Test Bank
CH. 1
The_ Government and Not-For-Profit Environment
T/F(CH. 1.
1. The_ main objective of a typical government or not-for-profit entity is to earn a profit.
2. A government’s budget may be backed by the_ force of law.
3. Governments have no need for an accounting system.
4. A government’s internal managers rely on general purpose financial statements for a considerable amount
of information about their government.
5. Governments and not-for-profit entities may never engage in business-type activities.
6. Lenders use the_ financial statements of governments and not-for-profit entities just as they would those of
businesses, that is, to help assess the_ borrower’s credit-worthiness.
7. Financial statements, no matter how prepared, do not directly affect the_ economic worth of an entity.
8. The_ Federal Accounting Standards Advisory Board’s standards do not apply to the_ federal Department
of the_ Treasury.
9. Governments may be subject to the_ same pressures that led to accounting scandals like Enron.
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10. The_ Governmental Accounting Standards Board establishes generally accepted accounting principles for
all state and local governments and all not-for-profit entities.
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MULTIPLE CHOICE QUESTIONS(CH. 1.
1. A primary characteristic that distinguishes governments from businesses 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 businesses 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.
3. Which of the_ following characteristics distinguishes a government or not-for-profit entity from a business?
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 government is the_
a) Balance sheet.
b) Operating statement.
c) Operating budget.
d) Cash flow statement.
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5. Which of the_ following statements is true?
a) Governments may engage in activities similar to activities engaged in by for-profit entities.
b) There are a limited number of different types of governments.
c) All governments 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 government 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.
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CH. 1
The_ Government and Not-For-Profit Environment
T/F(CH. 1.
1. The_ main objective of a typical government or not-for-profit entity is to earn a profit.
2. A government’s budget may be backed by the_ force of law.
3. Governments have no need for an accounting system.
4. A government’s internal managers rely on general purpose financial statements for a considerable amount
of information about their government.
5. Governments and not-for-profit entities may never engage in business-type activities.
6. Lenders use the_ financial statements of governments and not-for-profit entities just as they would those of
businesses, that is, to help assess the_ borrower’s credit-worthiness.
7. Financial statements, no matter how prepared, do not directly affect the_ economic worth of an entity.
8. The_ Federal Accounting Standards Advisory Board’s standards do not apply to the_ federal Department
of the_ Treasury.
9. Governments may be subject to the_ same pressures that led to accounting scandals like Enron.
1
,Test Bank
10. The_ Governmental Accounting Standards Board establishes generally accepted accounting principles for
all state and local governments and all not-for-profit entities.
2
,Test Bank
MULTIPLE CHOICE QUESTIONS(CH. 1.
1. A primary characteristic that distinguishes governments from businesses 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 businesses 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.
3. Which of the_ following characteristics distinguishes a government or not-for-profit entity from a business?
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 government is the_
a) Balance sheet.
b) Operating statement.
c) Operating budget.
d) Cash flow statement.
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5. Which of the_ following statements is true?
a) Governments may engage in activities similar to activities engaged in by for-profit entities.
b) There are a limited number of different types of governments.
c) All governments 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 government 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.
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