Government and Nonprofit Accounting
Final Exam 2026/2027 | Actual Questions
Standard University Accounting Department | Actual Q&A |
Accounting Students and Public Sector Professionals
Introduction
This original Government and Nonprofit Accounting Final Exam practice set covers Governmental Concepts and
Fund Accounting, Government-Wide and Fund-Level Statements, Proprietary and Fiduciary Funds, Not-for-
Profit Accounting, and Budgeting, Capital Assets, and Long-Term Debt. The questions emphasize GASB and
FASB reporting differences, fund accounting, measurement focus, basis of accounting, budgetary control,
nonprofit stewardship, and public-sector financial reporting. This document is designed to reinforce
Government and Nonprofit Accounting course objectives for exam readiness.
Content Area Overview
Content Area Questions Key Topics Weight
GASB concepts, measurement
Governmental Accounting
36 focus, basis of accounting, 20%
Concepts and Fund Accounting
governmental fund types
Government-wide statements,
Government-Wide and Fund- fund statements,
36 20%
Level Financial Statements reconciliations, major funds,
component units
Enterprise funds, internal
Proprietary and Fiduciary
36 service funds, pension trusts, 20%
Funds
custodial/agency activities
FASB NFP standards, net asset
Not-for-Profit (NFP)
36 classes, contributions, NFP 20%
Accounting
financial statements
Budgeting, capital projects,
Budgeting, Capital Assets, and
36 debt service, capital assets, 20%
Long-Term Debt
long-term liabilities
Complete governmental
Total 180 and nonprofit accounting 100%
final exam coverage
Actual Questions
Domain: Governmental Accounting Concepts and Fund Accounting
1. What is the primary objective of governmental financial reporting under GASB concepts?
A. Provide information useful for accountability and decision making
B. Maximize reported net income for shareholders
C. Measure taxable income under federal law
D. Report only cash received during the year
Answer: A
Rationale: GASB emphasizes public accountability and information useful to citizens, oversight bodies, creditors, and
other users.
2. Why is accountability central in governmental accounting?
A. Governments issue common stock to owners
B. Governments receive resources from taxpayers and must demonstrate legal and stewardship compliance
C. Government managers retain all residual profits
D. Taxpayers have no interest in resource use
Government and Nonprofit Accounting Final Exam 2026/2027
,Answer: B
Rationale: Public officials are accountable for raising and using public resources in accordance with laws, budgets, and
restrictions.
3. In governmental accounting, what is a fund?
A. A bank account only
B. A department's informal spending file
C. A fiscal and accounting entity with its own self-balancing set of accounts
D. A list of vendors paid in a year
Answer: C
Rationale: A fund is an accounting entity used to segregate resources for specific activities or restrictions.
4. What measurement focus is used by governmental funds?
A. Economic resources measurement focus
B. Fair value focus for all assets only
C. Taxable income focus
D. Current financial resources measurement focus
Answer: D
Rationale: Governmental funds focus on current financial resources available for near-term spending.
5. Under modified accrual accounting, revenues are recognized when they are what?
A. Measurable and available
B. Earned regardless of availability
C. Collected only as physical cash
D. Budgeted by the legislature
Answer: A
Rationale: Governmental funds recognize revenues when measurable and available to finance current-period
expenditures.
6. Governmental fund expenditures are generally recognized when what occurs?
A. The asset is depreciated over useful life
B. The related fund liability is incurred, if normally expected to be paid from current resources
C. The annual budget is proposed
D. The invoice is ignored until cash is paid
Answer: B
Rationale: Modified accrual expenditure recognition focuses on claims against current financial resources.
7. Which fund accounts for resources not required to be accounted for in another fund?
A. Debt Service Fund
B. Private-Purpose Trust Fund
C. General Fund
D. Enterprise Fund only
Answer: C
Rationale: The General Fund is the chief operating fund and accounts for general governmental activities not reported
elsewhere.
8. A dedicated fuel tax legally restricted for road maintenance is most appropriately reported in
which governmental fund?
A. Internal Service Fund
B. Pension Trust Fund
C. Permanent Fund only
D. Special Revenue Fund
Answer: D
Rationale: Special revenue funds report specific revenue sources restricted or committed to specified purposes other than
debt service or capital projects.
9. Which fund is used to account for financial resources restricted, committed, or assigned to
major capital facility acquisition or construction?
