Question 1

Special purpose governments generally provide a wider range of services to their residents than do general purpose governments.

Accepted Answer

Special purpose governments are designed to provide specific services, such as education, fire protection, or transportation, whereas general purpose governments, like cities or counties, offer a broad array of services to meet the general needs of their residents.

Question 2

The Governmental Accounting Standards Board (GASB) is the body authorized to establish accounting principles for all government entities.

Accepted Answer

False

Question 3

The FASB, GASB, and FASAB all focus their standards on both internal and external financial reporting.

Accepted Answer

The FASB (Financial Accounting Standards Board) and GASB (Governmental Accounting Standards Board) focus on external financial reporting, while FASAB (Federal Accounting Standards Advisory Board) focuses on accounting standards for federal entities, which can include both internal and external aspects, but the statement inaccurately generalizes their focus.

Question 4

The Financial Accounting Standards Board (FASB) is the body authorized to establish accounting principles for all colleges and universities and health care entities.

Accepted Answer

The Financial Accounting Standards Board (FASB) is the body authorized to establish accounting principles for all for-profit businesses and nonprofit organizations, but not specifically for colleges and universities or health care entities. However, there are specific accounting standards for these industries established by other organizations such as the National Association of College and University Business Officers (NACUBO) and the Healthcare Financial Management Association (HFMA).

Question 5

The Federal Accounting Standards Advisory Board (FASAB) recommends accounting principles and standards for the federal government and its agencies and departments.

Accepted Answer

This is the correct role and function of the Federal Accounting Standards Advisory Board (FASAB).

Question 6

Interperiod equity refers to the concept that current-year revenues are sufficient to pay for services provided that year, so that future taxpayers will not be required to assume the burden for services previously provided.

Accepted Answer

Interperiod equity refers to the idea that current taxpayers should pay for the services they receive rather than passing the burden onto future taxpayers. This means that current-year revenues should be sufficient to cover current-year expenses, promoting fairness and sustainability in public finances.

Question 7

The FASB standards require not-for-profit entities to report net assets in three categories: unrestricted, restricted, and net investment in capital assets.

Accepted Answer

The FASB standards require not-for-profit entities to report net assets in two categories: net assets without donor restrictions and net assets with donor restrictions, as updated by the FASB Accounting Standards Update No. 2016-14.

Question 8

The GASB provides optional guidance for those entities providing service efforts and accomplishments (SEA) reports to the public.

Accepted Answer

The GASB does provide optional guidance for entities to provide SEA reports to the public.

Question 9

Since neither governments nor not-for-profit entities have investors, the financial reporting objectives are the same for both types of entities.

Accepted Answer

The financial reporting objectives differ for governments and not-for-profit entities compared to for-profit entities, as they have different stakeholder and accountability requirements. While for-profit entities have investors as their primary stakeholders, governments and not-for-profit entities have a range of stakeholders, including citizens, donors, regulators, and grantors. Therefore, the objectives of financial reporting for governments and not-for-profit entities include transparency, accountability, and stewardship, in addition to providing useful information for decision making.

Question 10

The needs of users of government financial reports are the same as those of users of business entity financial reports.

Accepted Answer

The needs of users of government financial reports often differ from those of business entity financial reports because government financial reporting focuses more on accountability and the stewardship of public resources, whereas business financial reporting primarily focuses on profitability and financial position for the benefit of investors and creditors.

Question 11

The Governmental Accounting Standards Board (GASB) is the body authorized to establish accounting principles for all state and local governments, both general purpose and special purpose.

Accepted Answer

This statement is true. The GASB is the authoritative body responsible for establishing accounting principles for all state and local governments, including general purpose and special purpose entities. This is a true statement.

Question 12

Providing information on accountability is the primary financial reporting objective for both governments and not-for-profit entities.

Accepted Answer

The answer of Providing information on accountability is the primary...

Question 13

In addition to financial statements and notes, the GASB requires governments to provide information on service efforts and accomplishments (SEA) in their reports to the public.

Accepted Answer

The Governmental Accounting Standards Board (GASB) encourages but does not require governments to report on service efforts and accomplishments (SEA). Reporting SEA information is considered best practice for enhancing transparency and accountability but is not a mandated requirement in the financial reports.

Question 14

A characteristic common to governments and not-for-profit organizations is that they do not exist to provide goods or services at a profit or profit equivalent.

Accepted Answer

Governments and not-for-profit organizations have a different goal and purpose than for-profit businesses, and therefore their primary focus is not on generating profit or profit equivalent. Instead, they exist to provide services and benefits to their constituents or beneficiaries.

Question 15

Neither governments nor not-for-profit entities have residual equity that can be distributed to owners.

Accepted Answer

Residual equity represents the ownership interest in a company's assets after liabilities are paid off. Governments and not-for-profit entities do not have owners in the traditional sense, and therefore do not have residual equity to distribute.

Question 16

A difference in the financial reporting objectives for government entities and not-for-profit entities is that government entities report on compliance with laws, regulations, and rules that impact financial reports.

Accepted Answer

Government entities have a responsibility to report on compliance with laws and regulations, unlike not-for-profit entities whose financial reporting objectives may be more geared towards donor or stakeholder transparency.

Question 17

The minimum requirements for general purpose external financial reporting are (1) management's discussion and analysis (MD&A), (2) the basic financial statements, including the notes to the financial statements, and (3) combining and individual fund financial statements.

Accepted Answer

The minimum requirements for general purpose external financial reporting include management's discussion and analysis (MD&A), the basic financial statements, and required supplementary information other than MD&A. Combining and individual fund financial statements are not a minimum requirement; they may be included as supplementary information.

Question 18

Examples of general purpose governments include cities, towns, and public schools that receive tax revenue to finance the services they provide.

Accepted Answer

General purpose governments are those that provide a range of services to the community and are funded primarily by tax revenue. Examples of general purpose governments include cities, towns, and public schools.

Question 19

The Office of Management and Budget (OMB) requires major federal departments and agencies to prepare an annual performance report.

Accepted Answer

The OMB does require major federal departments and agencies to prepare an annual performance report.

Question 20

The Financial Accounting Foundation has oversight over both the FASB and the GASB.

Accepted Answer

The Financial Accounting Foundation (FAF) has oversight over both the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).

Quiz 1: Introduction to Accounting and Financial Reporting for Government and Not-for-Profit Entities