CGFM Exam 2 2025 Questions and
Answers
I 1.The Defense Logistics Agency holds jet fuel as inventory, which it sells to
support flight operations. The table on the left provides beginning/ending fiscal
year 2017 inventory levels and purchase information. Assuming the agency uses
the FIFO inventory valuation method, what was the cost of goods sold for jet fuel
in fiscal year 2017? - ANSWER-Correct Answer: $133.50
I 2.In financial reporting, consistency of communication means - ANSWER-
Correct Answer: if accounting principles have changed or if the financial reporting
entity has changed, the nature and reason for the change, as well as the effect of
the change, should be disclosed.
I 3.Budgeting is an element of which policy? - ANSWER-Correct Answer: fiscal
I 4.Another term for the federal government baseline budget is - ANSWER-
Correct Answer: a current level of service budget.
I 5.As described by FASAB, the four groups of people to whom the government is
accountable and are, therefore, potential users of federal financial statements are -
ANSWER-Correct Answer: citizens, Congress, executives, and program managers.
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
,I 6.When establishing an allowance for doubtful accounts, the journal entry
required is a debit to - ANSWER-Correct Answer: Bad Debts Expense and a
credit to the Allowance for Doubtful Accounts.
I 7.Street resurfacing is a type of which budget element? - ANSWER-Correct
Answer: program
I 8.Which of the following is a correct accounting entry when one government
agency receives a grant from another government agency? - ANSWER-Correct
Answer: The grantor agency recognizes liability and the recipient agency recognizes
non-exchange revenue when the recipient agency meets all eligibility requirements.
I 9.Which of the following sources of accounting principles is at the top of the
GASB hierarchy? - ANSWER-Correct Answer: Generally Accepted Accounting
Principles
I 10.The role of the International Public Sector Accounting Standards Board is to -
ANSWER-Correct Answer: set standards for the general purpose financial
statements of international public sector entities.
I 11.A state needs to determine its indirect cost rate for fringe benefits as a
function of direct salaries costs of $3 million. Based on the information shown on
the left, the indirect cost is - ANSWER-Correct Answer: 10.8%
I 12.Non-exchange revenue includes inflows of resources arising from -
ANSWER-Correct Answer: taxes, fines and penalties from the private sector.
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
,I 13.A group of activities within a function are known as - ANSWER-Correct
Answer: a program.
I 14.In financing capital projects, special assessments are used to ensure that -
ANSWER-Correct Answer: the individuals benefiting from the project are the
ones who pay for it.
I 15.The organizations that establish the standards used by their constituents for
external reporting purposes include FASB, FASAB, GASB and - ANSWER-
Correct Answer: International Public Sector Accounting Standards Board.
I 16.Which of the following terms describes costs an agency incurs on behalf of
another agency? - ANSWER-Correct Answer: inter-entity
I 17.State and local governments need cost information to receive reimbursements
for allowable costs for federal grants, while federal agencies are required to have
cost accounting concepts in the preparation of what type of statements? -
ANSWER-Correct Answer: financial statements
I 18.State and local governments use encumbrances as the major budgetary control
tool to ensure availability of funds prior to entering agreements, while the federal
government instills budgetary control using - ANSWER-Correct Answer:
commitments and obligations.
I 19.The equipment department of a municipality rents out equipment to other
departments and wants to set a fee that will recover expenses. The department
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 3
, estimates 10,000 rentals per year, with the annual operating costs shown on the
left. The department has $5,000 in annual interest payments and $15,000 in annual
debt service payments for the loan they took out to purchase the equipment. The
annual depreciation on the equipment is $7,500. Based on this information, the
user fee should be set at - ANSWER-Correct Answer: $91.25 per rental.
I 20.Apportionments and allotments are used by agencies to ensure - ANSWER-
Correct Answer: that outlays do not exceed appropriations.
I 21.Departments and agencies submit their apportionment requests for future
expenditures during which budget phase? - ANSWER-Correct Answer: execution
I 22.Which element of the budget structure is represented by license and permit
revenue? - ANSWER-Correct Answer: category or source
I 23.Agencies generally submit their budget requests during the - ANSWER-
Correct Answer: budget preparation phase.
I 24.In United States governments, what is the cornerstone of financial reporting? -
ANSWER-Correct Answer: accountability
I 25.Unlike governments, businesses establish priorities for the services and
products they provide, based on the concept that - ANSWER-Correct Answer:
shareholders provide financing and expect the business goals and objectives to be
profit-driven.