A. Capital Projects Fund
B. Agency Fund
C. General Fund only
Government and Nonprofit Accounting Final Exam 2026/2027
,D. Enterprise Fund only
Answer: A
Rationale: Capital projects funds track resources for capital acquisition or construction for governmental activities.
10. Which fund accounts for resources accumulated to pay principal and interest on general
long-term debt?
A. Custodial Fund
B. Debt Service Fund
C. Internal Service Fund
D. Investment Trust Fund
Answer: B
Rationale: Debt service funds are used when resources are legally mandated or financially accumulated for debt service.
11. A nonexpendable endowment whose earnings support a public library should be reported in
which fund if the government itself benefits?
A. Private-Purpose Trust Fund
B. Enterprise Fund
C. Permanent Fund
D. General Fund only
Answer: C
Rationale: Permanent funds report resources legally restricted so only earnings, not principal, support government
programs.
12. Which basis of accounting is used by proprietary funds?
A. Modified accrual basis only
B. Cash basis only
C. Budgetary basis only
D. Accrual basis
Answer: D
Rationale: Proprietary funds use the economic resources measurement focus and accrual basis, similar to business
accounting.
13. Why are fiduciary fund resources excluded from government-wide governmental and
business-type activities?
A. The government controls or administers them for others and they are not available for its own programs
B. They are always immaterial
C. They are reported as tax revenue
D. They are depreciated in the General Fund
Answer: A
Rationale: Fiduciary resources are held for beneficiaries outside the government's own programs and are not included in
government-wide activities.
14. Which term describes a short-term loan from one fund to another?
A. Interfund service provided and used
B. Interfund loan
C. Permanent transfer
D. Capital contribution only
Answer: B
Rationale: Interfund loans create receivables and payables between funds and are expected to be repaid.
15. Inventory reported in a governmental fund is classified in fund balance as what?
A. Unassigned
B. Committed
C. Nonspendable
D. Restricted by external parties only
Answer: C
Rationale: Nonspendable fund balance includes resources not in spendable form, such as inventory and prepaid items.
16. Grant proceeds restricted by the grantor for police equipment are classified as what fund
balance category?
A. Unassigned
Government and Nonprofit Accounting Final Exam 2026/2027
, B. Nonspendable
C. Assigned by the purchasing clerk
D. Restricted
Answer: D
Rationale: Restricted fund balance reflects constraints imposed externally by creditors, grantors, contributors, or laws.
17. A city council ordinance constrains resources for a park project before year-end. Which
category is most likely?
A. Committed fund balance
B. Unassigned fund balance
C. Nonspendable fund balance
D. Fiduciary net position
Answer: A
Rationale: Committed fund balance is constrained by formal action of the government's highest decision-making
authority.
18. Management's intent to use resources for technology upgrades, without formal highest-level
commitment, is reported as what?
A. Restricted fund balance
B. Assigned fund balance
C. Nonspendable fund balance
D. Deferred inflow
Answer: B
Rationale: Assigned fund balance reflects intended use established by authorized officials but not meeting restricted or
committed criteria.
19. Which fund commonly reports positive unassigned fund balance?
A. Permanent Fund only
B. Capital Projects Fund only
C. General Fund
D. Debt Service Fund only
Answer: C
Rationale: The General Fund is the only governmental fund that typically reports positive unassigned fund balance.
20. What is the purpose of encumbrance accounting?
A. Recognize depreciation expense
B. Record pension benefits earned
C. Convert accrual statements to tax basis
D. Record commitments for purchase orders and help control spending against appropriations
Answer: D
Rationale: Encumbrances help governments monitor budgetary authority before goods or services are received.
21. In budgetary accounting, an appropriation represents what?
A. Legal authorization to incur expenditures
B. Cash already collected
C. A liability for all future salaries
D. A permanent donor restriction
Answer: A
Rationale: Appropriations provide legal spending authority within the budget.
22. Why is Estimated Revenues debited in a governmental fund budgetary entry?
A. To record actual cash received
B. To record expected resource inflows available for appropriation
C. To close expenditures
D. To depreciate infrastructure
Answer: B
Rationale: Budgetary accounts record planned inflows and outflows separately from actual operating accounts.
