Question

answeres should be 3 to 5 sentence. for intro to gvmt/nonprofit acct

1.What is the primary reason government entities use funds for financial reporting? How are funds established?

2. How do expenses and expenditures differ?

3. How do Budgetary Fund Balance and Fund Balances accounts differ?

4. Distinguish among appropriations, expenditures, encumbrances, and expenses.

Answer 1

1. Governmental accounting systems must provide both reporting in accordance with GAAP and reporting in compliance with finance, legal and contractual requirements.To ensure that both GAAP and compliance reporting requirements are met, a separate accounting mechanism is used. The mechanism that is used is fund accounting, which makes it possible to ensure that the compliance reporting requirement is met. A fund is a separate reporting entity that may be established by imposition of grant or contract provisions by external parties, by constitutional provisions or legislation, or by discretionary action of the reporting government.

2. Expenditures report actual outlays of funds, whether for an operating cost or capital cost.

Expenses focus on costs necessary to generate revenues or fund operations, and may be a result of the using up or expiration of an asset, even if no cash was paid out for example depreciation.

3. Budgetary fund banalce is an offset account used to balance the budgetary entry; as such, it does not have a "normal balance" but is debited or credited as necessary to make debits equal credits within the budgetary entry. The five categories of fund balances are as follows: Nonspendable, Restricted, Committed, Assigned, and Unassigned.

Fund balance is the difference between the assets and liabilities. When assets are more than liabilities, positive fund balance is created and when liabilities are more than assets, negative fund balance is created.

4. Appropriations are the authorisations granted by a legislative bisy to incur liabilities for the purposes specified in the appropriation act.

Expenditures report actual outlays of funds, whether for an operating cost or capital cost.

Encumberances are accounts used to record the estimated amount of purchase orders, contracts, or salary commitments chargeable to an appropriation.

Expenses focus on costs necessary to generate revenues or fund operations, and may be a result of the using up or expiration of an asset, even if no cash was paid out for example depreciation.