Question 1

What is the correct sequence in the expenditure process in governmental accounting?

Accepted Answer

The correct sequence in the expenditure process in governmental accounting is Appropriation, Encumbrance, Expenditure, and Disbursement. Appropriation is the authorization to spend, encumbrance is the set-aside of funds for a specific purpose, expenditure is the actual spending of funds, and disbursement is the release of funds to pay for the expenditure.

Question 2

The general fund of Park City acquired computer equipment at a cost of $50,000 on May 18,2009.To record acquisition of this equipment,the general fund of Park City should debit:

Accepted Answer

In governmental accounting, the acquisition of equipment by the general fund is recorded as an expenditure, not as an asset. Therefore, the correct entry is to debit "expenditures."

Question 3

Identify the legal term that allows the general fund to make expenditures.

Accepted Answer

Appropriations are legal authorizations granted by a legislative body to spend money for specific purposes. In the case of a general fund, appropriations would allow for the expenditure of funds for various government services and programs.

Question 4

Which of the following observations concerning encumbrances is NOT true?

Accepted Answer

Encumbrances are recognized at the time of commitment, which is usually when a purchase order or contract is created. They are then adjusted or relieved when disbursements are made, but they are not only recognized at the time disbursements are made.

Question 5

The Town of Pasco has no supplies inventory in its general fund on January 1,2008.During 2008,Pasco incurred expenditures of $200,000 for the acquisition of supplies.On December 31,2008,Pasco's inventory of supplies amounted to $30,000.Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year.On December 31,2008,the general fund of Pasco should credit:

Accepted Answer

Under the purchase method, the entire amount of supplies purchased is initially recorded as an expenditure. At year-end, the inventory of supplies is recognized by adjusting the fund balance. Therefore, the Fund Balance-Reserved for Inventories should be credited for the $30,000 of supplies on hand.

Question 6

On July 25,2008,the city of Pullman,which reports on a calendar-year basis,ordered five police cars at an estimated cost of $200,000.On August 26,2008,the police cars were received,and the actual cost amounted to $197,000.Pullman encumbered the appropriation for police cars in its general fund when the cars were ordered.When the police cars were received,the general fund of Pullman should:

Accepted Answer

When the police cars were received, Pullman should debit Expenditures for $197,000, which represents the actual amount paid for the police cars. The encumbrance of $200,000 was recorded when the cars were ordered and is no longer needed since the actual cost was less than estimated. Therefore, neither option A nor B is correct. Option D is also incorrect because it suggests crediting Budgetary Fund Balance Reserved for Expenditures for $200,000, which would overstate the amount available for expenditures.

Question 7

The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet.What account is debited in the general fund when Ames acquires supplies?

Accepted Answer

The answer of The City of Ames uses the consumption...

Question 8

Which organization has the authority to establish generally accepted accounting principles for state and local government entities?

Accepted Answer

The Governmental Accounting Standards Board (GASB) has the authority to establish generally accepted accounting principles (GAAP) for state and local government entities in the United States. The National Council on Governmental Accounting and the Municipal Officers Finance Organization are not authoritative standard-setting bodies. The Financial Accounting Standards Board sets GAAP for private sector entities.

Question 9

Which of the following funds are classified as fiduciary funds?

Accepted Answer

Private-purpose trust funds and agency funds are classified as fiduciary funds according to generally accepted accounting principles (GAAP). Fiduciary funds account for resources held by a government in a trustee capacity or as an agent for individuals, organizations, or other governments. The other options listed (A, B, and D) are all classified as governmental funds.

Question 10

Works of art and historical treasures purchased by the general fund should be reported as:

Accepted Answer

I) General fund resources should be used to acquire art and historical treasures if such items are considered to have artistic, cultural, or historical significance. Therefore, these items are reported as assets in the government-wide financial statements.

