Discuss the distinguishing characteristics of general long-term liabilities and how they are reported.
April 19, 2021 Comments Off on Discuss the distinguishing characteristics of general long-term liabilities and how they are reported. Uncategorized Assignment-help
Words: 601
Pages: 3
Subject: Uncategorized

Week 3 Lecture Many state and local governmental entities are not allowed to borrow funds without voter approval. The approved debt will generally consist of bonds, notes, or capital leases. Required entries are generally made in the governmental activities general journal at the government-wide level, as well as in the appropriate governmental fund(s). To provide full disclosure to the financial statement reader, long-term liability disclosures are required. A schedule is required which provided details including the beginning balance, additions, reductions, ending balance, and the short-term portion of the balance. An addition schedule will disclose the principal and interest payments due in future years. Such information is very useful to managers, as well as potential investors, when making investment decisions. The issuance of serial bonds is one of the most common methods used by state and local governments to fund capital needs. Bonds will take one of four types: regular serial bonds, deferred serial bonds, annuity serial bonds, and irregular serial bonds. A regular serial bond will require equal annual payments over the life of the bond issue. A deferred serial bond will delay the first payment for more than one year but maintain regular payment thereafter. An annuity serial bond attempts to maintain equal annual payments by increasing the principal payment each year as the interest payment decreases. A serial bond with a payment schedule that does not correspond to one of the prior three types will constitute an irregular serial bond. Governmental entities are often involved in business-type activities. These activities are accounted for within proprietary funds. Internal service funds and enterprise funds are two types of proprietary funds used. In order to increase efficiencies and reduce costs, common services such as purchasing, data processing, and personnel services are handled within inter service funds. A city utility is an example of goods or services being provided to the public by the government. These activities are accounted for by an enterprise fund. Proprietary funds require accounting similar to that required for for-profit entities. A balance sheet (i.e., statement of net position), income statement (i.e., statement of revenues, expenses, and changes in fund net position), and a statement of cash flows is required. The GASB standards are used for the preparation of these statements instead of FASB standards used by for-profit entities. While both the enterprise funds and internal service funds are classified as a proprietary fund, they are not reported in the same way on the government-wide financial statements. Enterprise funds are reported as part of the Business-type Activities column while internal service funds are reported as part of the Governmental Activities column of the government-wide financial statements. If the Business-type Activities column of the government-wide financial statement only includes enterprise funds, the governmental entity does not need to maintain separate records for the activities at the government-wide level. The records of all enterprise funds may be added together for reporting. Since inter-fund transactions among enterprise funds have no net effect on overall business-type activities, they should be eliminated. Reference Reck, J., Lowensohn, S., & Wilson, E. (2019). Accounting for governmental and nonprofit entities (18th ed.). Question 1 Discuss the distinguishing characteristics of general long-term liabilities and how they are reported. Using the same financial statements referenced in your Week 2 discussion (or different organizations, if desired) provide two examples of general long-term liabilities and two examples of other long-term liabilities you found on the entities’ financial statements. Include any specific provisions or characteristics noted about each example. Question 2 Discuss the differences between internal service funds and enterprise funds. Why is it important to distinguish the differences? Provide two examples of each type.