Governmental and Nonprofit Accounting: Theory and Practice, 10e (Freeman)
Chapter 1 Governmental and Nonprofit Accounting—Environment and
Characteristics
1. Which of the following would not be considered a government or nonprofit
organization?
A. A software company that sells software exclusively to state and local
governments.
B. A public elementary school.
C. A church.
D. A private trust organized for charitable purposes.
(Answer: A; Easy; LO1)
2. Which of the following activities would most likely be accounted for as a business-
type activity?
A. Fire protection.
B. Recreation.
C. Water operations.
D. Street maintenance.
(Answer: C; Moderate; LO1)
3. Prior to the creation of the Governmental Accounting Standards Board in 1984,
which of the following organizations had the greatest influence over accounting
concepts, principles, and standards for the state and local governments?
A. The National Council on Governmental Accounting (NCGA)
B. The National Association of College and University Business Officers
(NACUBO).
C. The American Institute of Certified Public Accountants (AICPA).
, D. The Comptroller General of the United States.
(Answer: A; Moderate; LO1)
4. Which of the following is considered a health and welfare organization?
A. Secondary schools.
B. Young Men’s Christian Association (YMCA).
C. Child protection agencies.
D. United Way.
(Answer: C; Easy; LO2)
5. Which of the following characteristics best distinguishes a government entity from a
business entity?
A. Governments operate in a very small section of the economy while businesses
operate globally.
B. Cost analysis and other control and evaluation techniques are essential to ensure
that resources are used economically and efficiently.
C. Those contributing resources to the entity do not necessarily receive a direct or
proportionate share the services.
D. Businesses must acquire and convert scarce resources while governments can
demand whatever they need.
(Answer: C; Moderate; LO3)
6. Which source of financial resources is unique to governments?
A. Borrowings.
B. Gifts and grants.
C. Charges for services provided.
D. Taxation.
,(Answer: D; Easy: (LO4)
7. Which of the following is not an operational accountability measure for a
government?
A. Economic cost of providing services.
B. Net income.
C. Assessment whether a government raised sufficient revenues each period to cover
the cost of providing services.
D. Assessment whether services are being provided economically and efficiently.
(Answer: B; Moderate; LO4)
8. Which of the following is not a primary financial reporting objective of state and
local government (SLG) reporting?
A. Provide information necessary to assess the level of LG services and its ability to
continue to finance its activities and meet its obligations.
B. Provide information necessary for investment and credit decisions.
C. Provide a means of demonstrating the SLG’s accountability that enables users to
assess that accountability.
D. Provide information necessary to evaluate the SLG’s operating results for the
period.
(Answer B; Difficult; LO4)
9. The primary purpose of a fund is
A. To provide expenditure authority for a government or not-for-profit organization.
B. To segregate an organization's resources according to the purpose(s) for which
they are to be used.
C. To keep an organization's constituency from trying to insist that the organization
utilize resources that it wants to save for a specific future objective.
, D. To confuse and confound the legislative body as to the use and purpose of
government resources.
(Answer: B; Moderate; LO4)
10. Which of the following is not a characteristic of a fund?
A. Fiscal entity.
B. Separate legal entity.
C. Accounting entity.
D. Contains self-balancing set of accounts.
(Answer: B; Moderate; LO4)
11. Fixed-dollar budgets and appropriations are most often found in
A. All funds of a government.
B. Expendable funds.
C. Nonexpendable funds.
D. In not-for-profit organizations, but not governments.
(Answer: B; Moderate; LO4)
12. Expenditures in a governmental (expendable) fund would not potentially include
A. Salaries and wages.
B. Capital outlay.
C. Long-term debt principal retirement.
D. Depreciation.
(Answer: D; Easy; LO4)
Chapter 1 Governmental and Nonprofit Accounting—Environment and
Characteristics
1. Which of the following would not be considered a government or nonprofit
organization?
A. A software company that sells software exclusively to state and local
governments.
B. A public elementary school.
C. A church.
D. A private trust organized for charitable purposes.
(Answer: A; Easy; LO1)
2. Which of the following activities would most likely be accounted for as a business-
type activity?
A. Fire protection.
B. Recreation.
C. Water operations.
D. Street maintenance.
(Answer: C; Moderate; LO1)
3. Prior to the creation of the Governmental Accounting Standards Board in 1984,
which of the following organizations had the greatest influence over accounting
concepts, principles, and standards for the state and local governments?
A. The National Council on Governmental Accounting (NCGA)
B. The National Association of College and University Business Officers
(NACUBO).
C. The American Institute of Certified Public Accountants (AICPA).
, D. The Comptroller General of the United States.
(Answer: A; Moderate; LO1)
4. Which of the following is considered a health and welfare organization?
A. Secondary schools.
B. Young Men’s Christian Association (YMCA).
C. Child protection agencies.
D. United Way.
(Answer: C; Easy; LO2)
5. Which of the following characteristics best distinguishes a government entity from a
business entity?
A. Governments operate in a very small section of the economy while businesses
operate globally.
B. Cost analysis and other control and evaluation techniques are essential to ensure
that resources are used economically and efficiently.
C. Those contributing resources to the entity do not necessarily receive a direct or
proportionate share the services.
D. Businesses must acquire and convert scarce resources while governments can
demand whatever they need.
(Answer: C; Moderate; LO3)
6. Which source of financial resources is unique to governments?
A. Borrowings.
B. Gifts and grants.
C. Charges for services provided.
D. Taxation.
,(Answer: D; Easy: (LO4)
7. Which of the following is not an operational accountability measure for a
government?
A. Economic cost of providing services.
B. Net income.
C. Assessment whether a government raised sufficient revenues each period to cover
the cost of providing services.
D. Assessment whether services are being provided economically and efficiently.
(Answer: B; Moderate; LO4)
8. Which of the following is not a primary financial reporting objective of state and
local government (SLG) reporting?
A. Provide information necessary to assess the level of LG services and its ability to
continue to finance its activities and meet its obligations.
B. Provide information necessary for investment and credit decisions.
C. Provide a means of demonstrating the SLG’s accountability that enables users to
assess that accountability.
D. Provide information necessary to evaluate the SLG’s operating results for the
period.
(Answer B; Difficult; LO4)
9. The primary purpose of a fund is
A. To provide expenditure authority for a government or not-for-profit organization.
B. To segregate an organization's resources according to the purpose(s) for which
they are to be used.
C. To keep an organization's constituency from trying to insist that the organization
utilize resources that it wants to save for a specific future objective.
, D. To confuse and confound the legislative body as to the use and purpose of
government resources.
(Answer: B; Moderate; LO4)
10. Which of the following is not a characteristic of a fund?
A. Fiscal entity.
B. Separate legal entity.
C. Accounting entity.
D. Contains self-balancing set of accounts.
(Answer: B; Moderate; LO4)
11. Fixed-dollar budgets and appropriations are most often found in
A. All funds of a government.
B. Expendable funds.
C. Nonexpendable funds.
D. In not-for-profit organizations, but not governments.
(Answer: B; Moderate; LO4)
12. Expenditures in a governmental (expendable) fund would not potentially include
A. Salaries and wages.
B. Capital outlay.
C. Long-term debt principal retirement.
D. Depreciation.
(Answer: D; Easy; LO4)
