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Test Bank For Introduction To Fund
Accounting 5th Edition Norvelle Newest
Edition 2026
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Chapter 1
The government and not-for-profit environment
True/false (chapter 1)
1. f the main objective of a typical governmental or not-for-profit entity is to earn a profit.
2. ta government’s budget may be backed by the force of law.
3. fgovernmental entities have no need for an accounting system.
4. ta government’s internal managers rely on general purpose financial
statements for a considerable amount of information about their government.
5. fgovernments and not-for-profits may never engage in business-type activities.
6. tlenders use the financial statements of governments and not-for profits just as they
would those of businesses, that is, to help assess the borrower’s credit-worthiness.
7. tfinancial statements, no matter how prepared, do not directly affect the economic
worth of an entity.
8. fthe financial accounting standards advisory board’s standards do not apply to
the federal department of treasury.
9. tgovernments may be subject to the same pressures that led to accounting
scandals like enron.
10. fthe governmental accounting standards board establishes generally accepted
accounting principles for all state and local government entities, as well as all not-
for-profit entities.
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Multiple choice (chapter 1)
1. A primary characteristic that distinguishes governmental entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
2. A primary characteristic that distinguishes not-for-profit entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
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3. Which of the following characteristics distinguishes a governmental or not-for-profit
entity from a business entity?
a) There is always a direct link between revenues
generated and expenditures/expenses incurred.
b) Capital assets are used to produce revenues and save costs.
c) Revenues are always indicative of demand for goods and services.
d) The mission of the entity will determine the goods or services provided.
4. The most significant financial document provided by a governmental entity is the
a) The balance sheet.
b) The operating statement.
c) The operating budget.
d) The cash flow statement.
5. Which of the following statements is true?
a) Governments may engage in activities similar to activities engaged in by
forprofit entities.
b) There are a limited number of different types of governments.
c) All governmental entities engage in the same activities.
d) Managers may have a long-term focus and thereby sacrifice the short-term
liquidity of the entity.
6. Which of the following activities is not an activity in which a governmental entity
might engage?
a) Selling electric power.
b) Operating a golf course.
c) Operating a bookstore.
d) All of the above are activities that might be carried out by a government.
7. In which of the following activities is a not-for-profit entity least likely to engage?
a) Providing educational services.
b) Providing health-care services.
c) Providing for terrorism defense.
d) Retail sales of cookies.
8. Which of the following can be affected by gaap?
a) Legal ability to issue bonds.
b) Ability to balance the budget.
c) Amount reported as employee pension plan contributions.
d) Claims and judgments settled.
9. Which of the following characteristics is unique to a governmental entity?
a) The ability to have activities financed with tax-exempt debt.
b) The power to impose fees.
c) The ability to issue tax-exempt debt.
d) The ability to have activities financed by federal grants.
Granof test bank chapter 1 page 2
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Stuvia.com - The Marketplace to Buy and Sell your Study Material
Test Bank For Introduction To Fund
Accounting 5th Edition Norvelle Newest
Edition 2026
Downloaded by: Ariah |
Distribution of this document is illegal
,https://www.stuvia.com/
Stuvia.com - The Marketplace to Buy and Sell your Study Material
Chapter 1
The government and not-for-profit environment
True/false (chapter 1)
1. f the main objective of a typical governmental or not-for-profit entity is to earn a profit.
2. ta government’s budget may be backed by the force of law.
3. fgovernmental entities have no need for an accounting system.
4. ta government’s internal managers rely on general purpose financial
statements for a considerable amount of information about their government.
5. fgovernments and not-for-profits may never engage in business-type activities.
6. tlenders use the financial statements of governments and not-for profits just as they
would those of businesses, that is, to help assess the borrower’s credit-worthiness.
7. tfinancial statements, no matter how prepared, do not directly affect the economic
worth of an entity.
8. fthe financial accounting standards advisory board’s standards do not apply to
the federal department of treasury.
9. tgovernments may be subject to the same pressures that led to accounting
scandals like enron.
10. fthe governmental accounting standards board establishes generally accepted
accounting principles for all state and local government entities, as well as all not-
for-profit entities.
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Multiple choice (chapter 1)
1. A primary characteristic that distinguishes governmental entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
2. A primary characteristic that distinguishes not-for-profit entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
Granof test bank chapter 1 page 1
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3. Which of the following characteristics distinguishes a governmental or not-for-profit
entity from a business entity?
a) There is always a direct link between revenues
generated and expenditures/expenses incurred.
b) Capital assets are used to produce revenues and save costs.
c) Revenues are always indicative of demand for goods and services.
d) The mission of the entity will determine the goods or services provided.
4. The most significant financial document provided by a governmental entity is the
a) The balance sheet.
b) The operating statement.
c) The operating budget.
d) The cash flow statement.
5. Which of the following statements is true?
a) Governments may engage in activities similar to activities engaged in by
forprofit entities.
b) There are a limited number of different types of governments.
c) All governmental entities engage in the same activities.
d) Managers may have a long-term focus and thereby sacrifice the short-term
liquidity of the entity.
6. Which of the following activities is not an activity in which a governmental entity
might engage?
a) Selling electric power.
b) Operating a golf course.
c) Operating a bookstore.
d) All of the above are activities that might be carried out by a government.
7. In which of the following activities is a not-for-profit entity least likely to engage?
a) Providing educational services.
b) Providing health-care services.
c) Providing for terrorism defense.
d) Retail sales of cookies.
8. Which of the following can be affected by gaap?
a) Legal ability to issue bonds.
b) Ability to balance the budget.
c) Amount reported as employee pension plan contributions.
d) Claims and judgments settled.
9. Which of the following characteristics is unique to a governmental entity?
a) The ability to have activities financed with tax-exempt debt.
b) The power to impose fees.
c) The ability to issue tax-exempt debt.
d) The ability to have activities financed by federal grants.
Granof test bank chapter 1 page 2
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