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 4
Answers
I 1.The Defense Logistics Agency holds jet fuel as inventory, which it sells to
support flight operations. The table on the left provides beginning/ending fiscal
year 2017 inventory levels and purchase information. Assuming the agency uses
the FIFO inventory valuation method, what was the cost of goods sold for jet fuel
in fiscal year 2017? - ANSWER-Correct Answer: $133.50
I 2.In financial reporting, consistency of communication means - ANSWER-
Correct Answer: if accounting principles have changed or if the financial reporting
entity has changed, the nature and reason for the change, as well as the effect of
the change, should be disclosed.
I 3.Budgeting is an element of which policy? - ANSWER-Correct Answer: fiscal
I 4.Another term for the federal government baseline budget is - ANSWER-
Correct Answer: a current level of service budget.
I 5.As described by FASAB, the four groups of people to whom the government is
accountable and are, therefore, potential users of federal financial statements are -
ANSWER-Correct Answer: citizens, Congress, executives, and program managers.
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 1
,I 6.When establishing an allowance for doubtful accounts, the journal entry
required is a debit to - ANSWER-Correct Answer: Bad Debts Expense and a
credit to the Allowance for Doubtful Accounts.
I 7.Street resurfacing is a type of which budget element? - ANSWER-Correct
Answer: program
I 8.Which of the following is a correct accounting entry when one government
agency receives a grant from another government agency? - ANSWER-Correct
Answer: The grantor agency recognizes liability and the recipient agency recognizes
non-exchange revenue when the recipient agency meets all eligibility requirements.
I 9.Which of the following sources of accounting principles is at the top of the
GASB hierarchy? - ANSWER-Correct Answer: Generally Accepted Accounting
Principles
I 10.The role of the International Public Sector Accounting Standards Board is to -
ANSWER-Correct Answer: set standards for the general purpose financial
statements of international public sector entities.
I 11.A state needs to determine its indirect cost rate for fringe benefits as a
function of direct salaries costs of $3 million. Based on the information shown on
the left, the indirect cost is - ANSWER-Correct Answer: 10.8%
I 12.Non-exchange revenue includes inflows of resources arising from -
ANSWER-Correct Answer: taxes, fines and penalties from the private sector.
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 2
,I 13.A group of activities within a function are known as - ANSWER-Correct
Answer: a program.
I 14.In financing capital projects, special assessments are used to ensure that -
ANSWER-Correct Answer: the individuals benefiting from the project are the
ones who pay for it.
I 15.The organizations that establish the standards used by their constituents for
external reporting purposes include FASB, FASAB, GASB and - ANSWER-
Correct Answer: International Public Sector Accounting Standards Board.
I 16.Which of the following terms describes costs an agency incurs on behalf of
another agency? - ANSWER-Correct Answer: inter-entity
I 17.State and local governments need cost information to receive reimbursements
for allowable costs for federal grants, while federal agencies are required to have
cost accounting concepts in the preparation of what type of statements? -
ANSWER-Correct Answer: financial statements
I 18.State and local governments use encumbrances as the major budgetary control
tool to ensure availability of funds prior to entering agreements, while the federal
government instills budgetary control using - ANSWER-Correct Answer:
commitments and obligations.
I 19.The equipment department of a municipality rents out equipment to other
departments and wants to set a fee that will recover expenses. The department
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 3
, estimates 10,000 rentals per year, with the annual operating costs shown on the
left. The department has $5,000 in annual interest payments and $15,000 in annual
debt service payments for the loan they took out to purchase the equipment. The
annual depreciation on the equipment is $7,500. Based on this information, the
user fee should be set at - ANSWER-Correct Answer: $91.25 per rental.
I 20.Apportionments and allotments are used by agencies to ensure - ANSWER-
Correct Answer: that outlays do not exceed appropriations.
I 21.Departments and agencies submit their apportionment requests for future
expenditures during which budget phase? - ANSWER-Correct Answer: execution
I 22.Which element of the budget structure is represented by license and permit
revenue? - ANSWER-Correct Answer: category or source
I 23.Agencies generally submit their budget requests during the - ANSWER-
Correct Answer: budget preparation phase.
I 24.In United States governments, what is the cornerstone of financial reporting? -
ANSWER-Correct Answer: accountability
I 25.Unlike governments, businesses establish priorities for the services and
products they provide, based on the concept that - ANSWER-Correct Answer:
shareholders provide financing and expect the business goals and objectives to be
profit-driven.
COPYRIGHT ©️ 2025 ALL RIGHTS RESERVED...TRUSTED & VERIFIED 4
