Question 1

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 operates much like a business, with revenue being generated from the sale of goods or services and expenses being incurred in the production and delivery of those goods or services. Examples of activities that might be accounted for in an enterprise fund include utilities, parking garages, and golf courses.

Question 2

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 when they become both measurable and available, which means that they are earned and the related cash is expected to be collected within a reasonable period of time. This differs from the accrual basis of accounting, which recognizes revenues when they are earned regardless of when the cash is collected.

Question 3

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 4

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

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

Question 5

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 is primarily concerned with financial reporting for accountability purposes, rather than financial performance or profitability. Governments exist to serve the public and ensure the efficient use of public resources, which requires a different approach to financial reporting than for-profit corporations. Therefore, the lack of a profit motive is a key difference between governmental accounting and corporate financial accounting.

Question 6

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

Government-wide financial statements consist of a statement of net assets and a statement of activities, which provide a broad overview of a government's financial position and operations.

Question 7

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 is a fund that operates like a business and generates revenue through the sale of goods or services. Therefore, it is the most likely fund to report depreciation expense, which is a non-cash expense that reflects the wear and tear of long-term assets used in the business operations.

Question 8

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 9

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 a type of proprietary fund that provides goods and services primarily to other government agencies, such as motor pools or printing services. Unlike enterprise funds, they are not intended to show a profit, although they may charge for their services.

Question 10

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 is primarily concerned with the current ability of the government to provide and fund services and goods. This is because government accounting serves as a means of ensuring that budgetary resources are being used effectively and efficiently, and that government entities are meeting their fiscal responsibilities to their constituents. Fund accounting also focuses on providing financial transparency and accountability to citizens, stakeholders and other interested parties. Capital expenditures and intergovernmental transfers may be part of fund accounting, but they are not its primary focus. Income measurement is also not the key focus of government fund accounting.

Question 11

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 issued by the Governmental Accounting Standards Board (GASB), which sets accounting and financial reporting standards for state and local governments. The other options may provide guidance, but do not hold the same level of authority as GASB Statements.

Question 12

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 all examples of internal service activities that provide services or goods to other departments or agencies within the government. Therefore, they would be accounted for using an internal service fund. An agency fund is used to account for resources held by a government in a trustee capacity for individuals or other entities, while an enterprise fund is used for activities that are primarily financed by user charges or where the government is engaged in business-type activities. A trust fund is used to account for resources held by a government in a fiduciary capacity for the benefit of others.

Question 13

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 set of accounting records to track its financial activities and transactions, such as journals and ledgers. However, a separate auditor may not necessarily be assigned to each fund. Therefore, options I and II are correct but III is not always true.

Question 14

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 15

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 the approved or authorized expenditures that provide legislative control over the expenditure budget. Allotments refer to the process of assigning specific amounts of money from the total budget to individual departments or agencies. Allocations refer to the distribution of funds within a department or agency. Encumbrances are commitments to pay for goods or services that have not yet been received or paid for, such as purchase orders or contracts.

Question 16

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 17

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 18

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 is one where both parties give and receive something of value. Option C is an exchange transaction because the aquatic center is receiving cash for providing a service (group swim) to the customer. The other options are not exchange transactions because they do not involve a direct exchange of goods or services. A homeowner paying property taxes is an imposed non-exchange transaction since they do not receive anything in return. The university receiving a grant is a non-exchange transaction because there is no direct exchange between the university and the government. The employer deducting money for state tax withholding is also not an exchange transaction because it is a legal requirement imposed by the state, and the employer does not directly receive anything from the employee.

Question 19

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 20

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, while proprietary fund financial statements are prepared on the accrual basis of accounting. This is because governmental funds are designed to account for current financial resources and focus on short-term financial activities, while proprietary funds are similar to private-sector entities and focus on measuring economic resources and long-term financial activities. The other answer choices are incorrect because they either mix up the basis of accounting for governmental and proprietary funds or use terminology that does not apply to governmental accounting.

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

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?

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

What funds are reported in Government-wide financial statements?

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

Governmental accounting differs from corporate financial accounting primarily because

Government-wide financial statements include a

Which fund would most likely report depreciation expense?

The accounting equation for an agency fund is

Internal Service Funds differ from Enterprise Funds because Internal Service Funds

The key focus of government fund accounting concerns

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

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?

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 comprehensive annual financial report has the following three major sections:

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

Government-wide financial statements exclude the

The modified accrual basis of accounting is used for

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

The accounting equation for a governmental fund is

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