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143 Test Bank for Essentials of Accounting for

Governmental and Not for Profit Organizations 12th

True False Questions Free Text Questions

-Multiple Choice Questions

Governmental funds do not include:

1 A) Special revenue funds

2 B) Agency funds

3 C) Debt service funds

4 D) The General fund

The fund basis statements for governmental funds are

presented using the

1 A) Economic Resources Measurement focus and the Accrual Basis of Accounting.

2 B) Current Financial Resources Measurement focus and the Modified Accrual Basis of Accounting.

3 C) Current Financial Resources Measurement focus and the Accrual Basis of

Accounting.

4 D) Economic Resources Measurement focus and the Modified Accrual Basis of

Accounting.

Which of the following would not be included in FASB

Statement of Financial Accounting Concepts #4, which identifies the information needs of the users of non-

business financial statements?

1 A) Assessing services provided by a non-business organization and its ability to continue to provide those services

2 B) Format and content of financial statements

3 C) Assessing managements’ stewardship and performance

4 D) Evaluation of an organization’s resources, obligations and effects of changes in net resources

What are Enterprise funds used for?

1 A) To account for pension and employee benefit funds for which the governmental unit

is the trustee.

2 B) To account for most of the basic services provided by the governmental units.

3 C) To account for resources provided primarily through the use of sales and service charges to parties external to the government.

4 D) To report resources that are legally restricted so only earnings, not principal, may be expended, and for purposes to benefit the government and its citizenry

In order for a fund to exist, there must be:

1 A) A fiscal entity; assets set aside for a specific purpose

2 B) A double-entry accounting entity

3 C) A & B are optional and not required

4 D) Both A & B are required

Which of the following is most correct with regard to

Management's Discussion and Analysis (MD&A)?

1 A) State and local governments are required to provide an MD&A.

2 B) Federal agency financial reports are required to provide an MD&A.

3 C) Both state and local governments and federal agencies are encouraged, but not required to provide an MD&A.

4 D) Both state and local governments and federal agencies are required to provide an MD&A.

Which of the following best describes how many funds a

government should use?

1 A) One for each revenue source

2 B) Two at a minimum; the General Fund and one enterprise fund

3 C) As many as necessary to fulfill legal requirements and sound financial

administration

4 D) None of the above

The Fund accounts for and reports the proceeds of

specific revenue sources that are restricted or committed

to expenditure for specified purpose other than debt

service or capital projects

1 A) Agency

2 B) Enterprise

3 C) General

4 D) Special revenue

The term “proprietary funds” applies to:

1 A) all funds that use accrual accounting.

2 B) enterprise and internal service funds only.

3 C) enterprise, internal service, and private-purpose trust funds.

4 D) none of the above answers are correct.

Proprietary funds use the:

1 A) current financial resources measurement focus and modified accrual basis of accounting

2 B) economic resources measurement focus and accrual basis of accounting.

3 C) economic resources measurement focus and modified accrual basis of accounting.

4 D) current financial resources measurement focus and accrual basis of accounting.

Which of the following use current financial resources

measurement focus?

1 A) Fiduciary fund statements

2 B) Governmental fund statements

3 C) Proprietary fund statements

4 D) Internal Service fund statements

Which of the following is not a fiduciary fund type?

1 A) Agency.

2 B) Expendable trust.

3 C) Private-purpose trust.

4 D) All of the above

Long-term debt of a governmental unit would be reported in

the:

1 A) government-wide financial statements and proprietary fund financial statements.

2 B) government-wide financial statements only.

3 C) debt service funds of governmental fund financial statements and government-wide financial statements.

4 D) notes to the financial statements only.

The FASB has the authority to establish accounting and

financial reporting standards for:

1 A) Federal government

2 B) Private not-for-profits

3 C) Public not-for-profits

4 D) State and local governments

Which of the following is an environmental difference between

governments and for-profit business enterprises?

1 A) Relationship with stakeholders

2 B) Donor restricted assets

3 C) Investment Trust

4 D) Permanent

Level “A” GAAP for The University of Virginia, a public

institution, would be established by the:

1 A) Financial Accounting Standards Board.

2 B) Governmental Accounting Standards Board.

3 C) American Institute of Certified Public Accountants.

4 D) National Association of College and University Business Officers.

A city government sells police cars no longer in use No

restrictions have been placed on the proceeds Which fund should account for the receipt?

1 A) General fund

2 B) Capital projects fund

3 C) Enterprise fund

4 D) Debt service fund

Notre Dame University, a private institution, has level “A” GAAP

established by the:

1 A) American Institute of Certified Public Accountants.

2 B) Governmental Accounting Standards Board.

3 C) National Association of College and University Business Officers.

4 D) Financial Accounting Standards Board.

The Financial Accounting Standards Board (FASB) is the

standard setting organization for which of the following reporting organizations?

