AGA CGFM: Chapter 1 Top quality Exam Review guide
Questions and Answers 2024/2025
Statements by standard setting bodies - correct answer Sets forth the
accounting and reporting standard that should be followed by preparers and
auditors of financial statements along with effective date.
Concept statements - correct answer Does not establish accounting or reporting
standards. Describes the concepts the board will use as framework for evaluating
existing standards and practices and for establishing new standards.
Interpretations or technical bulletins - correct answer Clarify points that are
ambiguous in previous standards. Technical bulletins address issues not
warranting research involved in setting new standard.
FASAB Hierarchy - correct answer - Category A: established accounting
principles: Statements of Federal Financial Accounting Standards and
interpretations
- Category B: FASAB Technical Bulletins, AICPA Industry Audit ad Accounting
Guide
- Category C: Technical Releases of the Accounting and Auditing Policy
Committee of the FASAB
- Category D: FASAB Implementation Guides and practices which are widely
recognized and prevalent in the federal government.
- Other accounting literature: FASAB Concept statements, other non-federal
pronouncements, professional organizations/regulatory agencies,
textbooks/handbooks/articles
GASB Hierarchy - correct answer GAAP
- GASB Statements
- GASB Technical Bulletins
,State and Local non-authoritative sources:
- GASB Concept statements
- Other literature: FASB, FASAB, International Public Sector Accounting
Standards Board, International Accounting Standards Board, AICPA not cleared
by GASB.
- Practices widely recognized and prevalent in state and local government; other
professional associations/regulatory agencies, textbooks/handbooks/articles
AICPA Literature cleared by GASB:
- Definition of government
- Capital asset impairment for gaming entities
- Proceeds of bonds issued by financing authority
- Charity care
- Lottery reporting
- Gaming reporting
Describe at least three ways governments differ from private sector
organizations. - correct answer Governments are:
- established through legal means
- have no profit motive
- raise revenue primarily through taxes
- have not shareholders
- rely on the budget process to allocate resources
- have governing bodies with publicly elected leaders
- provide many services that are not available in the private sector
Budget is essential to government financial management.
TRUE of FALSE - correct answer TRUE
Governments are legally bound by appropriations.
, The budget establishes spending authority, outlines programs and service to be
provided tot he public, and defines the resources that are to be used.
Which of the following is not a type of accountability used in government?
A. Operational accountability
B. Legal accountability
C. Profit accountability
D. Performance accountability - correct answer C
Governments are not created to make a profit
The executive branch is only accountability to the public.
TRUE or FALSE - correct answer FALSE
The executive branch is also accountable to the legislative branch for spending
resources in accordance with legislative mandates.
Describe the concept of interperiod equality. - correct answer Current year
revenues should be sufficient to pay for current year services. Current year
services should not be financed by future year taxpayers.
Which basis of accounting cannot be used to demonstrate the concept of
interperiod equality?
A. Cash basis
B. Accrual basis
C. Modified accrual basis - correct answer a. NO
B. YES
C. YES
Cash basis cannot be used because transactions are recorded only based on the
inflows and outflows of cash. The period in which the revenue was earned or
liability incurred is not taken into consideration.
Questions and Answers 2024/2025
Statements by standard setting bodies - correct answer Sets forth the
accounting and reporting standard that should be followed by preparers and
auditors of financial statements along with effective date.
Concept statements - correct answer Does not establish accounting or reporting
standards. Describes the concepts the board will use as framework for evaluating
existing standards and practices and for establishing new standards.
Interpretations or technical bulletins - correct answer Clarify points that are
ambiguous in previous standards. Technical bulletins address issues not
warranting research involved in setting new standard.
FASAB Hierarchy - correct answer - Category A: established accounting
principles: Statements of Federal Financial Accounting Standards and
interpretations
- Category B: FASAB Technical Bulletins, AICPA Industry Audit ad Accounting
Guide
- Category C: Technical Releases of the Accounting and Auditing Policy
Committee of the FASAB
- Category D: FASAB Implementation Guides and practices which are widely
recognized and prevalent in the federal government.
- Other accounting literature: FASAB Concept statements, other non-federal
pronouncements, professional organizations/regulatory agencies,
textbooks/handbooks/articles
GASB Hierarchy - correct answer GAAP
- GASB Statements
- GASB Technical Bulletins
,State and Local non-authoritative sources:
- GASB Concept statements
- Other literature: FASB, FASAB, International Public Sector Accounting
Standards Board, International Accounting Standards Board, AICPA not cleared
by GASB.
- Practices widely recognized and prevalent in state and local government; other
professional associations/regulatory agencies, textbooks/handbooks/articles
AICPA Literature cleared by GASB:
- Definition of government
- Capital asset impairment for gaming entities
- Proceeds of bonds issued by financing authority
- Charity care
- Lottery reporting
- Gaming reporting
Describe at least three ways governments differ from private sector
organizations. - correct answer Governments are:
- established through legal means
- have no profit motive
- raise revenue primarily through taxes
- have not shareholders
- rely on the budget process to allocate resources
- have governing bodies with publicly elected leaders
- provide many services that are not available in the private sector
Budget is essential to government financial management.
TRUE of FALSE - correct answer TRUE
Governments are legally bound by appropriations.
, The budget establishes spending authority, outlines programs and service to be
provided tot he public, and defines the resources that are to be used.
Which of the following is not a type of accountability used in government?
A. Operational accountability
B. Legal accountability
C. Profit accountability
D. Performance accountability - correct answer C
Governments are not created to make a profit
The executive branch is only accountability to the public.
TRUE or FALSE - correct answer FALSE
The executive branch is also accountable to the legislative branch for spending
resources in accordance with legislative mandates.
Describe the concept of interperiod equality. - correct answer Current year
revenues should be sufficient to pay for current year services. Current year
services should not be financed by future year taxpayers.
Which basis of accounting cannot be used to demonstrate the concept of
interperiod equality?
A. Cash basis
B. Accrual basis
C. Modified accrual basis - correct answer a. NO
B. YES
C. YES
Cash basis cannot be used because transactions are recorded only based on the
inflows and outflows of cash. The period in which the revenue was earned or
liability incurred is not taken into consideration.
