Essentials of Accounting for Governmental and Not-For-Profit Organizations Exam Questions Answered
Correctly Latest 2025
accrual basis - Answers "Basis of accounting under which revenues are recorded when earned and
expenditures (or expenses) are recorded as soon as they result in liabilities for benefits received,
notwithstanding that the receipt of cash or the payment of cash may take place, in whole or in part, in
another accounting period."
advance refunding - Answers "A bond refunding (q.v.) in which the proceeds are placed in an escrow
account pending the call date or the maturity date of the existing debt. In this case, the debt is said to be
defeased (q.v.) for accounting purposes."
advances interfund - Answers Long-term loans between funds. A long-term loan to another fund would
be represented in the account.
agency fund - Answers "Fiduciary fund consisting of resources received and held by the governmental
agent for others; for example, taxes collected and held by a municipality for a school district."
agent multiple-employer defined benefit pension plan - Answers Statewide pension plan in which
separate account balances are maintained for each participating employer; expected to fund any
deficits. Contrast with cost-sharing multiple-employer defined benefit pension plan.
American Institute of Certified Public Accountants (AICPA) - Answers "Organization of Certified Public
Accountants that provides auditing guidance, including the GAAP Hierarchy (q.v.) and accounting and
auditing guidance, in the case of Audit and Accounting Guides, when approved by the FASB (q.v.) and/or
the GASB (q.v.)."
annual required contributions (ARC) - Answers "Term used by GASB to determine the amount required
by a retirement fund (including other postemployment benefit plans) to be contributed, including
normal cost and funding of past service cost. Used in the Schedule of Employer Contributions (q.v.)."
annuity - Answers "Series of equal money payments made at equal intervals during a designated period
of time. In governmental accounting, the most frequent annuities are accumulations of debt service
funds for term bonds and payments to retired employees or their beneficiaries under public employee
retirement systems."
appropriation - Answers Authorization granted by a legislative body to incur liabilities for purposes
specified in the appropriation act (q.v.).
appropriations expenditures, and encumbrances ledger - Answers Subsidiary ledger used by
governmental funds in which a budget is recorded to track the appropriations, expenditures, and
encumbrances that apply to the subsidiary account. Using this ledger, a department head, for example,
could determine the unencumbered balance in the department."
, assessment - Answers (1) Process of making the official valuation of property for purposes of taxation.
(2) Valuation placed on property as a result of this process.
asset impairment - Answers An unexpected decline in the usable capacity of a capital asset. An asset is
deemed to be impaired if the decline is not part of the normal life cycle of an asset and the amount of
the decline in service utility is large.
assigned fund balance - Answers "A classification of fund balance reported in governmental-type funds
to indicate net resources of the fund that the government intends for a specific purpose. Assigned
resources differ from committed in that constraints imposed on assigned resources are more easily
modified or removed. For governmental funds other than the General Fund, this is the category for all
(positive) residual fund balances."
balance sheet - Answers Format where assets equal liabilities plus net assets (fund balance). Required
governmental funds basic statement; may be used as government-wide and proprietary fund
statements in lieu of Statement of Net Assets.
basic financial statements - Answers "The primary financial statements required by the GASB in order for
state and local governments to meet GAAP. The nature of the government (general-purpose, special-
purpose) and of the governmental activities (governmental-type, business-type, and fiduciary-type)
determine which statements are basic."
basis of accounting - Answers "Rule (or rules) used to determine the point in time when assets,
liabilities, revenues, and expenses (expenditures) should be measured and recorded as such in the
accounts of an entity. An organization might use the cash, modified accrual, or accrual basis of
accounting."
blending, blended presentation - Answers One method of reporting the financial data of a component
unit in a manner similar to that in which the financial data of the primary government are presented.
Under this method, the component unit data are combined with the appropriate fund types of the
primary government and reported in the same columns as the data from the primary government. See
discrete presentation. "
bonded debt - Answers That portion of indebtedness represented by outstanding bonds.
bonds authorized and unissued - Answers Bonds that have been legally authorized but not issued and
that can be issued and sold without further authorization. Note: This term must not be confused with
the term legal debt margin, which represents the difference between the legal debt limit (q.v.) of a
governmental unit and the debt outstanding against it."
budget - Answers "Plan of financial operation embodying an estimate of proposed expenditures for a
given period and the proposed means of financing them. Used without any modifier, usually indicates a
financial plan for a single fiscal year."
