Question 1

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 2

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 provide legislative control over the expenditure budget by specifying the purposes for which funds are to be used and the amounts of funds to be used for each purpose. Allotments are amounts of money authorized to be spent by a government agency. Allocations are the process of distributing a government agency's budget to specific programs or activities. Encumbrances are commitments to purchase goods or services that have been ordered but not yet paid for.

Question 3

A fund
A)has its own accounting equation.
B)has consolidated financial statements for all funds.
C)must follow GAAS.
D)always uses modified accrual accounting.

Accepted Answer

A fund is a separate entity and therefore has its own accounting equation, separate from any other entity or organization it may be associated with.

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

The key focus of government fund accounting concerns the current ability to provide and fund services and goods. This includes monitoring and accounting for the inflow and outflow of financial resources in various funds, as well as ensuring that resources are allocated appropriately to meet current needs and obligations. Capital expenditures, intergovernmental transfers from the general fund, and income measurement are all important aspects of government accounting, but they are not the key focus.

Question 5

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

Accepted Answer

The modified accrual basis of accounting is used for governmental funds, which are defined as funds that are used to account for most government resources, including taxes, grants, and fees. This type of accounting is different from the accrual basis of accounting typically used by businesses, as it focuses on the inflows and outflows of resources rather than revenue and expenses.

Question 6

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 7

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 a transaction in which both parties receive and give something of value. In this case, the aquatic center receives payment in exchange for providing a service (group swim). The other transactions listed do not involve a direct exchange of goods or services.

Question 8

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 accountability to the public, rather than generating profits for shareholders, as is the case with corporate financial accounting. This requires a different focus in terms of financial reporting and measurement, as well as different standards and regulations. Additionally, the size and complexity of government operations and the fact that they serve a public purpose rather than a profit motive makes it necessary to have a separate set of accounting principles and practices rather than relying solely on corporate GAAP.

Question 9

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 position and a statement of activities.
D)statement of activities and a statement of cash flows.

Accepted Answer

Government-wide financial statements typically include a Statement of Net Position and a Statement of Activities. These statements provide a broader view of the government's overall financial status.

Question 10

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 typical examples of internal service activities that provide services to other units within the same government. Such activities are accounted for using an internal service fund.

Question 11

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. This means that the revenue can be reliably measured and that it is available for use by the government in the current period or soon thereafter. This is different from the accrual basis of accounting, which recognizes revenues when they are earned, regardless of when they are collected.

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 type of fund is distinguished from other funds because it charges customers for the services it provides and operates more like a business or commercial entity. Temporary funds are used for short-term activities or projects, general funds are used for general government operations, and agency funds are used to account for assets held by a government in a custodial capacity.

Question 13

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 establish accounting and financial reporting standards. The other options, such as Technical Bulletins and Consensus Positions of GASB Emerging Issues Task Force, provide interpretive guidance and do not have the same level of authority as GASB Statements. Financial Accounting Standards Board Statements are not applicable to state and local governments as they follow GASB standards.

Question 14

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 use accrual basis accounting, which recognizes revenue when earned and expenses when incurred, regardless of whether cash has been exchanged. This provides a more comprehensive and accurate picture of the government's financial position and performance.

Question 15

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 16

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 17

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 18

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

Accepted Answer

The accounting equation for a governmental fund is Current assets - Current liabilities = Fund Balance, as governmental funds focus on short-term financial resources and liabilities.

Question 19

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 20

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 type of government fund that operates like a business, providing goods or services to the public for a fee. As such, it is required to report depreciation expenses on its fixed assets like any other business, to reflect wear and tear over time. Special revenue funds, capital projects funds, and debt service funds are not expected to report depreciation expense as they do not operate like typical profit-making entities.

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

Government-wide financial statements exclude the

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

A fund

The key focus of government fund accounting concerns

The modified accrual basis of accounting is used for

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

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

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?

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

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?

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

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

The accounting equation for an agency fund is

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

What funds are reported in Government-wide financial statements?

The accounting equation for a governmental fund is

Internal Service Funds differ from Enterprise Funds because Internal Service Funds

Which fund would most likely report depreciation expense?