TEST BANK for Accounting for Governmental and Nonprofit Entities
(19th Edition) by Neely, Reck, Lowensohn & Wilson – All Chapters 1–
17 Included | Latest Exam Questions & VERIFIED AN
SWERS AFTER EVERY CHAPTER 2025//2026.
Franklyn A Plus Pass
Chapter 1
1) Explain the essential differences between general purpose and special purpose governments and
give
several examples of each.
2) Identify and explain the characteristics that distinguish governments and not-for-profit entities
from
business entities.
3) GASB and FASB standards are concerned only with external financial reporting; whereas, FASAB
1|Page
,standards are concerned with both internal and external financial reporting. Do you agree with this
statement? Why or why not?
Franklyne A plus Pass
4) Why should persons interested in reading financial reports of governments and not-for- profit
entities
be familiar with standards set by the GASB and the FASB?
5) Explain in your own words why accountability is the cornerstone of all financial reporting in
government.
2 | P a ge
Franklyn A Plus Pass
6) In your own words state the primary needs the GASB believes external users have for financial
reports
of state and local governments. For contrast, state the uses the FASB believes external users have
for the
financial reports of not-for-profit organizations.
7) Describe the difference between a comprehensive annual financial report (CAFR) and GASB
general
purpose external financial reporting for state and local governments.
8) Identify and briefly explain the four sections of the performance and accountability report (PAR)
that
the Office of Management and Budget requires major federal departments and agencies to prepare.
Franklyne A plus Pass
9) Explain the concepts of fiscal and operational accountability and the basis of accounting used to
capture each concept.
10) Describe the comprehensive annual financial report (CAFR). What are the sections of the report
and
which components of the organization should it include? Is a CAFR required?
3 | P a ge
Franklyn A Plus Pass
11) The Governmental Accounting Standards Board is assigned responsibility for setting accounting
and
financial reporting standards for which of the following?
A) Governments such as federal agencies, states, cities, counties, villages, and townships.
2|Page
,B) State and local government entities and governmentally-related units and agencies, such as
utilities,
authorities, hospitals, and colleges and universities.
C) Not-for-profit organizations.
D) State and local governments and all not-for-profit organizations.
12) Which of the following bodies has been established to recommend accounting and financial
reporting
standards for the federal government?
A) Financial Accounting Standards Board (FASB).
B) Governmental Accounting Standards Board (GASB).
C) Federal Accounting Foundation (FAF).
D) Federal Accounting Standards Advisory Board (FASAB).
Franklyne A plus Pass
13) The Financial Accounting Standards Board has the responsibility for setting accounting and
financial
reporting standards for which of the following?
A) All not-for-profit organizations that are nongovernmental and business entities.
B) All not-for-profit organizations and business entities.
C) All not-for-profit organizations.
D) Special purpose governments with a business purpose.
14) You are trying to decide if an entity you are reviewing is a government or a not-for- profit. Which
of
the following would indicate it is a government rather than a not-for-profit entity?
A) Absence of profit motive.
B) A primary source of revenues is taxes.
4 | P a ge
Franklyn A Plus Pass
C) Resource providers do not expect benefits proportional to the resources provided.
D) Absence of a defined ownership interest that can be sold, transferred, or redeemed.
15) Which of the following is identified by the GASB as the "cornerstone" of all financial reporting in
government?
A) Decision usefulness.
3|Page
, B) Stewardship.
C) Accountability.
D) Interperiod equity.
16) Which of the following organizations issue standards that focus on both internal and external
financial
reporting?
A) Federal Accounting Standards Advisory Board.
B) Governmental Accounting Standards Board.
C) Financial Accounting Standards Board.
D) American Institute of CPAs.
Franklyne A plus Pass
17) Which of the following is identified by the FASAB as the foundation for federal financial
reporting?
A) Decision usefulness.
B) Accountability.
C) Understandability.
D) Budget integrity.
18) Which of the following is not an objective of financial reporting by state and local governments?
A) To assist users in assessing the adequacy of systems and controls.
B) To assist users in assessing financial condition and results of operations.
5 | P a ge
Franklyn A Plus Pass
C) To assist financial report users in comparing actual financial results with the legally adopted
budget.
D) To assist in determining compliance with finance-related laws, rules, and regulations.
19) Which of the following groups is considered a primary user of a state or local government's
general
purpose external financial statements?
A) Citizens.
B) Managers and administrators.
C) Employees.