23. Bond proceeds in a governmental fund are commonly reported as what?
A. Program revenue
B. Capital asset gain
Government and Nonprofit Accounting Final Exam 2026/2027
Final Exam 2026/2027 | Actual Questions
Standard University Accounting Department | Actual Q&A |
Accounting Students and Public Sector Professionals
Introduction
This original Government and Nonprofit Accounting Final Exam practice set covers Governmental Concepts and
Fund Accounting, Government-Wide and Fund-Level Statements, Proprietary and Fiduciary Funds, Not-for-
Profit Accounting, and Budgeting, Capital Assets, and Long-Term Debt. The questions emphasize GASB and
FASB reporting differences, fund accounting, measurement focus, basis of accounting, budgetary control,
nonprofit stewardship, and public-sector financial reporting. This document is designed to reinforce
Government and Nonprofit Accounting course objectives for exam readiness.
Content Area Overview
Content Area Questions Key Topics Weight
GASB concepts, measurement
Governmental Accounting
36 focus, basis of accounting, 20%
Concepts and Fund Accounting
governmental fund types
Government-wide statements,
Government-Wide and Fund- fund statements,
36 20%
Level Financial Statements reconciliations, major funds,
component units
Enterprise funds, internal
Proprietary and Fiduciary
36 service funds, pension trusts, 20%
Funds
custodial/agency activities
FASB NFP standards, net asset
Not-for-Profit (NFP)
36 classes, contributions, NFP 20%
Accounting
financial statements
Budgeting, capital projects,
Budgeting, Capital Assets, and
36 debt service, capital assets, 20%
Long-Term Debt
long-term liabilities
Complete governmental
Total 180 and nonprofit accounting 100%
final exam coverage
Actual Questions
Domain: Governmental Accounting Concepts and Fund Accounting
1. What is the primary objective of governmental financial reporting under GASB concepts?
A. Provide information useful for accountability and decision making
B. Maximize reported net income for shareholders
C. Measure taxable income under federal law
D. Report only cash received during the year
Answer: A
Rationale: GASB emphasizes public accountability and information useful to citizens, oversight bodies, creditors, and
other users.
2. Why is accountability central in governmental accounting?
A. Governments issue common stock to owners
B. Governments receive resources from taxpayers and must demonstrate legal and stewardship compliance
C. Government managers retain all residual profits
D. Taxpayers have no interest in resource use
Government and Nonprofit Accounting Final Exam 2026/2027
,Answer: B
Rationale: Public officials are accountable for raising and using public resources in accordance with laws, budgets, and
restrictions.
3. In governmental accounting, what is a fund?
A. A bank account only
B. A department's informal spending file
C. A fiscal and accounting entity with its own self-balancing set of accounts
D. A list of vendors paid in a year
Answer: C
Rationale: A fund is an accounting entity used to segregate resources for specific activities or restrictions.
4. What measurement focus is used by governmental funds?
A. Economic resources measurement focus
B. Fair value focus for all assets only
C. Taxable income focus
D. Current financial resources measurement focus
Answer: D
Rationale: Governmental funds focus on current financial resources available for near-term spending.
5. Under modified accrual accounting, revenues are recognized when they are what?
A. Measurable and available
B. Earned regardless of availability
C. Collected only as physical cash
D. Budgeted by the legislature
Answer: A
Rationale: Governmental funds recognize revenues when measurable and available to finance current-period
expenditures.
6. Governmental fund expenditures are generally recognized when what occurs?
A. The asset is depreciated over useful life
B. The related fund liability is incurred, if normally expected to be paid from current resources
C. The annual budget is proposed
D. The invoice is ignored until cash is paid
Answer: B
Rationale: Modified accrual expenditure recognition focuses on claims against current financial resources.
7. Which fund accounts for resources not required to be accounted for in another fund?
A. Debt Service Fund
B. Private-Purpose Trust Fund
C. General Fund
D. Enterprise Fund only
Answer: C
Rationale: The General Fund is the chief operating fund and accounts for general governmental activities not reported
elsewhere.
8. A dedicated fuel tax legally restricted for road maintenance is most appropriately reported in
which governmental fund?
A. Internal Service Fund
B. Pension Trust Fund
C. Permanent Fund only
D. Special Revenue Fund
Answer: D
Rationale: Special revenue funds report specific revenue sources restricted or committed to specified purposes other than
debt service or capital projects.
9. Which fund is used to account for financial resources restricted, committed, or assigned to
major capital facility acquisition or construction?