1 A) Private not-for-profits

2 B) Public not-for-profits

3 C) Investor owned businesses

4 D) A and C are both correct.

Which of the following is a governmental fund?

1 A) Agency

2 B) Enterprise

3 C) Special revenue

4 D) Internal service

What type of fund is used when resources are provided mainly

through business-like transactions to parties external to the government?

1 A) Internal Service Funds

2 B) Capital Projects Funds

3 C) Agency Funds

4 D) Enterprise Funds

Under GASB Statement 34, modified accrual accounting would

be found in the:

1 A) government-wide financial statements only.

2 B) governmental fund financial statements only.

3 C) governmental and fiduciary fund financial statements only.

4 D) governmental, proprietary, and fiduciary fund financial statements but not in the government-wide financial statements

Which of the following statement(s) are not included in the

proprietary funds for a government entity:

1 A) Statement of Revenues, Expenditures, and Changes in Fund Balances

2 B) Statement of Cash Flows

3 C) Statement of Net Position

4 D) All of the above are included

Which of the following characteristics would not define an

organization as governmental?

1 A) The power to enact and enforce a tax levy.

2 B) The potential for unilateral dissolution by a government with the net resources reverting to a government.

3 C) The receipt of grant money from a state or local government for the purpose of providing services to the public.

4 D) All of the above.

Which of the following funds is not a Fiduciary Fund?

1 A) Investment Trust Fund

2 B) Private Purpose Trust Fund

A city government collects local option sales taxes legally

restricted to pay for the construction of a new

courthouse Which fund should account for the receipt of the sales taxes?

1 A) Special revenue fund

2 B) Capital projects fund

3 C) Private-purpose trust fund

4 D) General fund

Government-wide statements use the:

1 A) current financial resources measurement focus and accrual basis of accounting.

2 B) economic resources measurement focus and modified accrual basis of accounting.

3 C) economic resources measurement focus and accrual basis of accounting.

4 D) none of the above.

Which of the following is not a fiduciary fund?

1 A) Agency

2 B) Permanent

3 C) Pension trust

4 D) Private-purpose trust

Financial reports for state and local governments are well

suited for all the following EXCEPT?

1 A) Assessing financial condition and results of operations.

2 B) Comparing actual results with the legally adopted budget.

3 C) Measuring the effectiveness of government services such as police and fire protection.

4 D) Assisting in determining compliance with finance-related laws and regulations.

The GASB has the authority to establish accounting and

financial reporting standards for:

1 A) State governments

2 B) Private not-for-profits

3 C) Federal government

4 D) None of the above

Which of the following is true regarding fund classifications?

1 A) Governmental funds include the General, special revenue, debt service, capital projects, and permanent.

2 B) Proprietary funds include enterprise, internal service, and private-purpose.

3 C) Both of the above.

4 D) None of the above.

Which of the following funds is considered a Fiduciary Fund?

1 A) Debt Service Fund

2 B) Enterprise Fund

3 C) Internal Service Fund

4 D) Pension Trust Fund

Governmental funds include:

1 A) Special revenue funds

2 B) Internal service funds

3 C) Debt service funds

4 D) A and C

The _ sets the accounting and financial reporting

standards for both state and local governments and

The Funds are used when resources are provided

primarily through the use of sales and service charges to parties external to the government and it is the intent of the government to measure revenues, expenses and changes in net position

1 A) governmental, proprietary, and restricted

2 B) proprietary, fiduciary, and restricted

3 C) governmental, fiduciary, and restricted

4 D) governmental, proprietary, and fiduciary

A city government collects local option sales taxes legally

restricted to pay for the hiring of teachers for hearing impaired school children Which fund should account for the receipt of the sales taxes?

1 A) Special revenue fund

2 B) Capital projects fund

3 C) Private-purpose trust fund

4 D) General fund

GASB Concepts Statement No 3, Communication Methods in

General Purpose External Financial Reports that Contain Basic Financial Statements, states that

1 A) notes to the financial statements may not include management’s objective

explanations.

2 B) required supplementary information should be objective but may also include predictions or subjective assessments if management deems it necessary for

understanding of the financial statements.

3 C) disclosure in the notes is not an adequate substitute for recognition in the financial statements.

4 D) All of the above are correct.

Which of the following organizations has authority to establish

accounting and financial reporting standards for the

federal government?

1 A) Federal Accounting Standards Advisory Board.

2 B) Office of Management and Budget.

3 C) Governmental Accounting Standards Board.

4 D) None of the above; no one has been granted authority to set standards for the federal government

The Funds are used to account for situations in which

the government is acting as a collecting/disbursing

agent

1 A) Agency

2 B) Enterprise

3 C) General

4 D) Special revenue

Which of the following funds is used to account for the payment

of principal and interest of general long term debt of a government?

