A debt security is an investment in bonds issued by the government or a corporation. ... Total Running Time: 14:30 . Also for revenue bonds, if the Unexpended intergovernmental grants and taxes dedicated to capital improvements in a capital projects fund are likely to be classified as Assigned Fund Balance Answer: False 2. This is a liability account. Classified Balance Sheet. Yes, Debt Service funds are set up to account for the accumulation of resources and the payment of interest and principal on all "general obligation debt" other than that serviced by enterprise funds or by special assessments in another fund. The trick is the instructor insisted it was c due to the use of the word contribution in d, but the author's key says it is d. The debt service transactions for a special assessment for which the government is not obligated in any matter should be reported in an agency fund. Understand accounting and reporting for special assessment DSFs ... Debt service payments –try to minimize fluctuations ... Unreserved Fund Balance 162,000 6,000 80,000 100,000 50,000 10,000 88,000 #2 Financing operations [Page 308] Cash OFS –Transfer from GF 80,000 80,000 A debt fund is an investment pool, such as a mutual fund or exchange-traded fund, in which core holdings are fixed income investments. In the occurrence of an event of default, money in the debt service reserve account may be transferred to the debt service payment account to be used to pay debt service charges with respect to the debt obligations.” The answer from the author is d, because it is being serviced by a debt service fund it will come into the debt service fund and then be interfund transferred to the enterprise fund. This includes accounting for bond principal, interest, and other debt related expenditures. Fund Balance/Net Position Proprietary Funds Enterprise Funds/Internal Service Funds. C) Bond principal is shown as a liability of the debt service fund only when that principal is due and payable. 3.9.6.50 The internal service fund is usually accomplished by a contributions and/or transfers of cash or capital assets from the general (current expense) fund and other funds. B) If bonds supporting a capital project are issued at a premium, typically the premium will be used to service the debt… Unexpended intergovernmental grants and taxes dedicated to capital improvements in a … Basis of Accounting: All governmental funds are accounted for using the modified accrual basis of accounting. Debt service funds provide a useful mechanism for governments to account for transactions relating to the payment of principal and interest. Debt service funds are used to account for money that will be used to pay the interest and principal of long-term debts. We will cover governmental accounting objective, which will be a review from governmental accounting 100. These are the general fund, special revenue funds, debt service funds, and capital projects funds. They may be legally necessary; for example, a bond indenture often requires the current fund to transfer cash to the debt or plant fund for debt service purposes. Debt service payments are generally tax-supported via operating transfers from the General Fund. “In the debt service fund, there will be maintained the debt service payment account and the debt service reserve account. Chapter 5 Accounting for Other Governmental Fund Types: Capital Projects, Debt Service, and Permanent True/False Questions 1. City council adopts an annual budget for the general fund with estimated revenues of $1,700,000, appropriations of $1,500,000, and approved transfers of $120,000. We have step-by-step solutions for your textbooks written by Bartleby experts! Bonds used by a government to finance major construction projects, to be paid by tax levies over a period of years, require a debt service fund (sometimes titled as "interest and sinking fund") to account for their repayment. These fund revenues are Accounting; Accounting for a Debt Service Fund; Accounting for a Debt Service Fund. The Debt Service Fund is used to record payments of principal and interest on capital debt. Textbook solution for Advanced Accounting 12th Edition Paul M. Fischer Chapter 16 Problem 2.6E. PSAB Supplement 16 - Bonds, Capital Projects and Debt Service Page 1 Rev. General Accounting. Fund Description: Accounts for legally restricted revenue sources, other than those restricted for capital projects or debt service. Debt service fund = a fund to accumulate sources to pay general long term debt's principal amount and interest amount (usually on paying off bonds). Governmental fund financial statements (including financial data for the general fund and special revenue, capital projects, debt service, and permanent funds) should be prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Four fund types are used to account for a government’s “governmental-type” activities. 