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Comprehensive Assignment

1. Describe the principal differences that distinguish governmental and not-for-profit


organizations from business organizations.
2. Compare and contrast the Objective of financial reporting of State and local government,
Federal Government, and Not for profit entities.
3. Identify the authoritative bodies responsible for setting financial reporting standards for (1)
state and local governments, (2) the federal government, and (3) not-for-profit organizations.
4. Explain the minimum requirements for general purpose external financial reporting for state
and local governments and how they relate to comprehensive annual financial reports.
5. Explain the different objectives, measurement focus, and basis of accounting of the
government-wide financial statements and fund financial statements of state and local
governments.
6. Briefly describe the three Activities of state and local government using examples?
7. Briefly define Funds, fund accounting system and all types of funds using examples?
8. What are principles of governmental accounting and financial reporting discuss each of them?
9. What is major fund and briefly discuss criteria of classifying funds as major or not using
illustrations?
10. What is the main difference between General Fund and Special Revenue Fund?
11. What are the possible classifications of governmental units accounting?
12. Distinguish between:
a. Expenditure and Encumbrances.
b. Appropriations and Expenditures.
c. Revenues and Estimated Revenues.
d. Reserve for Encumbrances and Fund Balance.
13. What is the importance of incorporating budget in accounting records of General Fund and
Special Revenue Funds?
14. Are all expenditures made by governmental units required to be encumbered? Why/Why not?
Exemplify it.
15. What types of governmental revenues are accrued and which of the others are not accrued?
16. Why Tax Anticipation Notes Payables are issued by the governmental units?
17. Define and distinguish among; Inter-fund Transfers and Quasi-External Transactions and
Interfund Loans.

Page | 1
Comprehensive Assignment

1. Accounting for Capital Project Fund


Assume the town of Bonga wants to construct a new library on the site owned by the town. The
construction is expected to cost Br.50, 000,000. It is expected to be completed within two years
on June 30, year 7. In a special meeting held on July 2, year 5, the members of the town council
approved a Br.30,000,000 issuance of general obligation Bonds maturing in 20 years. The
proceeds of this sale will be used to help finance the construction of the new library. The
remaining Br.20, 000,000 will be financed by an irrevocable state Grant that has been awarded.
The following transactions occurred during the fiscal year ended June 30, year 6.
1. The General fund loaned Br.500, 000 to the library capital projects fund for Drafting,
Engineering and other preliminary expenses by receiving a note which is later to be settled
from the bond issue proceeds. The journal entry to record this will be:
2. Out of the irrevocable grant of Br.20, 000,000, the state contributed Br.5, 000,000 and the
remaining is deemed to be susceptible to accrual. This will be recorded as

3. Preliminary Engineering and Planning costs of Br.320, 000 were paid to the contractor.
4. The Bonds were sold at 101%. The bond indenture agreement requires that any premium to
be set aside in the related Debt Service fund.
5. The town of Bonga library capital project fund invested its Br.10,000,000 bond proceeds on
the federal Government treasury bills.
6. A construction contract for Br.44, 270,000 is authorized and signed with the contractor.
7. Orders were placed for materials estimated to cost Br.550, 000.
8. The materials previously ordered (transaction 7) were received at a cost of Br.510, 000.
9. In addition to the construction contract of transaction 6, Br.3, 900,000 was incurred for the
services of the architects and engineers; of this amount Br.3, 100,000 was paid.
No Encumbrance was recorded.
10. Received cash of Br.1, 000,000 from the General fund as an operating transfer.
11. A partial payment of Br.10, 000,000 was received from the state irrevocable grants and the
General fund loan was repaid with interest amounting to Br.10, 000.
12. When the project was approximately half finished, the contractor submitted billing for a
payment of 12,000,000.
13. The contractor’s initial claim was fully verified and paid.

Page | 2
Comprehensive Assignment

Required:
 Journalize the transaction
 Prepare a Trial Balance
 Statement of Revenues, Expenditures and Changes in Fund Balance
 Prepare a Balance Sheet

2. Accounting for Debt Service Fund


Assume that Bonga town administration issued Br 5,000,000 serial bonds on Jan 1, 2007 for the
construction of recreational park. The bond bear semi- annual interest rate of 5% to be paid on
Jan 1 and August 1 and the face value of the bond is to be retired over 10 years by making equal
installment payments on Jan 1 of each year.
Farther, burden of servicing the debt on the tax payers were distributed evenly throughout the life
of bond. Accordingly, it is determined that tax payers should provide Br 625,000 as revenue in
2007. It is also agreed that the General fund will transfer Br 125,000 to the debt service funds on
July, 2007.
Appropriations for the year incurred only one semi-annual interest payment to be made on
August, 2007.
1. The entry to record the legally adopted budget is as follows:
2. During the year 2007, the debt service fund levied property tax of Br 650,000 of which 3.85%
is estimated to be uncollectible. The entry would be:
3. If cash in the amount of Br 575,000 is realized from the property tax during the current year,
the entry in the debt service fund should be:
4. If Br 1,250 of uncollectible taxes are written off, the following entries should be passed
5. To generate asset, in addition to those contributed by the tax payers and the General fund, the
tax receipts are invested in marketable securities. If Br. 500,000 is invested, the entry would
be:
6. When some of the investments are sold for Br. 250,000 of which Br. 25,000 is interest earned
on investments, the following entry should be made:
7. For investments due to the town bond holders, checks are issued in August after vouched for
the amount of the semiannual interest. The entries to record the due is as follows:

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Comprehensive Assignment

8. To record the payment of the expenditure


9. To record the issuance of checks for payment of the transfer of Br. 125,000 from the General
fund, classified as an operating transfer in and recorded to the Debt service fund book as
follows:
10. On Dec 31, 2007, the balance sheet date of the interest earned but not yet received on the
investment amounted to Br. 12,500. This transaction should be recorded as:
11. If the remaining Br. 275,000 of the marketable securities previously acquired and still held
on Dec 31, 2007 had market value of Birr 287,500, the following journal entries should be
passed to record the increase in value.
12. After posting the above transactions, a pre-closing trial balance for the debt service fund of
the town at the end of the year 2007 is presented as follows:

Required:
 Journalize the transaction
 Prepare a Trial Balance
 Statement of Revenues, Expenditures and Changes in Fund Balance
 Prepare a Balance Sheet

Page | 4

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