NFP Exam #3 UPDATED ACTUAL Exam
Questions and CORRECT Answers
Proprietary Funds include what - CORRECT ANSWER - internal service funds and
enterprise funds
Proprietary Fund - CORRECT ANSWER -
Internal Service Fund - CORRECT ANSWER - Fund established to finance and account or
services and commodities furnished by a designated department or agency to other departments
and agencies within a single government or to other governments. Amounts expended by the
fund are restored thereto either from operating earnings or by transfers from other funds so that
the original fund capital is kept intact
Enterprise Funds - CORRECT ANSWER - Established to finance and account for the
acquisition, operating, and maintenance of governmental facilities and services that are entirely
or predominantly self supporting by user charges or for when the governing body of the
government has decided periodic determination of revenues earned, expenses incurred and or net
income is appropriate. governmentally owned utilities and hospitals are ordinarily accounted for
here
What flow focus do proprietary fund have and what basis do they use - CORRECT
ANSWER - economic resources flow using accrual basis of accounting
Proprietary Fund Financial Statements - CORRECT ANSWER - Classified Statement of
net position
Statement of Revenues, Expenses, and change in net fund balance
Statement of Cash Flows (Requires direct method)
Why are internal service funds established? - CORRECT ANSWER - to improve financial
management of government resources
,How are internal service funds established - CORRECT ANSWER - though ordinance or
other legislative action which should specify the source or sources of financial resources to be
used for fund operations
What is the financial objective of an internal service fund - CORRECT ANSWER -
recover from operating revenues the full cost of operations including future needs for equipment
replacements and upgrades to meet the needs of using funds and departments whose scale of
operations is increasing or changing
Administration and governing bodies of internal service funds need what kinds of information? -
CORRECT ANSWER - information that will allow them to determine that the costs of
operating the fund are reasonable in relation to the benefits provided by the fund
For external reporting purposes how are internal service fund financial information reported? -
CORRECT ANSWER - it is aggregated and reported as a separate column in the statement
of net position - proprietary funds; statement of revenues, expenses, and changes in net position -
proprietary funds; and statement of cash flows - proprietary funds.
How is internal service funds reported in the government wide statement of net position and
statement of activites - CORRECT ANSWER - it is collapsed and reported in the
governmental activities column of both government wide financial statements, unless enterprise
funds are the predominant participants in an internal service fund.
Three steps that need to be taken before an internal service fund can be dissoloved - CORRECT
ANSWER - transfer assets to another fund to continue activity, distribute assets to another
fund, convert non cash assets to cash and distribute
Can internal service funds be used to produce product - CORRECT ANSWER - yes
Can internal service funds be used to finanicae risk management, equipment purchases and
operations - CORRECT ANSWER - yes
, What types of guidelines are risk management internal service funds subject to? - CORRECT
ANSWER - the same basic guidelines as public entity risk pools
Under GASB standards, a government must report certain activities in an enterprise fund if any
of the follow criteria are met - CORRECT ANSWER - 1) the activity is financed with debt
that is secured solely by a pledge of the revenues from fees and charges of an activity 2) laws or
regulations require that the activity's costs of providing services including capital costs be
recovered with feeds and charges, rather than with taxes or similar revenues 3) pricing polices
are designed to recover the costs of the activity including capital costs
what basis do enterprise fund used - CORRECT ANSWER - accrual, including all assets
used in the activity, as well as any long-term debt to be serviced by the fund
Governmental business-type activities` generally have what type of counterparts? - CORRECT
ANSWER - investor-owned and they can take advantage of the accounting structures
developed in the private sector
What is the most common example of a enterprise fund - CORRECT ANSWER - Public
utilities
What are the enterprise fund financial statements - CORRECT ANSWER - statement of
net position
statement of revenues, expenses, and changes in fund net position
Statement of cash flows
Enterprise funds are included in what column of the government wide financial statemetns -
CORRECT ANSWER - business type
Receipt of interfund loan in supplies fund - CORRECT ANSWER - debit Cash
Credit Interfund loan from water utility fund - current, interfund loan from water utility fund -