Correctly Latest 2025
accrual basis - Answers "Basis of accounting under which revenues are recorded when earned and
expenditures (or expenses) are recorded as soon as they result in liabilities for benefits received,
notwithstanding that the receipt of cash or the payment of cash may take place, in whole or in part, in
another accounting period."
advance refunding - Answers "A bond refunding (q.v.) in which the proceeds are placed in an escrow
account pending the call date or the maturity date of the existing debt. In this case, the debt is said to be
defeased (q.v.) for accounting purposes."
advances interfund - Answers Long-term loans between funds. A long-term loan to another fund would
be represented in the account.
agency fund - Answers "Fiduciary fund consisting of resources received and held by the governmental
agent for others; for example, taxes collected and held by a municipality for a school district."
agent multiple-employer defined benefit pension plan - Answers Statewide pension plan in which
separate account balances are maintained for each participating employer; expected to fund any
deficits. Contrast with cost-sharing multiple-employer defined benefit pension plan.
American Institute of Certified Public Accountants (AICPA) - Answers "Organization of Certified Public
Accountants that provides auditing guidance, including the GAAP Hierarchy (q.v.) and accounting and
auditing guidance, in the case of Audit and Accounting Guides, when approved by the FASB (q.v.) and/or
the GASB (q.v.)."
annual required contributions (ARC) - Answers "Term used by GASB to determine the amount required
by a retirement fund (including other postemployment benefit plans) to be contributed, including
normal cost and funding of past service cost. Used in the Schedule of Employer Contributions (q.v.)."
annuity - Answers "Series of equal money payments made at equal intervals during a designated period
of time. In governmental accounting, the most frequent annuities are accumulations of debt service
funds for term bonds and payments to retired employees or their beneficiaries under public employee
retirement systems."
appropriation - Answers Authorization granted by a legislative body to incur liabilities for purposes
specified in the appropriation act (q.v.).
appropriations expenditures, and encumbrances ledger - Answers Subsidiary ledger used by
governmental funds in which a budget is recorded to track the appropriations, expenditures, and
encumbrances that apply to the subsidiary account. Using this ledger, a department head, for example,
could determine the unencumbered balance in the department."
, assessment - Answers (1) Process of making the official valuation of property for purposes of taxation.
(2) Valuation placed on property as a result of this process.
asset impairment - Answers An unexpected decline in the usable capacity of a capital asset. An asset is
deemed to be impaired if the decline is not part of the normal life cycle of an asset and the amount of
the decline in service utility is large.
assigned fund balance - Answers "A classification of fund balance reported in governmental-type funds
to indicate net resources of the fund that the government intends for a specific purpose. Assigned
resources differ from committed in that constraints imposed on assigned resources are more easily
modified or removed. For governmental funds other than the General Fund, this is the category for all
(positive) residual fund balances."
balance sheet - Answers Format where assets equal liabilities plus net assets (fund balance). Required
governmental funds basic statement; may be used as government-wide and proprietary fund
statements in lieu of Statement of Net Assets.
basic financial statements - Answers "The primary financial statements required by the GASB in order for
state and local governments to meet GAAP. The nature of the government (general-purpose, special-
purpose) and of the governmental activities (governmental-type, business-type, and fiduciary-type)
determine which statements are basic."
basis of accounting - Answers "Rule (or rules) used to determine the point in time when assets,
liabilities, revenues, and expenses (expenditures) should be measured and recorded as such in the
accounts of an entity. An organization might use the cash, modified accrual, or accrual basis of
accounting."
blending, blended presentation - Answers One method of reporting the financial data of a component
unit in a manner similar to that in which the financial data of the primary government are presented.
Under this method, the component unit data are combined with the appropriate fund types of the
primary government and reported in the same columns as the data from the primary government. See
discrete presentation. "
bonded debt - Answers That portion of indebtedness represented by outstanding bonds.
bonds authorized and unissued - Answers Bonds that have been legally authorized but not issued and
that can be issued and sold without further authorization. Note: This term must not be confused with
the term legal debt margin, which represents the difference between the legal debt limit (q.v.) of a
governmental unit and the debt outstanding against it."
budget - Answers "Plan of financial operation embodying an estimate of proposed expenditures for a
given period and the proposed means of financing them. Used without any modifier, usually indicates a
financial plan for a single fiscal year."
