Question 1

Which of the following is true regarding the Comprehensive Annual Financial Report?
A) The basic financial statements consist of the government-wide, the governmental fund, the proprietary fund, and the fiduciary fund financial statements (and the notes to the financial statements).
B) The government-wide financial statements include the Statement of Net Assets, the Statement of Activities, and the Statement of Cash Flows.
C) Both of the above.
D) Neither of the above.

Accepted Answer

The answer of Which of the following is true regarding...

Question 2

With respect to the preparation of fund basis financial statements,governmental funds other than the major fund are considered to be major when which of the following conditions exist?
A) With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of the individual governmental fund under consideration constitutes 25% of the total for the governmental fund category.
B) With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of individual governmental or enterprise fund under consideration are 15% of the total of the governmental and enterprise categories, combined.
C) Both A and B are required for a governmental fund to be a major fund.
D) Neither A nor B are correct.

Accepted Answer

Neither A nor B are correct because the criteria for a governmental fund to be considered a major fund typically involve the fund's total assets, liabilities, revenues, or expenditures being at least 10% of the total for the governmental funds category and at least 5% of the total for the governmental and enterprise funds combined.

Question 3

Which of the following is true regarding the government-wide Statement of Activities?
A) The government-wide Statement of Activities may reflect expenses either by function (general government, public safety, etc.) or by object or natural classification (salaries, supplies, etc.).
B) The government-wide Statement of Activities is prepared using the modified accrual basis of accounting for governmental activities and using the accrual basis of accounting for business-type activities.
C) The government-wide Statement of Activities reflects taxes as general revenues.
D) Indirect program expenses may not be allocated to the other functional areas.

Accepted Answer

The government-wide Statement of Activities reflects taxes as general revenues, which are not directly linked to specific functions or programs.

Question 4

Which of the following is true regarding Management's Discussion and Analysis (MD&A)?
A) MD&A is not considered part of Required Supplementary Information (RSI).
B) MD&A takes the place of footnotes.
C) MD&A should present an analysis of significant variations between the original and final budget.
D) All of the above are true.

Accepted Answer

MD&A should present an analysis of significant variations between the original and final budget. None of the other options are true. MD&A is considered part of RSI and does not take the place of footnotes.

Question 5

Which of the following is true regarding GASB's definition of the financial reporting entity?
A) The financial reporting entity might include a primary government, component units, joint ventures, or a jointly governed organization.
B) Primary governments may be general-purpose governments (such as states, cities, and counties) or special-purpose governments that have separately elected governing bodies, are legally separate and are fiscally independent of other state or local governments.
C) Blending is used to incorporate component units when those component units are, in substance, part of the primary government.
D) All of the above are true.

Accepted Answer

All three statements are true regarding GASB's definition of the financial reporting entity. The financial reporting entity can include a primary government, component units, joint ventures, or a jointly governed organization. Primary governments may be either general-purpose governments or special-purpose governments that are legally separate and fiscally independent. Blending may be used to incorporate component units when they are part of the primary government substance.

Question 6

Which of the following is true regarding the financial reporting entity of a state or local government?
A) Many component units are discretely presented, rather than blended.
B) A school district could never be a primary government.
C) Only a primary government is reported in the government-wide statements.
D) All of the above are true.

Accepted Answer

Many component units, such as public universities or transportation authorities, are presented separately in the financial statements as discretely presented component units (DPCUs).

B and C are both false. A school district may be a primary government, and both primary governments and component units are included in the government-wide statements.

Question 7

With respect to the preparation of fund basis financial statements,governmental funds other than the General Fund are considered to be major when which of the following conditions exist?
A) With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of that individual governmental fund constitutes 10% of the total for the governmental fund category.
B) With respect to fund basis financial statements. governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of that individual governmental or enterprise fund are 5% of the total of the governmental and enterprise categories, combined.
C) Both A and B are required for a governmental fund to be a major fund.
D) Either A or B would fulfill the requirements.

Accepted Answer

Both A and B are required for a governmental fund to be considered a major fund for the purpose of preparing fund basis financial statements. The threshold for major status is either 10% of the total for governmental funds or 5% of the total for governmental and enterprise funds combined. Both conditions must be met for a fund to be considered major.

Question 8

Which of the following is true regarding the government-wide Statement of Net Assets?
A) The government-wide Statement of Net Assets reflects capital assets, net of accumulated depreciation, for both governmental and business-type activities.
B) The government-wide Statement of Net Assets must be prepared in a classified format; that is, both assets and liabilities must be separated between current and long-term categories.
C) The government-wide Statement of Net Assets includes all resources entrusted to the government; including governmental, proprietary, and fiduciary.
D) A reporting entity (primary government plus component units) total column is required.

