Question 1

Which pronouncements have the highest level of authority for state and local governments?
A) Financial Accounting Standards Board Statements
B) GASB Statements
C) Consensus Positions of GASB Emerging Issues Task Force
D) GASB Technical Bulletins

Accepted Answer

GASB Statements have the highest level of authority for state and local governments as they are the official pronouncements issued by the Governmental Accounting Standards Board.

Question 2

Government-wide financial statements exclude the
A) general fund.
B) fiduciary funds.
C) proprietary funds.
D) special revenue funds.

Accepted Answer

Government-wide financial statements exclude fiduciary funds because these funds are held in a trustee or agency capacity for others and cannot be used to support the government's own programs.

Question 3

The accounting equation for an agency fund is
A) Current assets - Current liabilities = Fund Balance.
B) Assets - Liabilities = Equity.
C) Assets = Equity + Liabilities.
D) Assets = Liabilities.

Accepted Answer

For an agency fund, the assets belong to the agency's clients, not to the agency itself. Therefore, the accounting equation is simplified to Assets = Liabilities, as the agency has no claim on the assets held.

Question 4

The key focus of government fund accounting concerns
A) capital expenditures.
B) intergovernmental transfers from the general fund.
C) income measurement.
D) the current ability to provide and fund services and goods.

Accepted Answer

Government fund accounting focuses on accountability for the use of public funds, particularly in tracking the current ability of the government to provide and fund services and goods. This includes monitoring revenue and expenditures in different funds, such as the general fund, special revenue funds, and capital projects funds. While capital expenditures may be a part of this, it is not the primary focus. Intergovernmental transfers from the general fund and income measurement may also be important considerations, but these are not the main focus of government fund accounting.

Question 5

Under the modified accrual basis of accounting, revenues are recognized in the period
A) when the relevant service is done.
B) when they are collected.
C) when the paying entity is billed.
D) when they become both measurable and available.

Accepted Answer

Under the modified accrual basis of accounting, revenues are recognized in the period when they become both measurable and available. This means that the amount of revenue can be reasonably estimated and the revenue is expected to be collected within the current period or soon enough to be included in the current period's financial statements. This differs from the accrual basis of accounting, which recognizes revenue when it is earned, regardless of when it is collected.

Question 6

When examining revenue transactions, which of the following transactions is classified as an exchange transaction?
A) When a homeowner pays property taxes
B) When a university receives a federal grant that mandates a certain type of research activity
C) When an aquatic center receives cash for a group swim
D) When an employer deducts money for state tax withholding

Accepted Answer

An exchange transaction involves the exchange of goods or services for a corresponding amount of cash or some other type of payment. When an aquatic center receives cash for a group swim, it is a clear example of an exchange transaction as the center is receiving payment for providing a service (the group swim). The other transactions listed do not involve a clear exchange of goods or services for payment.

Question 7

Internal Service Funds differ from Enterprise Funds because Internal Service Funds
A) are a proprietary fund.
B) are intended to show a profit.
C) charge for their services.
D) provide goods and services primarily to other government agencies.

Accepted Answer

Internal Service Funds are used to account for the provision of goods or services by one department of a government to other departments of the same government or to other governmental units, typically on a cost-reimbursement basis. Enterprise Funds, on the other hand, are used to account for operations that are financed and operated in a manner similar to private business enterprises, where the intent is to make a profit from fees charged to external users.

Question 8

Governmental fund financial statements are prepared on the ________ basis of accounting.Proprietary fund financial statements are prepared on the ________ basis of accounting.
A) modified accrual; modified accrual
B) accrual; fund
C) modified accrual; accrual
D) blended; discrete

Accepted Answer

Governmental fund financial statements are prepared on the modified accrual basis of accounting, which means that revenues are recognized when they become both measurable and available to finance current expenditures, and expenditures are recognized when the related liability is incurred. Proprietary fund financial statements, on the other hand, are prepared on the accrual basis of accounting, which means that revenues are recognized when earned, and expenses are recognized when incurred, regardless of when cash is received or paid.

Question 9

A comprehensive annual financial report has the following three major sections:
A) introductory, financial, and management's discussion and analysis.
B) introductory, financial, and statistical.
C) transmittal, financial, and statistical.
D) transmittal, financial, and management's discussion and analysis.

Accepted Answer

A comprehensive annual financial report (CAFR) is typically divided into three major sections: the introductory section, the financial section, and the statistical section. The introductory section provides an overview of the report, the financial section includes the basic financial statements and notes, and the statistical section presents additional financial and demographic information in a detailed format.

Question 10

Which fund would most likely report depreciation expense?
A) A special revenue fund
B) An enterprise fund
C) A capital projects fund
D) A debt service fund

Accepted Answer

An enterprise fund would most likely report depreciation expense because it is used to account for government activities that provide goods or services to the general public for a fee. Such activities involve the use of long-lived capital assets like buildings, equipment, and machinery, which will lose value over time due to wear and tear, obsolescence, or other factors. Depreciation expense is a way to allocate the cost of these assets over their useful lives and reflect their decreasing value in the financial statements. Special revenue funds are used to account for specific revenue sources that are legally restricted to particular programs and do not typically incur depreciation expenses. Capital projects funds are used to account for resources that are restricted, committed, or assigned to capital projects such as constructing a new building or renovating an existing facility. Debt service funds are used to account for the debt payments of a government and do not have capital assets to depreciate.