1 A) Capital Projects Fund

2 B) Internal Service Fund

3 C) Agency Fund

4 D) None of the above

The term “fiduciary funds” applies to:

1 A) enterprise and internal service funds.

2 B) pension, investment trust and enterprise funds

3 C) enterprise, internal service, and private-purpose trust funds.

4 D) none of the above answers are correct.

The GASB is under the oversight of:

1 A) GAO.

2 B) FASAB.

3 C) FAF.

4 D) FASB.

The _ is the government’s official annual report

prepared and published as a matter of public record

1 A) comprehensive annual financial report

2 B) governmental annual financial report

3 C) independent auditor’s report

4 D) complete audited financial report

Long-term debt to be paid from proprietary funds is reported as

a liability in

1 A) the proprietary fund Statement of Net assets (or Net Position).

2 B) the government-wide Statement of Net assets (or Net Position).

2 B) As many as needed to fulfill legal obligations.

3 C) A varying number, depending on the annual needs of the government.

4 D) None of the above.

Which of the following is not an objective of federal financial

Governmental funds use the:

1 A) economic resources measurement focus and accrual basis of accounting.

2 B) current financial resources measurement focus and accrual basis of accounting.

3 C) economic resources measurement focus and modified accrual basis of accounting.

4 D) current financial resources measurement focus and modified accrual basis of accounting

Which of the following are the governmental funds?

1 A) General, special revenue, debt service, capital projects, private purpose.

2 B) General, special revenue, debt service, capital projects, permanent.

3 C) General, special revenue, debt service, capital projects, internal service.

4 D) None of the above.

Level "A" GAAP for Cook County Hospital, a public hospital,

would be established by the:

1 A) Governmental Accounting Standards Board.

2 B) Financial Accounting Standards Board.

3 C) Hospital Financial Management Association.

4 D) American Institute of Certified Public Accountants.

The FASAB has the authority to establish accounting and

financial reporting standards for:

1 A) State and local governments

2 B) Investor owned business

3 C) Federal government

4 D) Public not-for-profits

A permanent fund classified under governmental funds…

1 A) Accounts for most of the basic services provided by the governmental unit.

2 B) Accounts for financial resources intended for major capital projects

3 C) Accounts for services provided by one department of a government to another

4 D) Accounts for resources that are legally restricted so only earnings, not principal, may be expended, and for purposes to benefit the government and its citizenry.

Under GASB Statement 34, capital assets:

1 A) must be reported in government-wide statements but are not reported in any of the fund financial statements.

2 B) must be reported in government-wide statements and in proprietary fund financial statements.

3 C) are not to be reported in either government-wide or fund financial statements.

4 D) are to be reported but not depreciated in government-wide and fund financial statements.

Under GASB Statement 34, accrual accounting is used for:

1 A) government-wide financial statements only.

2 B) government-wide financial statements and proprietary fund financial statements only.

3 C) government-wide, proprietary fund, and fiduciary fund financial statements only.

4 D) government-wide and all fund financial statements

A city government makes its semiannual payment of interest on

revenue bonds issued to pay for the construction of

additional public transit stations Which fund would

account for the payment?

1 A) Debt service fund

2 B) Capital projects fund

3 C) Enterprise fund

4 D) Internal service fund

Which of the following fund types is present in every

Which fund category must change from modified accrual to

accrual basis when preparing government-wide financial statements?

1 A) Governmental

2 B) Proprietary

3 C) Fiduciary

4 D) A & B only

The Governmental Accounting Standards Board has been given

authority to establish accounting and financial reporting standards for:

1 A) all governmental units and agencies.

2 B) federal, state, and local governments and governmentally related utilities,

authorities, hospitals, and colleges and universities

3 C) state and local governmental entities, and governmentally related utilities,

authorities, hospitals, and colleges and universities.

4 D) all governmental units and all not-for-profit organizations.

Under the modified accrual basis of accounting, expenditures

should be recognized when:

1 A) they are authorized by the budget ordinance.

2 B) they are paid.

3 C) they are measurable and can be financed by the revenues of the current period.

4 D) the fund liability is incurred.

Which of the following is not one of the objectives of Federal

Financial Reporting, as outlined in SFFAC 1, which was issued by the FASAB?

1 A) Financial reporting should enable evaluation of the success rate of programs.

2 B) Financial reporting should enable evaluation of the service efforts, costs and

accomplishments of the reporting entity.

3 C) Financial reporting should reveal whether financial systems and controls are

adequate.

4 D) Financial reporting should demonstrate accountability with regard to raising and expending money.

The “Hierarchy of GAAP” is established by the:

1 A) Financial Accounting Standards Board.

2 B) Federal Accounting Standards Advisory Board

3 C) Governmental Accounting Standards Board

4 D) All of the above have established a hierarchy