A. Capital Projects Fund
B. Agency Fund
C. General Fund only
Government and Nonprofit Accounting Final Exam 2026/2027
,D. Enterprise Fund only
Answer: A
Rationale: Capital projects funds track resources for capital acquisition or construction for governmental activities.
10. Which fund accounts for resources accumulated to pay principal and interest on general
long-term debt?
A. Custodial Fund
B. Debt Service Fund
C. Internal Service Fund
D. Investment Trust Fund
Answer: B
Rationale: Debt service funds are used when resources are legally mandated or financially accumulated for debt service.
11. A nonexpendable endowment whose earnings support a public library should be reported in
which fund if the government itself benefits?
A. Private-Purpose Trust Fund
B. Enterprise Fund
C. Permanent Fund
D. General Fund only
Answer: C
Rationale: Permanent funds report resources legally restricted so only earnings, not principal, support government
programs.
12. Which basis of accounting is used by proprietary funds?
A. Modified accrual basis only
B. Cash basis only
C. Budgetary basis only
D. Accrual basis
Answer: D
Rationale: Proprietary funds use the economic resources measurement focus and accrual basis, similar to business
accounting.
13. Why are fiduciary fund resources excluded from government-wide governmental and
business-type activities?
A. The government controls or administers them for others and they are not available for its own programs
B. They are always immaterial
C. They are reported as tax revenue
D. They are depreciated in the General Fund
Answer: A
Rationale: Fiduciary resources are held for beneficiaries outside the government's own programs and are not included in
government-wide activities.
14. Which term describes a short-term loan from one fund to another?
A. Interfund service provided and used
B. Interfund loan
C. Permanent transfer
D. Capital contribution only
Answer: B
Rationale: Interfund loans create receivables and payables between funds and are expected to be repaid.
15. Inventory reported in a governmental fund is classified in fund balance as what?
A. Unassigned
B. Committed
C. Nonspendable
D. Restricted by external parties only
Answer: C
Rationale: Nonspendable fund balance includes resources not in spendable form, such as inventory and prepaid items.
16. Grant proceeds restricted by the grantor for police equipment are classified as what fund
balance category?
A. Unassigned
Government and Nonprofit Accounting Final Exam 2026/2027
, B. Nonspendable
C. Assigned by the purchasing clerk
D. Restricted
Answer: D
Rationale: Restricted fund balance reflects constraints imposed externally by creditors, grantors, contributors, or laws.
17. A city council ordinance constrains resources for a park project before year-end. Which
category is most likely?
A. Committed fund balance
B. Unassigned fund balance
C. Nonspendable fund balance
D. Fiduciary net position
Answer: A
Rationale: Committed fund balance is constrained by formal action of the government's highest decision-making
authority.
18. Management's intent to use resources for technology upgrades, without formal highest-level
commitment, is reported as what?
A. Restricted fund balance
B. Assigned fund balance
C. Nonspendable fund balance
D. Deferred inflow
Answer: B
Rationale: Assigned fund balance reflects intended use established by authorized officials but not meeting restricted or
committed criteria.
19. Which fund commonly reports positive unassigned fund balance?
A. Permanent Fund only
B. Capital Projects Fund only
C. General Fund
D. Debt Service Fund only
Answer: C
Rationale: The General Fund is the only governmental fund that typically reports positive unassigned fund balance.
20. What is the purpose of encumbrance accounting?
A. Recognize depreciation expense
B. Record pension benefits earned
C. Convert accrual statements to tax basis
D. Record commitments for purchase orders and help control spending against appropriations
Answer: D
Rationale: Encumbrances help governments monitor budgetary authority before goods or services are received.
21. In budgetary accounting, an appropriation represents what?
A. Legal authorization to incur expenditures
B. Cash already collected
C. A liability for all future salaries
D. A permanent donor restriction
Answer: A
Rationale: Appropriations provide legal spending authority within the budget.
22. Why is Estimated Revenues debited in a governmental fund budgetary entry?
A. To record actual cash received
B. To record expected resource inflows available for appropriation
C. To close expenditures
D. To depreciate infrastructure
Answer: B
Rationale: Budgetary accounts record planned inflows and outflows separately from actual operating accounts.
23. Bond proceeds in a governmental fund are commonly reported as what?
A. Program revenue
B. Capital asset gain
Government and Nonprofit Accounting Final Exam 2026/2027
