CMFO EXAM STUDY GUIDE 2026
COMPLETE ANSWERS VERIFIED
⫸ A municipality & county are essentially:. Answer: - corporations
created by the State's Constitution and statutes
⫸ A municipal corporation is designed to:. Answer: - aid the
municipality in carrying out specific activities
⫸ A municipal corporation has the following powers: (5). Answer: 1. to
sue & be sued, to defend & be defended in all courts of law
2. to adopt a common seal
3. to acquire property
4. to acquire, lease, and operate public utilities
5. to exercise any power & render any service which contributes to the
general welfare
⫸ What is an Authority?. Answer: - an authority is a "quasi-municipal"
corporation established for the purpose of achieving certain objectives or
providing specified services
- established WITHOUT the consent of the residents
- only has powers specifically granted by law
⫸ Examples of an Authority. Answer: 1. water treatment
2. sewage & waste disposal
,3. parking
⫸ What is an ordinance?. Answer: - an ordinance is a municipality's
basic law to regulate its local affairs
- passed by the municipality's legislative body
- contained in a municipality's charter
- MUST NOT conflict with the municipality's charter
- municipal laws are subordinate to the state
⫸ What is a municipal charter?. Answer: - a municipal charter is to the
municipality, what the constitution is to the state
⫸ What are the characteristics of a governmental unit as a corporation?.
Answer: 1. Permanency of government entity
2. Purpose of establishment
3. Ability to levy taxes (main source of revenue)
4. Greater borrowing power
5. Fund accounting
6. Greater legal restrictions
7. Fiduciary responsibility to customers
8. Lack of profit motive
⫸ Common characteristics shared by a municipality & private
business:. Answer: 1. double entry accounting
,2. maintenance of a general ledger & subsidiary ledgers
3. required financial reporting
4. required system of internal controls
⫸ What is a fund?. Answer: - a fund is a sum of money or other
resources segregated for the purpose of carrying on a specific activity
- contains self-balancing set of accounts
⫸ Required set of funds:. Answer: 1. Current
2. Trust
3. Capital
4. Utility operating
5. Utility capital
⫸ What is the Current Fund?. Answer: - the current fund is the fund
where all current operations of the municipality are accounted for.
- transactions represent the everyday operations of the local unit
⫸ What is the accounting equation. Answer: Assets = Liabilities + Fund
Balance
- MUST always balance
⫸ What are the permanent (Balance Sheet) accounts?. Answer: 1.
Assets
, 2. Liabilities
3. Fund Balance
- All three major account groups compile the balance sheet
- they are PERPETUAL - meaning that they are not closed out annually
⫸ What are the temporary (Income Statement) accounts?. Answer: 1.
Revenues
2. Appropriations
- these accounts start each accounting period with NO balance
⫸ Explain the balances for permanent accounts:. Answer: - the
ENDING balance for each balance sheet account at the end of an
accounting period (monthly or annually) becomes the OPENING
balance of that account for the next accounting period.
⫸ Explain the balances for temporary accounts:. Answer: - start each
accounting period with NO balance
- the budget is then recorded to each account
- current period transactions are then recorded to each account
- accounts are closed to a ZERO balance through journal entries before
the end of the accounting period (monthly or annually)
COMPLETE ANSWERS VERIFIED
⫸ A municipality & county are essentially:. Answer: - corporations
created by the State's Constitution and statutes
⫸ A municipal corporation is designed to:. Answer: - aid the
municipality in carrying out specific activities
⫸ A municipal corporation has the following powers: (5). Answer: 1. to
sue & be sued, to defend & be defended in all courts of law
2. to adopt a common seal
3. to acquire property
4. to acquire, lease, and operate public utilities
5. to exercise any power & render any service which contributes to the
general welfare
⫸ What is an Authority?. Answer: - an authority is a "quasi-municipal"
corporation established for the purpose of achieving certain objectives or
providing specified services
- established WITHOUT the consent of the residents
- only has powers specifically granted by law
⫸ Examples of an Authority. Answer: 1. water treatment
2. sewage & waste disposal
,3. parking
⫸ What is an ordinance?. Answer: - an ordinance is a municipality's
basic law to regulate its local affairs
- passed by the municipality's legislative body
- contained in a municipality's charter
- MUST NOT conflict with the municipality's charter
- municipal laws are subordinate to the state
⫸ What is a municipal charter?. Answer: - a municipal charter is to the
municipality, what the constitution is to the state
⫸ What are the characteristics of a governmental unit as a corporation?.
Answer: 1. Permanency of government entity
2. Purpose of establishment
3. Ability to levy taxes (main source of revenue)
4. Greater borrowing power
5. Fund accounting
6. Greater legal restrictions
7. Fiduciary responsibility to customers
8. Lack of profit motive
⫸ Common characteristics shared by a municipality & private
business:. Answer: 1. double entry accounting
,2. maintenance of a general ledger & subsidiary ledgers
3. required financial reporting
4. required system of internal controls
⫸ What is a fund?. Answer: - a fund is a sum of money or other
resources segregated for the purpose of carrying on a specific activity
- contains self-balancing set of accounts
⫸ Required set of funds:. Answer: 1. Current
2. Trust
3. Capital
4. Utility operating
5. Utility capital
⫸ What is the Current Fund?. Answer: - the current fund is the fund
where all current operations of the municipality are accounted for.
- transactions represent the everyday operations of the local unit
⫸ What is the accounting equation. Answer: Assets = Liabilities + Fund
Balance
- MUST always balance
⫸ What are the permanent (Balance Sheet) accounts?. Answer: 1.
Assets
, 2. Liabilities
3. Fund Balance
- All three major account groups compile the balance sheet
- they are PERPETUAL - meaning that they are not closed out annually
⫸ What are the temporary (Income Statement) accounts?. Answer: 1.
Revenues
2. Appropriations
- these accounts start each accounting period with NO balance
⫸ Explain the balances for permanent accounts:. Answer: - the
ENDING balance for each balance sheet account at the end of an
accounting period (monthly or annually) becomes the OPENING
balance of that account for the next accounting period.
⫸ Explain the balances for temporary accounts:. Answer: - start each
accounting period with NO balance
- the budget is then recorded to each account
- current period transactions are then recorded to each account
- accounts are closed to a ZERO balance through journal entries before
the end of the accounting period (monthly or annually)