Question 11

What basis of accounting is used to prepare Government-wide financial statements?
A) Modified accrual basis
B) Accrual basis
C) Cash basis
D) Fiduciary basis

Accepted Answer

The Government-wide financial statements are prepared using the accrual basis of accounting, which recognizes both revenues and expenses when they are earned or incurred, regardless of when cash is received or paid. This method provides a better picture of a government's financial position and performance.

Question 12

Which type of fund is used to account for a government activity that sells goods or services either solely or almost solely to external customers?
A) A temporary fund
B) A general fund
C) An agency fund
D) An enterprise fund

Accepted Answer

An enterprise fund is used to account for a government activity that sells goods or services either solely or almost solely to external customers. This fund is used when the government is acting in a business-like manner and the revenue generated is intended to cover the costs of providing those goods or services. The other options (A, B, C) do not fit this scenario.

Question 13

Approved or authorized expenditures that provide legislative control over the expenditure budget are referred to as
A) appropriations.
B) allotments.
C) allocations.
D) encumbrances

Accepted Answer

Appropriations are funds that have been approved or authorized by a legislative body for a specific purpose, program, or project. The process of appropriating funds provides the legislative control over the expenditure budget. Allotments refer to the portion of the appropriation that is set aside for specific purposes, while allocations refer to the distribution of funds within a department or agency. Encumbrances are commitments made for future expenditures, but do not provide legislative control over the expenditure budget.

Question 14

The accounting equation for a governmental fund is
A) Assets = Liabilities + Equity.
B) Current assets + Noncurrent assets - Current liabilities - Noncurrent liabilities = Net assets.
C) Current assets - Current liabilities = Fund Balance.
D) Assets = Liabilities + Fund Balance.

Accepted Answer

The answer of The accounting equation for a governmental fund...

Question 15

The modified accrual basis of accounting is used for
A) governmental funds.
B) proprietary funds.
C) internal service funds.
D) both A and C.

Accepted Answer

The answer of The modified accrual basis of accounting is...

Question 16

What funds are reported in Government-wide financial statements?
A) Governmental only
B) Proprietary only
C) Governmental and proprietary
D) Governmental, proprietary and fiduciary

Accepted Answer

Government-wide financial statements include both governmental and proprietary funds, but exclude fiduciary funds, to provide a comprehensive overview of a government's overall financial status.

Question 17

Because a fund is an accounting entity, each fund has I.its own accounting equation.
II)its own journals, ledgers, and other accounting records.
III)its own separate auditor.
A) I only
B) II only
C) I and II
D) I, II and III

Accepted Answer

Each fund has its own accounting equation, as well as its own journals, ledgers, and other accounting records. However, it does not necessarily have its own separate auditor - this would depend on the specific circumstances and requirements of the organization.

Question 18

Governmental accounting differs from corporate financial accounting primarily because
A) the size of the government and the various levels would make it unreasonable to use corporate GAAP.
B) governments lack a profit motive and must focus on accountability to the public they serve.
C) the government has no stakeholders who require financial reporting.
D) the government has too many types of organizations to use one type of corporate GAAP.

Accepted Answer

Governmental accounting focuses on accountability to the public, rather than a profit motive like corporate financial accounting. The unique nature of government services and its responsibility to constituents requires a different perspective on financial reporting and management. Governmental accounting also has its own set of standards, Generally Accepted Accounting Principles for government entities (GAAFR), which are tailored specifically for the unique circumstances of governmental organizations.

Question 19

Government-wide financial statements include a
A) balance sheet, an income statement, and a statement of cash flows.
B) statement of net assets, a statement of activities, and a statement of cash flows.
C) statement of net assets and a statement of activities.
D) statement of activities and a statement of cash flows.

Accepted Answer

The answer of Government-wide financial statements include a
A) balance sheet,...

Question 20

Centralized data processing, central motor pools and garages, centralized risk-financing activities, and central stores typically would be accounted for using what type of fund?
A) An agency fund
B) An enterprise fund
C) An internal service fund
D) A trust fund

Accepted Answer

Centralized data processing, central motor pools and garages, centralized risk-financing activities, and central stores are typically accounted for using internal service funds. Internal service funds function like a business, charging fees to other departments for the services provided.

Quiz 19: An Introduction to Accounting for State and Local Governmental Units

Which pronouncements have the highest level of authority for state and local governments?

Government-wide financial statements exclude the

The accounting equation for an agency fund is

The key focus of government fund accounting concerns

Under the modified accrual basis of accounting, revenues are recognized in the period

When examining revenue transactions, which of the following transactions is classified as an exchange transaction?

Internal Service Funds differ from Enterprise Funds because Internal Service Funds

Governmental fund financial statements are prepared on the basis of accounting.Proprietary fund financial statements are prepared on the basis of accounting.

A comprehensive annual financial report has the following three major sections:

Which fund would most likely report depreciation expense?

What basis of accounting is used to prepare Government-wide financial statements?

Which type of fund is used to account for a government activity that sells goods or services either solely or almost solely to external customers?

Approved or authorized expenditures that provide legislative control over the expenditure budget are referred to as

The accounting equation for a governmental fund is

The modified accrual basis of accounting is used for

What funds are reported in Government-wide financial statements?

Because a fund is an accounting entity, each fund has I.its own accounting equation. II) its own journals, ledgers, and other accounting records. III) its own separate auditor.

Governmental accounting differs from corporate financial accounting primarily because

Government-wide financial statements include a

Centralized data processing, central motor pools and garages, centralized risk-financing activities, and central stores typically would be accounted for using what type of fund?