1. A debt service fund holds monies to pay interest, principal, and other fees associated with short- and long-term debt. However, governments may keep money toward debt repayment in other governmental funds, according to the Governmental Accounting … 5 CAPITAL PROJECTS FUNDS Introduction Basis of Accounting Measurement Focus When Are Capital Projects Funds Used? All debt issue costs should also be recorded as a deferred charge and amortized over the term of the debt. Revenues and Other Financing Sources Proceeds from Debt Issuance Basic journal entries to record … - Selection from Wiley GAAP for Governments 2015: Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments [Book] 7/11 MANUAL OF PROCEDURES PSAB SUPPLEMENT 16 BONDS/CAPITAL PROJECTS/DEBT SERVICE INTRODUCTION This supplement details the regulations and procedures for conducting bond elections, and for the accounting of bond issues, Capital Projects Funds, and Debt Service Funds. Interest is recorded in the fund financial statements only when it is legally payable. Chapter 6 Accounting for Capital Projects and Debt Service Questions for Review and Discussion 1. Every organization is different. But at the very minimum, most nonprofits will need to do the following to get their accounting system up and running: Find a nonprofit-friendly bookkeeping solution; Find an accounting solution that can do fund accounting A) Resources transferred to the debt service fund from the General Fund would typically be classified as Due to the General Fund by the debt service fund. In addition, money saved toward debt repayment also sometimes appears in this fund. Budgets, and hence budget comparisons, are not as essential for capital projects and debt service funds because they are often on a project, rather than an annual, basis and spending is typically authorized on that basis. Academia.edu is a platform for academics to share research papers. 2. Accounting for Debt Securities. ... require a transfer from the general fund or debt service fund 400 to cover the reduction of the bond discount. Textbook solution for Advanced Accounting 12th Edition Paul M. Fischer Chapter 16 Problem 4UTI. Some entities may be required to establish such funds before they can take on debt obligations. Other revenues are generally derived from patient fees and other miscellaneous revenues that are restricted for payment of debt service. Examples include general funds, special revenue funds, debt service funds, capital projects funds and permanent funds. If the debt is payable in more than one year, record the debt in a long-term debt account. The first, governmental funds, generally account for the acquisition, use and balances of expendable financial resources and related current liabilities. Nonprofit accounting: an overview. At the time of purchasing a bond, the acquisition costs are recorded in an asset account, such as “Debt Investments.” Acquisition costs include the market price paid for the bond and any investment fees or broker's commissions. When nonmonetary assets are contributed or transferred within the government the assets must be recorded at the book value. The debt service ratio—otherwise known as the debt service coverage ratio—compares an entity's operating income to its debt liabilities. Generally, this long‐term debt is repaid from a governmental fund called a debt service fund. The course will focus on larger capital projects and the use of a capital project fund and debt service fund to track them. B) Interest payable may be reported as a liability of the debt service fund. Government fund accounting uses three basic groups of funds. Currently, the only specific accounting guidance on debt transactions in proprietary funds is Statement 23, Accounting and Reporting for Refundings of Debt Reported by Proprietary Activities, discussed later in this chapter. Fund Term: For each period that a substantial portion of the resources are provided by one or more restricted or committed revenue sources. Accounting for a Capital Projects Fund. Journal Entries- Fund Based vs. Government-Wide. Expressing this relationship as a ratio allows analysts to quickly gauge a company's ability to repay its debts, including any bonds, loans, or lines of credit. Governments often issue long‐term debt to finance various governmental projects. Debt Service Fund Expenditures The Debt Service Fund is provided to account for the revenues, other financing sources, other financing uses, and the related expenditures for long-term debt. Also, if the government is authorized, or required to establish and maintain a special assessment bond reserve, guaranty, or sinking fund, it is required to use a debt service fund for this purpose. A) Special assessment debt for which the government has some obligation is paid through the debt service fund. We have step-by-step solutions for your textbooks written by Bartleby experts! purpose, understanding accounting. If so, an interfund transfer is recorded and an interfund receivable should be recognized at the time the bonds are recorded. 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