Question 1

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

A

Question 2

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 3

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 4

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 answer of The accounting equation for a governmental fund...

Question 5

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. These activities are funded by internal service funds, which are used to account for services provided by one department or agency to other departments or agencies within the same government entity.

Question 6

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 7

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 revenues are recorded when they are both measurable and available to finance expenditures of the current period, and expenditures are recognized when the related fund liability is incurred, except for certain long-term debt and capital asset transactions.

Proprietary fund financial statements, on the other hand, are prepared on the accrual basis of accounting, which means revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of cash flows. This provides a more complete picture of the financial performance and position of the entity, as proprietary funds are intended to operate more like commercial entities.

Question 8

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 funds that have been approved by a legislative body for a specific purpose. This provides control over the expenditure budget as the funds can only be used for the purpose they were authorized for. Allotments refer to the amount of funds allocated to a specific department or agency for a specific time period. Allocations refer to the distribution of funds to various departments or agencies. Encumbrances refer to the portion of the budget that has been set aside for a specific purchase or expense, but has not yet been spent.

Question 9

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

A fund is a separate accounting entity and therefore has its own accounting equation and accounting records (journals, ledgers, and other records) to track its financial transactions. However, a fund does not necessarily have its own separate auditor, as the auditor may be shared with the organization as a whole.

Question 10

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 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 must be earned (measurable) and the amount of revenue to be received must be reasonably certain (available), but it does not necessarily need to be collected.

Question 12

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.

Question 13

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 involves the transfer of goods or services for something of equal value. In this case, the aquatic center receives cash in exchange for providing a group swim, making it an example of an exchange transaction. The other options do not involve an exchange of goods or services of equal value.

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

Government-wide financial statements are prepared using the accrual basis of accounting, which records transactions when they occur, regardless of when cash is received or paid out. This provides a more comprehensive and accurate representation of the government's financial position and performance.

Question 15

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 16

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. The purpose of this fund is to provide financial information to evaluate the cost effectiveness and financial sustainability of the activity. The other options (A, B, and C) do not fit the description of an enterprise fund.

Question 17

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 18

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 a government entity to provide and fund services and goods. It focuses on tracking and reporting the flow of resources as they are received and spent within specific funds, such as the general fund or special revenue funds. This enables governments to keep track of their financial positions and ensure that they have the necessary resources to support current operations and future plans. While capital expenditures and intergovernmental transfers are important aspects of government finance, they are secondary to the primary goal of ensuring that current services and goods can be provided and funded. Similarly, while income measurement is important for financial reporting purposes, it is not the primary focus of government fund accounting.

Question 19

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

The primary focus of governmental accounting is accountability to the public and not on generating profits like in the corporate sector. The government is accountable for the efficient use of public funds and resources to meet the needs of its citizens. Hence, the accounting practices used by the government need to be different from those used in the corporate sector.

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 would most likely report depreciation expense because it is used for business-like activities that charge fees to customers, such as a utility company or a parking garage. These types of funds are required to use accrual accounting, which includes reporting depreciation expense. Special revenue funds are used for specific programs and typically report revenue and expenses related to that program, but may not have any depreciable assets. Capital projects funds are used for construction or acquisition of major capital assets and may report capital assets, but not necessarily depreciation expense. Debt service funds are used to service debt payments and do not typically have depreciable assets.

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

The modified accrual basis of accounting is used for

Internal Service Funds differ from Enterprise Funds because Internal Service Funds

Government-wide financial statements exclude the

The accounting equation for a governmental fund is

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?

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.

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

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.

What funds are reported in Government-wide financial statements?

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

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

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

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

Government-wide financial statements include a

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 comprehensive annual financial report has the following three major sections:

The key focus of government fund accounting concerns

Governmental accounting differs from corporate financial accounting primarily because

Which fund would most likely report depreciation expense?