V246 Final Exam Questions with Correct Answers Latest Update 2025/2026
T/F Debt service expenditures and capital outlays are never made directly from the GF -
Answers False. Unless legally mandated or financial resources are being accumulated for debt
service coming due in future years, Debt Service Funds are not absolutely required. Capital
Projects Funds are not required to be used if, say, smaller items of equipment are acquired with
general tax revenues and paid for directly from the General Fund.
T/F SRF are used if the law restricts one or more specific sources of revenue, rather than
general tax revenues, for specific purpose - Answers True
T/F SRF can't be used if a portion of the revenues are derived from transfers from the GF -
Answers False. Governments may supplement specific sources of revenue for Special Revenue
Funds with transfers from the General Fund. However, the proceeds of specific sources of
revenue should comprise a substantial portion of the resource inflows to the Special Revenue
Fund.
T/F CPF are used to account for and report on all capital assets, whether they are financed from
the proceeds of general obligation bonds or from revenue bonds sold by proprietary funds -
Answers False. Capital assets financed by Proprietary Fund resources are accounted for in a
Proprietary Fund, not in a Capital Projects Fund.
T/F DSF are used to accumulate resources for paying debt service in the current year, but not in
future years - Answers False. Debt Service Funds are used to accumulate resources for paying
debt service coming due both in the current and future years. In fact, such funds must be used if
the government is accumulating resources for debt service coming due in future years.
T/F Capital assets are recognized as assets and depreciated over their estimated useful lives -
Answers False. The acquisition or construction of capital assets in governmental-type funds is
recorded as an expenditure and is not capitalized and depreciated.
T/F Repayments of bond principal are recorded as expenditures - Answers True
T/F Liabilities for compensated absences are not accrued unless they are required to be
liquidated with current financial resources - Answers True
T/F As a general rule, property taxes are recognized as revenue and reported in the operating
statement, provided they are expected to be collected at a future date. - Answers False. Property
tax revenues are recognized to the extent they are measurable and available. Available means
collected in the current period or soon enough thereafter to be used to pay the bills of the
current period, generally 60 days after the accounting period ends.
T/F Enterprise funds are used when governmental entity sells products or services primarily to
external parties for a fee or user charge. - Answers True
, T/F An enterprise fund may not be used if the entity, such as a provider f mass transit services,
receives subsidies from the GF. - Answers False. Enterprise Funds may (and often do) received
subsidies from the General Fund.
T/F To ascertain the amount of capital assets acquired by an enterprise fund during the year,
you should read the statement of revenue, expenses and changes in net position. - Answers
False. Enterprise Funds report expenses. Capital outlays result in assets, which are depreciated.
To ascertain the capital assets acquired during the year, read the statement of cash flows.
T/F When enterprise funds are used, expenses are accrued only if they are expected to be paid
within 60 days after the end of the year. - Answers False. Expenses are accrued if applicable to
the current year, regardless of when they ae expected to be paid.
T/F When enterprise funds are used, revenues are recognized in the period they are earned,
even if cash has not been received. - Answers True
What is a key difference between budgets prepared by governmental units and by commercial
organizations? - Answers Budgets prepared by governmental units are legal documents,
whereas those prepared by commercial organizations are not
Which of the following is not including when preparing cash forecasts? - Answers Depreciation
Who prepared a nondepartmental expenditures request? - Answers The CEO or budget director
When the city's budget is approved, the total amount appropriated is greater than the estimated
revenues. What are the implications of that budget? - Answers The city anticipates a budget
deficit for the year
Which of the following events results in a debit to the encumbrances account? - Answers A
purchase order is placed
In the appropriations ledger, the amount available for appropriation is equal to - Answers The
total appropriation minus both outstanding encumbrances and expenditures
A city places a purchase order for police sedans at an estimated price of $100,000. The
purchase order allows the supplier to increase the price by up to 5% if the price of steel
increases. The city receives the sedans along with an invoice for $104,000. With what amount
should the city credit the encumbrances account? - Answers $100,000
Under the modified accrual basis of accounting, when are revenues considered to be available? -
Answers When collectible in the current period or soon enough thereafter to pay current-period
bills
In budgetary accounting, what is the net effect of receiving all the items ordered together with
an invoice for an amount less than the amount encumbered? - Answers The amount available
for spending is increased
T/F Debt service expenditures and capital outlays are never made directly from the GF -
Answers False. Unless legally mandated or financial resources are being accumulated for debt
service coming due in future years, Debt Service Funds are not absolutely required. Capital
Projects Funds are not required to be used if, say, smaller items of equipment are acquired with
general tax revenues and paid for directly from the General Fund.
