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Governmental financial statement information

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Can you please verify my question #1, and answer #2-5 for me?

1. Can you identify the correct classification in the cash flow statement of the following cash transactions if they were transactions of a government enterprise fund in the first column, and if they were cash transactions of a business firm in the second column?

Transaction Type Government Classification Business Classification
Capital asset acquisition/sale
Capital debt issue/retirement
Noncapital debt issue/retirement
Interest paid on capital debt
Interest paid on noncapital debt
Receipt of investment earnings

Transaction Type Government Classification Business Classification
Capital asset acquisition/sale Capital and Related Financing Investing
Capital debt issue/retirement Capital and Related Financing Financing
Noncapital debt issue/retirement Noncapital Financing Financing
Interest paid on capital debt Capital and Related Financing Operating
Interest paid on noncapital debt Noncapital Financing Operating
Receipt of investment earnings Investing Operating

2. What are some of the factors that should be considered, when deciding if a particular undertaking by a government should be accounted for as an Enterprise Fund or as part of general governmental activities?

3. A public college had tuition and fees for the year ended June 30th, 2007, in the amount of $45,000,000. Scholarships, for which no services were required, amounted to $2,500,000. Graduate assistantships, for which services were required, amounted to $2,300,000. First, compute the amount to be reported by the college for net tuition and fee revenue. Second, state the source of the rule that you relied on to make the computations. Third, on what statement would the net tuition be reported?

$45,000 - $2,500 = $42,500 as amount reported for net tuition & fee revenue.

4. Briefly, what is meant by a worksheet approach to a conversion and what is meant by a dual-track approach to recording the data?

5. How can a worksheet approach be used to convert the fund statements to government-wide statements?

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Solution Preview

I hope the notes below assist you. I encourage you to ask your accounting department for a copy of the audited financial statements. Those should include these statements and a cash flow statement for any proprietary funds, at the very least. Looking over the financial statements for your particular organization and drawing conclusions, based on what you know for your agency, may give you further insight into how things are classified.

1) In considering the business classification of transactions, think of these rules when considering how to classify transactions: For operating, it is the transactions required for day to day business. Basically, if a transaction does not fall into another category, enter it in operations. Consider items that would be on the income statement for the business and those are operating activities. For Investing activities, the owners are investing in the business and financial future of their company. Purchasing property, plant, or equipment or loaning excess funds to another business would both be investing activities. The funds received from those loans would also fall into this category. When comparing the cash flow statement to the balance sheet, look at the transactions that would fall into the long term asset grouping to get a good idea of investing activities. For financing activities, think of lending and having to pay for financing to keep the business operational. When looking at a balance sheet, many of the transactions that would fall into the long ...

Solution Summary

This solution provides information regarding the classification of different types of transactions and how the effect is different in governmental versus for-profit entities. It discusses enterprise funds of a governmental entity and how tuition and fee revenue is recognized. The solution also discusses the need for a worksheet approach when transitioning from fund financial statements to entity wide governmental statements.