ACCT 4421 EXAM 1 CH 3 QUESTIONS
AND ANSWERS
encumbrance - ANSWER-an estimated amount recorded for purchase orders,
contracts, or other expected expenditures chargeable to an appropriation (goods
ordered but not received)
T - ANSWER-often times, govt's do not encumber normal recurring expenditures and
small $ amounts as these expenditures are adequately controlled by other means
encumbrances - ANSWER-prevents overspending the budget, reduces the budget
available for expenditures; entry to record is made when purchase order is issued, a
contract is signed or a commitment is made; if outstanding, reported in the notes to
the entity's FS's, no longer on face of the balance sheet
1. lapse
2. do not lapse - ANSWER-2 options for encumbrances?
lapse - ANSWER-if the appropriations _________________, spending authority
(approved by the legislature) ended at the end of the year and you must use current
appropriations to cover the expenditure paid in the following year
do not lapse - ANSWER-if appropriations ___________________, (spending
authority was carried over to the new year and you do not have to use current year
appropriations to cover the expenditure) you do not reestablish the encumbrance at
the beginning of the year
govt type funds - ANSWER-fund hierarchy relates to balance sheet of
____________________________, not proprietary or fiduciary fund or the govt-wide
FS
T - ANSWER-Capital budgets focus on plans for the acquisition and construction of
fixed assets
F - ANSWER-the accounting cycle for most governments is 2 to 3 years, consistent
w the terms of elected officials
T - ANSWER-most budgets are prepared on a cash or modified cash basis
T - ANSWER-neither the GASB nor the FASB sets standards for budgetary
accounting
F - ANSWER-state and local govt's must prepare their GAAP budgetary
comparisons on the modified accrual basis of accounting
T - ANSWER-When budgets are integrated into a govt's accounting system,
estimated revenues are debited
AND ANSWERS
encumbrance - ANSWER-an estimated amount recorded for purchase orders,
contracts, or other expected expenditures chargeable to an appropriation (goods
ordered but not received)
T - ANSWER-often times, govt's do not encumber normal recurring expenditures and
small $ amounts as these expenditures are adequately controlled by other means
encumbrances - ANSWER-prevents overspending the budget, reduces the budget
available for expenditures; entry to record is made when purchase order is issued, a
contract is signed or a commitment is made; if outstanding, reported in the notes to
the entity's FS's, no longer on face of the balance sheet
1. lapse
2. do not lapse - ANSWER-2 options for encumbrances?
lapse - ANSWER-if the appropriations _________________, spending authority
(approved by the legislature) ended at the end of the year and you must use current
appropriations to cover the expenditure paid in the following year
do not lapse - ANSWER-if appropriations ___________________, (spending
authority was carried over to the new year and you do not have to use current year
appropriations to cover the expenditure) you do not reestablish the encumbrance at
the beginning of the year
govt type funds - ANSWER-fund hierarchy relates to balance sheet of
____________________________, not proprietary or fiduciary fund or the govt-wide
FS
T - ANSWER-Capital budgets focus on plans for the acquisition and construction of
fixed assets
F - ANSWER-the accounting cycle for most governments is 2 to 3 years, consistent
w the terms of elected officials
T - ANSWER-most budgets are prepared on a cash or modified cash basis
T - ANSWER-neither the GASB nor the FASB sets standards for budgetary
accounting
F - ANSWER-state and local govt's must prepare their GAAP budgetary
comparisons on the modified accrual basis of accounting
T - ANSWER-When budgets are integrated into a govt's accounting system,
estimated revenues are debited
