CMFO EXAM -
CURRENT FUND STUDY
TEST QUESTIONS AND
CORRECT ANSWERS
GRADED A+ 2025-2026
Name the two types of local units of government in NJ - ANS-1. Municipalities
2. Counties
A municipality & county are essentially: - ANS-- corporations created by the State's
Constitution and statutes
A municipal corporation is designed to: - ANS-- aid the municipality in carrying out
specific activities
A municipal corporation has the following powers: (5) - ANS-1. to sue & be sued, to
defend & be defended in all courts of law
2. to adopt a common seal
3. to acquire property
4. to acquire, lease, and operate public utilities
5. to exercise any power & render any service which contributes to the general
welfare
What is an Authority? - ANS-- an authority is a "quasi-municipal" corporation
established for the purpose of achieving certain objectives or providing specified
services
,- established WITHOUT the consent of the residents
- only has powers specifically granted by law
Examples of an Authority - ANS-1. water treatment
2. sewage & waste disposal
3. parking
What is an ordinance? - ANS-- an ordinance is a municipality's basic law to regulate
its local affairs
- passed by the municipality's legislative body
- contained in a municipality's charter
- MUST NOT conflict with the municipality's charter
- municipal laws are subordinate to the state
What is a municipal charter? - ANS-- a municipal charter is to the municipality, what
the constitution is to the state
What are the characteristics of a governmental unit as a corporation? - ANS-1.
Permanency of government entity
2. Purpose of establishment
3. Ability to levy taxes (main source of revenue)
4. Greater borrowing power
5. Fund accounting
6. Greater legal restrictions
7. Fiduciary responsibility to customers
8. Lack of profit motive
Common characteristics shared by a municipality & private business: - ANS-1.
double entry accounting
2. maintenance of a general ledger & subsidiary ledgers
3. required financial reporting
, 4. required system of internal controls
What is a fund? - ANS-- a fund is a sum of money or other resources segregated for
the purpose of carrying on a specific activity
- contains self-balancing set of accounts
Required set of funds: - ANS-1. Current
2. Trust
3. Capital
4. Utility operating
5. Utility capital
What is the Current Fund? - ANS-- the current fund is the fund where all current
operations of the municipality are accounted for.
- transactions represent the everyday operations of the local unit
What is the accounting equation - ANS-Assets = Liabilities + Fund Balance
- MUST always balance
What are the permanent (Balance Sheet) accounts? - ANS-1. Assets
2. Liabilities
3. Fund Balance
- All three major account groups compile the balance sheet
- they are PERPETUAL - meaning that they are not closed out annually
What are the temporary (Income Statement) accounts? - ANS-1. Revenues
2. Appropriations
- these accounts start each accounting period with NO balance
CURRENT FUND STUDY
TEST QUESTIONS AND
CORRECT ANSWERS
GRADED A+ 2025-2026
Name the two types of local units of government in NJ - ANS-1. Municipalities
2. Counties
A municipality & county are essentially: - ANS-- corporations created by the State's
Constitution and statutes
A municipal corporation is designed to: - ANS-- aid the municipality in carrying out
specific activities
A municipal corporation has the following powers: (5) - ANS-1. to sue & be sued, to
defend & be defended in all courts of law
2. to adopt a common seal
3. to acquire property
4. to acquire, lease, and operate public utilities
5. to exercise any power & render any service which contributes to the general
welfare
What is an Authority? - ANS-- an authority is a "quasi-municipal" corporation
established for the purpose of achieving certain objectives or providing specified
services
,- established WITHOUT the consent of the residents
- only has powers specifically granted by law
Examples of an Authority - ANS-1. water treatment
2. sewage & waste disposal
3. parking
What is an ordinance? - ANS-- an ordinance is a municipality's basic law to regulate
its local affairs
- passed by the municipality's legislative body
- contained in a municipality's charter
- MUST NOT conflict with the municipality's charter
- municipal laws are subordinate to the state
What is a municipal charter? - ANS-- a municipal charter is to the municipality, what
the constitution is to the state
What are the characteristics of a governmental unit as a corporation? - ANS-1.
Permanency of government entity
2. Purpose of establishment
3. Ability to levy taxes (main source of revenue)
4. Greater borrowing power
5. Fund accounting
6. Greater legal restrictions
7. Fiduciary responsibility to customers
8. Lack of profit motive
Common characteristics shared by a municipality & private business: - ANS-1.
double entry accounting
2. maintenance of a general ledger & subsidiary ledgers
3. required financial reporting
, 4. required system of internal controls
What is a fund? - ANS-- a fund is a sum of money or other resources segregated for
the purpose of carrying on a specific activity
- contains self-balancing set of accounts
Required set of funds: - ANS-1. Current
2. Trust
3. Capital
4. Utility operating
5. Utility capital
What is the Current Fund? - ANS-- the current fund is the fund where all current
operations of the municipality are accounted for.
- transactions represent the everyday operations of the local unit
What is the accounting equation - ANS-Assets = Liabilities + Fund Balance
- MUST always balance
What are the permanent (Balance Sheet) accounts? - ANS-1. Assets
2. Liabilities
3. Fund Balance
- All three major account groups compile the balance sheet
- they are PERPETUAL - meaning that they are not closed out annually
What are the temporary (Income Statement) accounts? - ANS-1. Revenues
2. Appropriations
- these accounts start each accounting period with NO balance
