Question 1

On what should the governmental fund financial statements report?
A) Net position and results of financial operations of the government as a whole.
B) Fiscal accountability.
C) Operational accountability.
D) Cost of government services.

Accepted Answer

Governmental fund financial statements should report on fiscal accountability, meaning they should provide information on how the government raised and spent money in accordance with legal requirements and budgetary constraints. This includes information on the sources and uses of funds, as well as balances and changes in fund balances. The other choices may be important for other financial statements or reports, but are not specifically required for governmental fund financial statements.

Question 2

Which of the following should be included in the financial section of a comprehensive annual financial report?
A) Transmittal letter.
B) The basic financial statements, including notes thereto.
C) Tables and charts showing demographic and economic data.
D) A description of the government.

Accepted Answer

The financial section of a comprehensive annual financial report should include the basic financial statements, including notes thereto. This includes the statement of net position, the statement of activities, and the statement of cash flows. These statements provide information about the government's financial position, activities, and cash flows, which are necessary for stakeholders to make informed decisions. The other options listed may be included in a comprehensive annual financial report, but they would not be included in the financial section.

Question 3

The FASAB's Statement of Accounting and Reporting Concepts Statement No. 1 identifies four objectives of federal financial reporting. The requirement to be publicly accountable for laws and regulations related to spending tax revenues relates to which of the four objectives?
A) Stewardship.
B) Operating performance.
C) Budgetary integrity.
D) Accountability.

Accepted Answer

The requirement to be publicly accountable for laws and regulations related to spending tax revenues directly relates to the objective of "Budgetary Integrity." This objective emphasizes the government's responsibility to manage and report on the sources, uses, and status of its financial resources, ensuring compliance with budgetary and fiscal laws and regulations.

Question 4

Explain in your own words why accountability is the cornerstone of all financial reporting in government.

Accepted Answer

The answer of Explain in your own words why accountability...

Question 5

Identify and explain the characteristics that distinguish governments and not-for-profit entities from business entities.

Accepted Answer

The answer of Identify and explain the characteristics that distinguish...

Question 6

Which of the following statements is prepared by all not-for-profit organizations?
A) Statement of financial position.
B) Statement of changes in net position.
C) Statement of revenues, expenses, and changes in net position.
D) Both Statement of financial position and Statement of changes in net position.

Accepted Answer

The Statement of Financial Position is a fundamental financial statement prepared by all not-for-profit organizations, equivalent to a balance sheet for for-profit entities, showing assets, liabilities, and net assets.

Question 7

Which of the following is not classified as a support activity reported by not-for-profit entities?
A) Fund-raising expenses.
B) Program expenses.
C) Management expenses.
D) General expenses of operating the not-for-profit entity.

Accepted Answer

Program expenses are not classified as a support activity, but rather as a primary activity of a not-for-profit entity. The other options listed (fund-raising, management, and general expenses) are all considered support activities.

Question 8

Which of the following sections is not considered a part of a federal agency's performance and accountability report?
A) Basic financial statements.
B) Annual performance report.
C) Statistical section.
D) Management's discussion and analysis.

Accepted Answer

The statistical section is not considered a part of a federal agency's performance and accountability report. The other three sections (basic financial statements, annual performance report, and management's discussion and analysis) are required components of the report. The statistical section may be included but is not mandatory.

Question 9

Which of the following standard-setting bodies requires a management's discussion and analysis as a part of the financial report?
A) GASB.
B) FASB.
C) FASAB.
D) Both GASB and FASAB.

Accepted Answer

Both the Governmental Accounting Standards Board (GASB) and the Federal Accounting Standards Advisory Board (FASAB) require a management's discussion and analysis (MD&A) as part of the financial reporting package. GASB sets standards for state and local governments, while FASAB sets standards for federal entities. The Financial Accounting Standards Board (FASB), which sets standards for private sector entities, also requires MD&A, but the question specifically asks about the inclusion in the financial report, emphasizing the public sector context.

Question 10

The FASB requires that a statement showing the relationship of functional expenses to natural classifications of expense be prepared by which of the following entities?
A) Colleges and universities.
B) Health care entities.
C) Voluntary health and welfare entities.
D) All not-for-profit entities.

Accepted Answer

The FASB requires that all not-for-profit entities prepare a statement showing the relationship of functional expenses to natural classifications of expense. This statement is known as the statement of functional expenses and provides information on how the organization's expenses are disaggregated by function, such as program services or supporting activities, and by natural expense classifications, such as salaries or rent. The statement of functional expenses is an important part of the financial statements for not-for-profit entities and is used by stakeholders to evaluate the organization's performance and efficiency.

Question 11

In your own words state the primary uses the GASB believes external users have for financial reports of state and local governments. For contrast, state the uses the FASB believes external users have for the financial reports of not-for-profit organizations.

