Governmental Accounting reviewed
questions with correct answers.
A city government issues general obligation bonds to finance the construction of a new fire station. ANS
-By using a Capital Projects Fund with a modified accrual basis of accounting and a measurement focus
on financial resources, the city government can effectively track and manage the funds dedicated to the
construction of the new fire station while complying with accounting principles applicable to capital
projects.
A city government collects a tax of $1.00 per address from the internet providers servicing the locality.
This amount is required by state law to be used to improve the high-speed internet infrastructure within
the city limits. ANS -By utilizing a Special Revenue Fund with a modified accrual basis of accounting and a
measurement focus on the specific revenue source, the city government can transparently manage and
report on the funds dedicated to improving high-speed internet infrastructure as required by state law.
A county government spent $2 million to upgrade the water and sewer treatment plan by adding on a
2,000 square foot addition. ANS -By utilizing a Capital Projects Fund with a modified accrual basis of
accounting and a measurement focus on financial resources related to capital projects, the county
government can effectively manage and report the funds dedicated to the upgrade of the water and
sewer treatment plant.
A donor provided $100,000 to purchase new blocks and timing system for the city pool costing $50,000.
The remaining money is placed into an endowment and the interest can be used to maintain the pool.
This pool is not accounted for as an enterprise fund. ANS -By using a Special Revenue Fund for the
specific purchase and an Endowment Fund for the remaining funds dedicated to maintaining the pool,
the city can appropriately manage and report on the donor-provided resources, aligning with the legal
restrictions and intended purposes set by the donor.
A township contributed $10,000 to a pension trust fund administered by the state for its employees.
ANS -By using a Pension Trust Fund with a full accrual basis of accounting and an economic resources
measurement focus, the township can effectively manage and report the funds dedicated to fulfilling its
pension obligations for employees. This ensures transparency and compliance with accounting principles
related to pension fund management.
, What are the two presentation methods for component units? What makes something a component
unit of the primary government? ANS -2 presentation methods for component units:
Blending Method
Discrete Method
Determining whether an entity qualifies as a component unit requires a careful analysis of its legal
status, financial relationships, and the nature of its connection with the primary government. Once
identified, the appropriate presentation method (blending or discrete) is chosen based on the level of
integration and financial independence.
What's the GASB and FASB agreed upon definition of a governmental entity? How does the GASB
hierarchy apply to a local governmental entity? ANS -According to GASB and FASB, a governmental
entity is an organization that possesses the following characteristics:
1. Separate Legal Structure
2. Operates in the Public Interest
3. Governed by an Elected Body
4. Derives its Powers from Law
the GASB hierarchy establishes the authoritative sources of GAAP for local governmental entities,
prioritizing GASB Statements and Interpretations at the top.
Local governments should follow the guidance provided by GASB in its authoritative pronouncements to
ensure consistent and standardized financial reporting.
What are the categories for net position and fund balance? GASB restricts three categories to always
being positive. Which are the three categories? ANS -Net Position Categories (Government-Wide
Financial Statements):
1. Net Investment in Capital Assets
2. Restricted
3. Unrestricted
Fund Balance Categories (Fund Financial Statements):
questions with correct answers.
A city government issues general obligation bonds to finance the construction of a new fire station. ANS
-By using a Capital Projects Fund with a modified accrual basis of accounting and a measurement focus
on financial resources, the city government can effectively track and manage the funds dedicated to the
construction of the new fire station while complying with accounting principles applicable to capital
projects.
A city government collects a tax of $1.00 per address from the internet providers servicing the locality.
This amount is required by state law to be used to improve the high-speed internet infrastructure within
the city limits. ANS -By utilizing a Special Revenue Fund with a modified accrual basis of accounting and a
measurement focus on the specific revenue source, the city government can transparently manage and
report on the funds dedicated to improving high-speed internet infrastructure as required by state law.
A county government spent $2 million to upgrade the water and sewer treatment plan by adding on a
2,000 square foot addition. ANS -By utilizing a Capital Projects Fund with a modified accrual basis of
accounting and a measurement focus on financial resources related to capital projects, the county
government can effectively manage and report the funds dedicated to the upgrade of the water and
sewer treatment plant.
A donor provided $100,000 to purchase new blocks and timing system for the city pool costing $50,000.
The remaining money is placed into an endowment and the interest can be used to maintain the pool.
This pool is not accounted for as an enterprise fund. ANS -By using a Special Revenue Fund for the
specific purchase and an Endowment Fund for the remaining funds dedicated to maintaining the pool,
the city can appropriately manage and report on the donor-provided resources, aligning with the legal
restrictions and intended purposes set by the donor.
A township contributed $10,000 to a pension trust fund administered by the state for its employees.
ANS -By using a Pension Trust Fund with a full accrual basis of accounting and an economic resources
measurement focus, the township can effectively manage and report the funds dedicated to fulfilling its
pension obligations for employees. This ensures transparency and compliance with accounting principles
related to pension fund management.
, What are the two presentation methods for component units? What makes something a component
unit of the primary government? ANS -2 presentation methods for component units:
Blending Method
Discrete Method
Determining whether an entity qualifies as a component unit requires a careful analysis of its legal
status, financial relationships, and the nature of its connection with the primary government. Once
identified, the appropriate presentation method (blending or discrete) is chosen based on the level of
integration and financial independence.
What's the GASB and FASB agreed upon definition of a governmental entity? How does the GASB
hierarchy apply to a local governmental entity? ANS -According to GASB and FASB, a governmental
entity is an organization that possesses the following characteristics:
1. Separate Legal Structure
2. Operates in the Public Interest
3. Governed by an Elected Body
4. Derives its Powers from Law
the GASB hierarchy establishes the authoritative sources of GAAP for local governmental entities,
prioritizing GASB Statements and Interpretations at the top.
Local governments should follow the guidance provided by GASB in its authoritative pronouncements to
ensure consistent and standardized financial reporting.
What are the categories for net position and fund balance? GASB restricts three categories to always
being positive. Which are the three categories? ANS -Net Position Categories (Government-Wide
Financial Statements):
1. Net Investment in Capital Assets
2. Restricted
3. Unrestricted
Fund Balance Categories (Fund Financial Statements):