II) Since these items are collected and held for public exhibition, education, or research in furtherance of public service rather than financial gain, they are classified as collections rather than investments. The collections are exempt from normal capitalization and depreciation policies. Therefore, they are not depreciated in the government-wide financial statements, but rather are reported as capital assets with a cost of $0.

Question 11

Which of the following characteristics are emphasized in the accounting for state and local government entities? I.Revenues should be matched with expenditures to measure success or failure of the government entity.
II)There is an emphasis on expendability of resources to accomplish objectives of the governmental entity.

Accepted Answer

The accounting for state and local government entities emphasizes the expendability of resources to accomplish objectives, rather than matching revenues with expenditures to measure success or failure. This approach focuses on how resources are used to meet the entity's goals.

Question 12

Which of the following funds provides goods and services only to other departments or agencies of the government on a cost-reimbursement basis?

Accepted Answer

According to generally accepted accounting principles (GAAP), internal service funds are used to account for goods and services provided by one department or agency of the government to other departments or agencies, on a cost-reimbursement basis. Therefore, option A is the correct answer.

Option B, enterprise funds, refers to funds that are used to account for operations that provide goods or services to the public on a user-fee basis such as water or transportation services.

Option C, special revenue funds, are used to account for specific revenue sources that are restricted or designated for particular purposes, such as grants or sales taxes.

Option D, the general fund, is used to account for most of the government’s basic services, such as police, fire, and sanitation. However, it does not solely provide goods and services to other departments or agencies of the government on a cost-reimbursement basis.

Question 13

Which of the following funds are classified as proprietary funds?

Accepted Answer

Proprietary funds are funds that operate like businesses and charge fees for services provided. Enterprise funds are used to account for operations that are financed and operated in a manner similar to private business enterprises, while internal service funds are used to account for services provided by one department or agency to other departments or agencies of the government on a cost-reimbursement basis.

Question 14

Which of the following funds are classified as governmental funds?

Accepted Answer

The general and special revenue funds are classified as governmental funds according to the Governmental Accounting Standards Board (GASB). Internal service, capital projects, debt service, enterprise, and agency funds are all considered proprietary or fiduciary funds.

Question 15

Which of the following funds should use the accrual basis of accounting?

Accepted Answer

The answer of Which of the following funds should use...

Question 16

Which of the following funds should use the modified accrual basis of accounting?

Accepted Answer

Capital projects and special revenue funds typically use the modified accrual basis of accounting as they are focused on specific projects or programs with defined periods of activity and funding sources. The other fund types listed have different characteristics that make other bases of accounting more appropriate.

Question 17

The following information was obtained from the general fund balance sheet of Lima Village on June 30,2009,the close of its fiscal year: On June 30,2009,what was Lima's unreserved fund balance in its general fund?

Accepted Answer

The unreserved fund balance can be calculated as total fund balance minus amounts restricted for specific purposes. In this case, the total fund balance is $84,000 and there are $50,000 of amounts restricted for specific purposes. Therefore, the unreserved fund balance is $34,000 (option C).

Question 18

What amount should be reported as expenditures for the current fiscal year when accounting for inventories of supplies under the purchase method and under the consumption method?

Accepted Answer

The answer of What amount should be reported as expenditures...

Question 19

Which of the following statements is(are)correct about the funds used by governmental entities?

Accepted Answer

I. Governmental entities use funds accounting to track resources that are legally restricted to expenditures for specific purposes.
This statement is correct. Governmental entities use fund accounting to properly track and report resources that are restricted for specific purposes such as capital improvement funds, special revenue funds, etc.

II. Governmental entities do not use budgeting to plan for future cash inflows and outflows.
This statement is incorrect. Governmental entities use budgeting to plan for future cash inflows and outflows. Budgets are essential for governmental entities as they help in identifying the priorities, setting goals, and measuring performance against the goals.

Question 20

Under the modified accrual basis of accounting,revenue should be recognized when it is:

Accepted Answer

The answer of Under the modified accrual basis of accounting,revenue...

Quiz 17: Governmental Entities: Introduction and General Fund Accounting