Accepted Answer

The answer of Which of the following is true regarding...

Question 9

Governmental fund statements are prepared using:
A) Economic resources measurement focus and modified accrual basis of accounting.
B) Current financial resources measurement focus and modified accrual basis of accounting.
C) Economic resources measurement focus and accrual basis of accounting.
D) Current financial resources measurement focus and accrual basis of accounting.

Accepted Answer

Governmental fund statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting.

Question 10

Which of the following items would likely appear in the reconciliation between the governmental fund financial statements and the governmental activities column in the government-wide financial statements?
A) The inclusion of long-term liabilities in the government-wide financial statements and not in the governmental fund financial statements.
B) The inclusion of depreciation of capital assets in the governmental activities column of the government-wide financial statements and not in the governmental fund statements.
C) The additional accrual of some revenues and expenses in the government-wide financial statements that were not made in the governmental fund financial statements.
D) All of the above.

Accepted Answer

All of the given items are likely to appear in the reconciliation between the governmental fund financial statements and the governmental activities column in the government-wide financial statements. Long-term liabilities are not recognized in the governmental fund financial statements but are included in the government-wide financial statements. Depreciation is reported in the government-wide financial statements to reflect the consumption of capital assets over time, but not in the governmental fund statements. Finally, certain accruals of revenues and expenses may be required in the government-wide financial statements that are not recorded in the cash-basis accounting used in governmental fund financial statements. Therefore, all three options should be reconciled in order to create a more accurate picture of the government's financial position and performance.

Question 11

Under GASB rules for the financial reporting entity:
A) component units are included if the primary government is financially accountable for their operations.
B) counties are component units of the State Government.
C) blended and discretely presented component units are to be reported in government-wide financial statements but not in fund financial statements.
D) component units must be reported in columns (discrete presentation) separate from the funds of a primary government.

Accepted Answer

GASB rules dictate that component units should be included if the primary government is financially accountable for their operations.

Answer: C 
 Blended and discretely presented component units are to be reported in government-wide financial statements, but not in fund financial statements.

Answer: D 
 Component units must be reported in columns (discrete presentation) separate from the funds of a primary government, as per GASB rules.

Note: B is not a correct option as the question mentions nothing about counties being a component unit of state government.

Question 12

Which of the following is included in Required Supplementary Information (RSI)?
A) Management's Discussion and Analysis (MD&A).
B) Budgetary Comparison Schedule.
C) The Schedule of Funding Progress and Schedule of Employer Contributions when the government reports a pension trust fund.
D) All of the above.

Accepted Answer

RSI includes all three options - Management's Discussion and Analysis (MD&A), Budgetary Comparison Schedule, and the Schedule of Funding Progress and Schedule of Employer Contributions when the government reports a pension trust fund.

Question 13

Which of the following is true regarding the composition of the Comprehensive Annual Financial Report (CAFR)?
A) The CAFR is required in order to be in conformity with Generally Accepted Accounting Principles (GAAP).
B) The CAFR is to include both blended and discretely presented component units.
C) The CAFR contains four major sections: introductory, financial, supplementary, and statistical.
D) All of the above are true.

Accepted Answer

The CAFR includes both blended and discretely presented component units as part of its financial reporting.

Question 14

Which of the following is true regarding the government-wide Statement of Activities?
A) The Statement of Activities includes depreciation expense.
B) Transfers between governmental and business type activities are eliminated and do not appear on the government-wide Statement of Activities.
C) In the government-wide Statement of Activities, "special items" are those items that are both unusual and infrequent and are not under the control of management.
D) Taxes levied for specific functions may be reported as program revenue.

Accepted Answer

The answer of Which of the following is true regarding...

Question 15

Which of the following is true regarding the governmental fund financial statements?
A) The governmental fund financial statements include the Balance Sheet, and the Statement of Revenues, Expenditures, and Changes in Fund Balances.
B) The governmental fund financial statements are prepared on the current financial resources measurement focus and modified accrual basis of accounting.
C) The governmental fund Balance Sheet reflects the difference of assets minus liabilities as Fund Balance.
D) All of the above are true.

Accepted Answer

All of the options are true regarding the governmental fund financial statements. The balance sheet and the statement of revenues, expenditures, and changes in fund balances are included in the governmental fund financial statements. The statements are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The governmental fund balance sheet reflects the difference between assets and liabilities as fund balance. Therefore, all options are correct.