D) Special interest groups.
4|Page
(19th Edition) by Neely, Reck, Lowensohn & Wilson – All Chapters 1–
17 Included | Latest Exam Questions & VERIFIED AN
SWERS AFTER EVERY CHAPTER 2025//2026.
Franklyn A Plus Pass
Chapter 1
1) Explain the essential differences between general purpose and special purpose governments and
give
several examples of each.
2) Identify and explain the characteristics that distinguish governments and not-for-profit entities
from
business entities.
3) GASB and FASB standards are concerned only with external financial reporting; whereas, FASAB
1|Page
,standards are concerned with both internal and external financial reporting. Do you agree with this
statement? Why or why not?
Franklyne A plus Pass
4) Why should persons interested in reading financial reports of governments and not-for- profit
entities
be familiar with standards set by the GASB and the FASB?
5) Explain in your own words why accountability is the cornerstone of all financial reporting in
government.
2 | P a ge
Franklyn A Plus Pass
6) In your own words state the primary needs the GASB believes external users have for financial
reports
of state and local governments. For contrast, state the uses the FASB believes external users have
for the
financial reports of not-for-profit organizations.
7) Describe the difference between a comprehensive annual financial report (CAFR) and GASB
general
purpose external financial reporting for state and local governments.
8) Identify and briefly explain the four sections of the performance and accountability report (PAR)
that
the Office of Management and Budget requires major federal departments and agencies to prepare.
Franklyne A plus Pass
9) Explain the concepts of fiscal and operational accountability and the basis of accounting used to
capture each concept.
10) Describe the comprehensive annual financial report (CAFR). What are the sections of the report
and
which components of the organization should it include? Is a CAFR required?
3 | P a ge
Franklyn A Plus Pass
11) The Governmental Accounting Standards Board is assigned responsibility for setting accounting
and
financial reporting standards for which of the following?
A) Governments such as federal agencies, states, cities, counties, villages, and townships.
2|Page
,B) State and local government entities and governmentally-related units and agencies, such as
utilities,
authorities, hospitals, and colleges and universities.
C) Not-for-profit organizations.
D) State and local governments and all not-for-profit organizations.
12) Which of the following bodies has been established to recommend accounting and financial
reporting
standards for the federal government?
A) Financial Accounting Standards Board (FASB).
B) Governmental Accounting Standards Board (GASB).
C) Federal Accounting Foundation (FAF).
D) Federal Accounting Standards Advisory Board (FASAB).
Franklyne A plus Pass
13) The Financial Accounting Standards Board has the responsibility for setting accounting and
financial
reporting standards for which of the following?
A) All not-for-profit organizations that are nongovernmental and business entities.
B) All not-for-profit organizations and business entities.
C) All not-for-profit organizations.
D) Special purpose governments with a business purpose.
14) You are trying to decide if an entity you are reviewing is a government or a not-for- profit. Which
of
the following would indicate it is a government rather than a not-for-profit entity?
A) Absence of profit motive.
B) A primary source of revenues is taxes.
4 | P a ge
Franklyn A Plus Pass
C) Resource providers do not expect benefits proportional to the resources provided.
D) Absence of a defined ownership interest that can be sold, transferred, or redeemed.
15) Which of the following is identified by the GASB as the "cornerstone" of all financial reporting in
government?
A) Decision usefulness.
3|Page
, B) Stewardship.
C) Accountability.
D) Interperiod equity.
16) Which of the following organizations issue standards that focus on both internal and external
financial
reporting?
A) Federal Accounting Standards Advisory Board.
B) Governmental Accounting Standards Board.
C) Financial Accounting Standards Board.
D) American Institute of CPAs.
Franklyne A plus Pass
17) Which of the following is identified by the FASAB as the foundation for federal financial
reporting?
A) Decision usefulness.
B) Accountability.
C) Understandability.
D) Budget integrity.
18) Which of the following is not an objective of financial reporting by state and local governments?
A) To assist users in assessing the adequacy of systems and controls.
B) To assist users in assessing financial condition and results of operations.
5 | P a ge
Franklyn A Plus Pass
C) To assist financial report users in comparing actual financial results with the legally adopted
budget.
D) To assist in determining compliance with finance-related laws, rules, and regulations.
19) Which of the following groups is considered a primary user of a state or local government's
general
purpose external financial statements?
A) Citizens.
B) Managers and administrators.
C) Employees.
D) Special interest groups.
4|Page