T/F SRF are used if the law restricts one or more specific sources of revenue, rather than
general tax revenues, for specific purpose - Answers True
T/F SRF can't be used if a portion of the revenues are derived from transfers from the GF -
Answers False. Governments may supplement specific sources of revenue for Special Revenue
Funds with transfers from the General Fund. However, the proceeds of specific sources of
revenue should comprise a substantial portion of the resource inflows to the Special Revenue
Fund.
T/F CPF are used to account for and report on all capital assets, whether they are financed from
the proceeds of general obligation bonds or from revenue bonds sold by proprietary funds -
Answers False. Capital assets financed by Proprietary Fund resources are accounted for in a
Proprietary Fund, not in a Capital Projects Fund.
T/F DSF are used to accumulate resources for paying debt service in the current year, but not in
future years - Answers False. Debt Service Funds are used to accumulate resources for paying
debt service coming due both in the current and future years. In fact, such funds must be used if
the government is accumulating resources for debt service coming due in future years.
T/F Capital assets are recognized as assets and depreciated over their estimated useful lives -
Answers False. The acquisition or construction of capital assets in governmental-type funds is
recorded as an expenditure and is not capitalized and depreciated.
T/F Repayments of bond principal are recorded as expenditures - Answers True
T/F Liabilities for compensated absences are not accrued unless they are required to be
liquidated with current financial resources - Answers True
T/F As a general rule, property taxes are recognized as revenue and reported in the operating
statement, provided they are expected to be collected at a future date. - Answers False. Property
tax revenues are recognized to the extent they are measurable and available. Available means
collected in the current period or soon enough thereafter to be used to pay the bills of the
current period, generally 60 days after the accounting period ends.
T/F Enterprise funds are used when governmental entity sells products or services primarily to
external parties for a fee or user charge. - Answers True
, T/F An enterprise fund may not be used if the entity, such as a provider f mass transit services,
receives subsidies from the GF. - Answers False. Enterprise Funds may (and often do) received
subsidies from the General Fund.
T/F To ascertain the amount of capital assets acquired by an enterprise fund during the year,
you should read the statement of revenue, expenses and changes in net position. - Answers
False. Enterprise Funds report expenses. Capital outlays result in assets, which are depreciated.
To ascertain the capital assets acquired during the year, read the statement of cash flows.
T/F When enterprise funds are used, expenses are accrued only if they are expected to be paid
within 60 days after the end of the year. - Answers False. Expenses are accrued if applicable to
the current year, regardless of when they ae expected to be paid.
T/F When enterprise funds are used, revenues are recognized in the period they are earned,
even if cash has not been received. - Answers True
What is a key difference between budgets prepared by governmental units and by commercial
organizations? - Answers Budgets prepared by governmental units are legal documents,
whereas those prepared by commercial organizations are not
Which of the following is not including when preparing cash forecasts? - Answers Depreciation
Who prepared a nondepartmental expenditures request? - Answers The CEO or budget director
When the city's budget is approved, the total amount appropriated is greater than the estimated
revenues. What are the implications of that budget? - Answers The city anticipates a budget
deficit for the year
Which of the following events results in a debit to the encumbrances account? - Answers A
purchase order is placed
In the appropriations ledger, the amount available for appropriation is equal to - Answers The
total appropriation minus both outstanding encumbrances and expenditures
A city places a purchase order for police sedans at an estimated price of $100,000. The
purchase order allows the supplier to increase the price by up to 5% if the price of steel
increases. The city receives the sedans along with an invoice for $104,000. With what amount
should the city credit the encumbrances account? - Answers $100,000
Under the modified accrual basis of accounting, when are revenues considered to be available? -
Answers When collectible in the current period or soon enough thereafter to pay current-period
bills
In budgetary accounting, what is the net effect of receiving all the items ordered together with
an invoice for an amount less than the amount encumbered? - Answers The amount available
for spending is increased
