1 - A city library imposes a fee on patrons to access its electronic databases. The fee has been earmarked to maintain database subscriptions. However, city officials have the authority to redirect the fees to any public use.
Should this fee be accounted for in a general fund or a special revenue fund? Why? Is the collection of the fee an exchange or nonexchange transaction? Provide an appropriate rationale for your answer. Would your previous response change if the city officials were not able to redirect the library fee? Why or why not?
2 - Under a pressure to balance their budgets, governments at all levels have resorted to fiscal gimmicks, such as delaying the wages and salaries of employees from the last day of the month to the first day of the following month. In the year of the change, they reduced the number of pay periods.
How would this change affect the reported expenditures of a governmental fund under GAAP? List at least two other accounting gimmicks and describe their effect on reported revenues and expenditures. In your opinion, does the use of such gimmicks undermine GASB's reporting objectives? Explain your response.© BrainMass Inc. brainmass.com October 10, 2019, 7:42 am ad1c9bdddf
Since the fees can be redirected for any public use, they should be accounted for under a general fund. Remember that special funds are used to account money earmarked for a particular purpose. Although the database fees has been earmarked to maintain database subscriptions, the city officials still have the authority to redirect the fees for any public use. Now, if ...
This solution discusses governmental and not-for-profit accounting.