1. What is the distinction between expenditures and expenses as the terms are used in governmental accounting?

1. What is the distinction between expenditures and expenses as the terms are used in governmental accounting?

2. A government expects to pay its electric bill relating to its current fiscal year sometime in the following year. An official of the government requests your advice as to whether the anticipated payment should be charged as an expenditure of the current or the following year. How would you respond?

3. Under pressure to balance their budgets, governments at all levels have resorted to fiscal gimmicks, such as delaying the wages and salaries of government employees from the last day of the month to the first day of the following month. In the year of the change they thereby had one fewer pay periods. How would the change affect the reported expenditures of a governmental fund under GAAP?

4. A government permits its employees to accumulate all unused vacation days and sick leave. Whereas (in accord with current standards) it may have to “book” a liability for the unused vacation days, it may not have to record an obligation for the unused sick leave. Explain and justify the applicable standards.

5. A school district grants teachers a sabbatical leave every seven years. Yet, consistent with GAAP, it fails to accrue a liability for such leave over the period in which the leave is earned—not even in its government-wide statements. How can you justify such accounting?

6. A government accounts for inventory on the consumption basis. Why do some accountants believe that it should offset the year-end inventory balance with a fund balance—nonspendable when no comparable fund balance is required for cash, taxes receivable, or most other assets?

7. A government accounts for inventory on the purchases basis. Why must it offset its year-end inventory balance with an addition to fund balance?

8. Many accountants note that for most governments the reported “bottom line” of their financial statements (i.e., revenues less expenditures/expenses and other charges that affect fund balance/net position) will not greatly differ between their fund statements and their government-wide statements insofar as the expenditures/expenses relate to long-term assets and the long-term liabilities issued to finance those assets. That’s because governments typically repay the debt evenly over a period which approximates the economic life of the related asset. Assuming the accountant’s assumption as to means of financing to be correct, will the expenditures and related charges affecting fund balance of the governmental fund statements approximate the expenses of the government-wide statements?

9. Governments are not required to accrue interest on long-term debt in governmental funds even if the interest is applicable to a current period and will be due the first day of the following year. Explain and justify the standards that permit this practice.

10. A school district accounts for its pension costs in a governmental fund. In a particular year the district’s actuary recommends that it contribute $18 million for the year. The district, however, had only budgeted $15 million and chooses to contribute only what was budgeted. The district is not legally or contractually required to follow the actuary’s recommendation. What should the district report as its pension expenditure for the year? Explain.

11. A city’s electric utility transfers $40 million to its general fund. Of this amount, $30 million is a return of the general fund’s initial contribution of “start-up capital.” The balance is a payment in lieu of property taxes that a private utility operating in the city would have had to pay. Explain how each element of the transfer would be reported in the general fund’s operating statement.

12. A government’s unassigned fund balance in the general fund at year-end should be indicative of the amount that the government has available for appropriation in future years. Explain and provide an example to support your answer.

13. Per GASB standards if a government gives a cash advance to a grantee and the grantee has not yet satisfied all eligibility requirements, the government would offset its credit to cash with a debit to an asset. By contrast, if the grantee has satisfied all eligibility requirements then it would offset the credit to cash with a debit to a deferred outflow of resources. On what basis can this difference in accounting be justified?