Question 16

Which of the following statements is false?
A) With respect to fund basis financial statements, a government may designate any fund to be a major fund if reporting that fund separately would be useful.
B) When preparing fund basis financial statements, any funds not reported separately are aggregated and reported in a single column under the label non-major funds.
C) When preparing fund basis financial statements, any funds not reported separately are reported by function.
D) In addition to the government-wide statements, governments are required to prepare fund financial statements for governmental, proprietary and fiduciary funds.

Accepted Answer

When preparing fund basis financial statements, any funds not reported separately are not reported by function. They are aggregated and reported in a single column under the label non-major funds.

Question 17

Which of the following is true regarding the Budgetary Comparison Schedule?
A) The Budgetary Comparison Schedule compares the actual results to the original budget, but display of variances is optional.
B) The Budgetary Comparison Schedule must be prepared for the General Fund and each major special revenue fund that has a legally adopted budget.
C) The Budgetary Comparison Schedule is considered part of the basic financial statements.
D) All of the above are true.

Accepted Answer

The Budgetary Comparison Schedule must be prepared for the General Fund and each major special revenue fund that has a legally adopted budget. This is the only statement that is completely true. Option A is partially true as the Budgetary Comparison Schedule compares the actual results to the original budget, but it is mandatory to display variances. Option C is not true as the Budgetary Comparison Schedule is not considered part of the basic financial statements.

Question 18

Which of the following is false regarding the government-wide financial statements?
A) The government-wide financial statements are not required to present prior-year data.
B) The government-wide financial statements include a Statement of Net Assets, Statement of Activities, and Statement of Cash Flows.
C) The government-wide financial statements include capital assets, including infrastructure, and reflect depreciation, except for infrastructure using the modified approach.
D) All of the above are true.

Accepted Answer

The government-wide financial statements do not include a Statement of Cash Flows. They consist of the Statement of Net Position and the Statement of Activities.

Question 19

The total fund balances presented in Governmental Funds Statements are different from the total net assets on the government-wide Statement of Net assets.Which of the following is not a reason for this difference?
A) The two statements have different bases of accounting
B) Capital assets used in government operations are not financial resources and therefore are not reported in the funds
C) Some liabilities are not due and payable in the current period and are not reported in fund liabilities
D) Accrued Wages Payable at year end are reported on the statement of net assets but are not reported in the fund statements

Accepted Answer

Accrued wages payable are typically reported in both the fund statements and the government-wide statements, so they do not contribute to the difference between the two.

Question 20

Which of the following is false regarding major fund reporting for governmental funds?
A) The General Fund is always a major fund.
B) Each fund that is considered major must be reported in a separate column in the governmental funds financial statements.
C) A government may designate any fund as major if it feels that reporting that fund in the basic financial statements would be useful.
D) None of the above, all are true.

Accepted Answer

Al of statements are true. The General Fund is always a major fund. Each fund that is considered major must be reported in a separate column in the governmental funds financial statements. A government may designate any fund as major if it feels that reporting that fund in the basic financial statements would be useful.

Quiz 2: Overview of Financial Reporting for State and Local Governments

Which of the following is true regarding the Comprehensive Annual Financial Report?

With respect to the preparation of fund basis financial statements,governmental funds other than the major fund are considered to be major when which of the following conditions exist?

Which of the following is true regarding the government-wide Statement of Activities?

Which of the following is true regarding Management's Discussion and Analysis (MD&A) ?

Which of the following is true regarding GASB's definition of the financial reporting entity?

Which of the following is true regarding the financial reporting entity of a state or local government?

With respect to the preparation of fund basis financial statements,governmental funds other than the General Fund are considered to be major when which of the following conditions exist?

Which of the following is true regarding the government-wide Statement of Net Assets?

Governmental fund statements are prepared using:

Which of the following items would likely appear in the reconciliation between the governmental fund financial statements and the governmental activities column in the government-wide financial statements?

Under GASB rules for the financial reporting entity:

Which of the following is included in Required Supplementary Information (RSI) ?

Which of the following is true regarding the composition of the Comprehensive Annual Financial Report (CAFR) ?

Which of the following is true regarding the government-wide Statement of Activities?

Which of the following is true regarding the governmental fund financial statements?

Which of the following statements is false?

Which of the following is true regarding the Budgetary Comparison Schedule?

Which of the following is false regarding the government-wide financial statements?

The total fund balances presented in Governmental Funds Statements are different from the total net assets on the government-wide Statement of Net assets.Which of the following is not a reason for this difference?

Which of the following is false regarding major fund reporting for governmental funds?