Question

When preparing government-wide statements, which of the following is not true?

Multiple Choice

• Entries are necessary to adjust revenues to the accrual basis, record expenses not recognized under the modified accrual basis.

• Entries are necessary to eliminate fiduciary funds.

• General capital assets, general long-term debt, and internal service funds are added through worksheet journal entries.

• Worksheet entries eliminate elements of the modified accrual basis fund statements that do not conform to accrual accounting, such as expenditures for capital assets and principal repayments.

Answer 1

When preparing government-wide statements, which of the following is not true?

ANS: following statement is not true.

Entries are necessary to eliminate fiduciary funds.

Details:

What are Government-Wide Financial Statements?

Imagine that you have just won an election to your state legislature. As part of the majority party, you have been given the chair of the finance committee. Your first task is to evaluate the government-wide financial statements that the state and local governments of your state use. How will you make them simpler, and what statements are they using now?

Government financial statements report all financial transactions for the government for the year. These statements are are not a budget, but rather a history, showing the revenue collected and the amounts that the government spent.

A statement of activities and a statement of net position are usually included. A balance sheet is often included as well, but is not necessary. These statements are generally used for state and local governments.

Statement of Activities

The statement of activities lists the revenue and expenditures of the government. A statement of activities is the same thing as an income statement used in business, and is very straightforward. It may also show capital contributions or other sources used such as grants.

These are funds that are not normally funded through, like income tax or proprietary funds. These funds may come from the federal government for road repair, or infrastructure maintenance.

Statement of Net Position

The statement of net position looks at the governments' assets and liabilities, and the difference between the two are considered the net assets. It's essentially the balance sheet for government financial statements. This is what funds the government would have left over after all other obligations and liabilities are met. This is a quick reference to what money the government has.

The net assets are a look at the government's financial position. This can be a good indication as to whether or not their financial position is healthy or deteriorating.

The statement of net position is broken down into five categories: assets, liabilities, deferred inflows, deferred outflows, and net assets.

Assets are usually presented in order of their liquidity. This means that the statement lists first the cash and assets that are most easily converted to cash. The statement then leads to the assets that are expected to be used for many years, such as capital assets and buildings. For example, repairs to the city hall or the construction of a new government building where a bond was issued.

Cash is reported on this statement based on the balance at the end of the period covered on the statement.

Liabilities are reported in order of their maturity (when they are expected to be paid off). There are usually two designations, current liabilities that are due within a year, and non current liabilities that are due beyond one year. examples of these would be bond issues, or the government providing money for long term project.