Accepted Answer

The answer of In your own words state the primary...

Question 12

On what do the government-wide financial statements report?
A) Operational accountability.
B) Fiscal accountability.
C) The cost of government services.
D) Budgetary compliance.

Accepted Answer

Government-wide financial statements report on operational accountability, which focuses on the government's ability to meet its service objectives and the efficient use of resources.

Question 13

Recognizing revenues when measurable and available for paying current obligations and expenditures when incurred describes which basis of accounting?
A) Accrual.
B) Modified accrual.
C) Modified cash.
D) Budgetary.

Accepted Answer

This description of recognizing revenues aligns with the modified accrual basis of accounting, which is commonly used by government entities. This basis of accounting recognizes revenues when they are measurable and available, meaning they are both earned and can be collected soon enough to be used to pay for current expenses. It also recognizes expenditures when they are incurred, meaning goods or services are received and the obligation to pay is established.

Question 14

Why should persons interested in reading financial reports of governments and not-for-profit entities be familiar with standards set by the GASB and the FASB?

Accepted Answer

The answer of Why should persons interested in reading financial...

Question 15

The section of the comprehensive annual financial report that presents tables and charts showing social and economic data in addition to financial trends, fiscal capacity, and operating information of the government is the:
A) Introductory section.
B) Management's discussion and analysis section.
C) Statistical section.
D) Financial section.

Accepted Answer

The statistical section of the comprehensive annual financial report presents non-financial data, such as demographic and economic statistics, as well as financial trends and operating information of the government. The other sections listed do not typically contain this type of data.

Question 16

Which of the following is a net asset category reported by not-for-profit entities?
A) Unrestricted net assets.
B) Net assets with donor restrictions.
C) Temporarily restricted net assets.
D) Net investment in capital assets.

Accepted Answer

The answer of Which of the following is a net...

Question 17

Explain the essential differences between general purpose and special purpose governments and give several examples of each.

Accepted Answer

The answer of Explain the essential differences between general purpose...

Question 18

Describe the difference between a comprehensive annual financial report (CAFR) and GASB general purpose external financial reporting for state and local governments.

Accepted Answer

The answer of Describe the difference between a comprehensive annual...

Question 19

Identify and briefly explain the four sections of the performance and accountability report (PAR) that the Office of Management and Budget requires major federal departments and agencies to prepare.

Accepted Answer

The answer of Identify and briefly explain the four sections...

Question 20

GASB and FASB standards are concerned only with external financial reporting; whereas, FASAB standards are concerned with both internal and external financial reporting. Do you agree with this statement? Why or why not?

Accepted Answer

The answer of GASB and FASB standards are concerned only...

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

On what should the governmental fund financial statements report?

Which of the following should be included in the financial section of a comprehensive annual financial report?

The FASAB's Statement of Accounting and Reporting Concepts Statement No. 1 identifies four objectives of federal financial reporting. The requirement to be publicly accountable for laws and regulations related to spending tax revenues relates to which of the four objectives?

Explain in your own words why accountability is the cornerstone of all financial reporting in government.

Identify and explain the characteristics that distinguish governments and not-for-profit entities from business entities.

Which of the following statements is prepared by all not-for-profit organizations?

Which of the following is not classified as a support activity reported by not-for-profit entities?

Which of the following sections is not considered a part of a federal agency's performance and accountability report?

Which of the following standard-setting bodies requires a management's discussion and analysis as a part of the financial report?

The FASB requires that a statement showing the relationship of functional expenses to natural classifications of expense be prepared by which of the following entities?

In your own words state the primary uses the GASB believes external users have for financial reports of state and local governments. For contrast, state the uses the FASB believes external users have for the financial reports of not-for-profit organizations.

On what do the government-wide financial statements report?

Recognizing revenues when measurable and available for paying current obligations and expenditures when incurred describes which basis of accounting?

Why should persons interested in reading financial reports of governments and not-for-profit entities be familiar with standards set by the GASB and the FASB?

The section of the comprehensive annual financial report that presents tables and charts showing social and economic data in addition to financial trends, fiscal capacity, and operating information of the government is the:

Which of the following is a net asset category reported by not-for-profit entities?

Explain the essential differences between general purpose and special purpose governments and give several examples of each.

Describe the difference between a comprehensive annual financial report (CAFR) and GASB general purpose external financial reporting for state and local governments.

Identify and briefly explain the four sections of the performance and accountability report (PAR) that the Office of Management and Budget requires major federal departments and agencies to prepare.

GASB and FASB standards are concerned only with external financial reporting; whereas, FASAB standards are concerned with both internal and external financial reporting. Do you agree with this statement? Why or why not?