noncurrent
Questions and CORRECT Answers
Proprietary Funds include what - CORRECT ANSWER - internal service funds and
enterprise funds
Proprietary Fund - CORRECT ANSWER -
Internal Service Fund - CORRECT ANSWER - Fund established to finance and account or
services and commodities furnished by a designated department or agency to other departments
and agencies within a single government or to other governments. Amounts expended by the
fund are restored thereto either from operating earnings or by transfers from other funds so that
the original fund capital is kept intact
Enterprise Funds - CORRECT ANSWER - Established to finance and account for the
acquisition, operating, and maintenance of governmental facilities and services that are entirely
or predominantly self supporting by user charges or for when the governing body of the
government has decided periodic determination of revenues earned, expenses incurred and or net
income is appropriate. governmentally owned utilities and hospitals are ordinarily accounted for
here
What flow focus do proprietary fund have and what basis do they use - CORRECT
ANSWER - economic resources flow using accrual basis of accounting
Proprietary Fund Financial Statements - CORRECT ANSWER - Classified Statement of
net position
Statement of Revenues, Expenses, and change in net fund balance
Statement of Cash Flows (Requires direct method)
Why are internal service funds established? - CORRECT ANSWER - to improve financial
management of government resources
,How are internal service funds established - CORRECT ANSWER - though ordinance or
other legislative action which should specify the source or sources of financial resources to be
used for fund operations
What is the financial objective of an internal service fund - CORRECT ANSWER -
recover from operating revenues the full cost of operations including future needs for equipment
replacements and upgrades to meet the needs of using funds and departments whose scale of
operations is increasing or changing
Administration and governing bodies of internal service funds need what kinds of information? -
CORRECT ANSWER - information that will allow them to determine that the costs of
operating the fund are reasonable in relation to the benefits provided by the fund
For external reporting purposes how are internal service fund financial information reported? -
CORRECT ANSWER - it is aggregated and reported as a separate column in the statement
of net position - proprietary funds; statement of revenues, expenses, and changes in net position -
proprietary funds; and statement of cash flows - proprietary funds.
How is internal service funds reported in the government wide statement of net position and
statement of activites - CORRECT ANSWER - it is collapsed and reported in the
governmental activities column of both government wide financial statements, unless enterprise
funds are the predominant participants in an internal service fund.
Three steps that need to be taken before an internal service fund can be dissoloved - CORRECT
ANSWER - transfer assets to another fund to continue activity, distribute assets to another
fund, convert non cash assets to cash and distribute
Can internal service funds be used to produce product - CORRECT ANSWER - yes
Can internal service funds be used to finanicae risk management, equipment purchases and
operations - CORRECT ANSWER - yes
, What types of guidelines are risk management internal service funds subject to? - CORRECT
ANSWER - the same basic guidelines as public entity risk pools
Under GASB standards, a government must report certain activities in an enterprise fund if any
of the follow criteria are met - CORRECT ANSWER - 1) the activity is financed with debt
that is secured solely by a pledge of the revenues from fees and charges of an activity 2) laws or
regulations require that the activity's costs of providing services including capital costs be
recovered with feeds and charges, rather than with taxes or similar revenues 3) pricing polices
are designed to recover the costs of the activity including capital costs
what basis do enterprise fund used - CORRECT ANSWER - accrual, including all assets
used in the activity, as well as any long-term debt to be serviced by the fund
Governmental business-type activities` generally have what type of counterparts? - CORRECT
ANSWER - investor-owned and they can take advantage of the accounting structures
developed in the private sector
What is the most common example of a enterprise fund - CORRECT ANSWER - Public
utilities
What are the enterprise fund financial statements - CORRECT ANSWER - statement of
net position
statement of revenues, expenses, and changes in fund net position
Statement of cash flows
Enterprise funds are included in what column of the government wide financial statemetns -
CORRECT ANSWER - business type
Receipt of interfund loan in supplies fund - CORRECT ANSWER - debit Cash
Credit Interfund loan from water utility fund - current, interfund loan from water utility fund -
noncurrent
