The choice of reporting alternative for the general fund is up to the governmental entity because the total expenditures will be the same regardless of how or where the capital outlay is reported.]

P17-17 Identification of Governmental Accounting Terms

1. Government-wide financial statements

2. The Governmental Accounting Standards Board (GASB)

3. A fund

4. Interfund services provided or used

5. Internal service and enterprise funds

6. Infrastructure assets

7. Agency and trust funds

8. Modified accrual basis

9. Flow of total economic resources

10. The property tax levy

11. The general, special revenue, capital projects, debt service funds and permanent funds

12. The allowance for uncollectible property taxes

13. Budgetary fund balance – unassigned

14. Encumbrances

15. The consumption method

16. Other financing uses – transfer out

17. Expenditures

18. Fund balance – unassigned

19. Expenditures

20. Appropriations

21. Nonlapsing method