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ACC407/5407 – Governmental Accounting – William A. Morehead
Exam 1 – Discussion – Due, February 18, 2020 – NAME ___________________________
Discussion Questions – EVERYONE must answer discussion questions 1 and 2; AND, any 2 of
the questions 3-6; please type your responses in a Word document and upload in Connect by
11:59 p.m. on February 18, 2020 (worth 8 points each):
REQUIRED:
1. The Board of Aldermen of Clinton have estimated revenues of $17.6 million and estimated
appropriations of $16.9 million. The Board has adopted the following budget for its General
Fund for the year ending September 30, 2020.
Taxes $13,600,000
Licenses and Permits 2,100,000
Intergovernmental Revenues 800,000
Charges for Services 500,000
Fines and Forfeits 300,000
Miscellaneous Revenues 300,000
Total Estimated Revenues $17,600,000
General Government $5,700,000
Public Safety 4,900,000
Public Works 2,300,000
Health and Welfare 1,600,000
Culture and Recreation 1,300,000
Contributions to State Retirement
Fund (PERS)
1,100,000
Total General Fund Appropriations $16,900,000
a. Explain the legal significance of an appropriation and why auditors engaged for a
financial and compliance audit need to know the meaning of the term.
b. Describe whether it is illegal for a government to spend money for any purpose
unless a valid appropriation and allocation for that purpose exists (be specific in your
reasoning).
c. Does a legally approved budget assure good financial management for each
government? Why or why not?
d. Provide the entries in general journal form to initially record the budget in the
general ledger and subsidiary ledger accounts.
REQUIRED:
2. Discuss the following:
a. Describe the difference between the economic resources measurement focus and the
current financial resources measurement focus,
b. Describe the difference between measurement focus and basis of accounting.
c. Outline revenue and expenditure recognition criteria in modified accrual; cite key
differences between modified accrual and accrual accounting.
d. For the following, describe the activities of a state and local government
1. governmental activities
2. business-type activities
3. fiduciary-type activities
For each of these three activities above:
1. List each type of fund within each activities statement
2. Indicate the measurement focus basis of accounting for each fund and
each of these activities
CHOOSE ANY TWO of the following in questions 3 – 6:
3. Describe how the cash flow statement of an enterprise fund differs in format from the cash
flow statements of a private sector organizations such as a commercial business. What is
the purpose of each section of the Statement of Cash Flows in an enterprise fund?
4. Define the term “Expenditure.” Distinguish an “expenditure” from each of the following
terms in “a.” through “e.”
a. Appropriation
b. Expense
c. Disbursement
d. Encumbrance
e. Other financing use
5. Answer the following:
a. Describe the difference between exchange and non-exchange
transactions
b. Discuss the four eligibility requirements for revenue recognition in non-exchange
transactions
c. List the four categories of non-exchange transactions, give an example of each,
and discuss the asset and revenue recognition criteria for each.
6. Using GASB rules for the financial reporting entity, answer each of the following:
a. Define the financial reporting entity
b. Define and give an example of a primary government
c. Define and give an example of a component unit
d. Define and describe the two methods of reporting the primary government and
component units in the financial reporting entity
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