CGFM EXAM 2 2026 GOVERNMENT
FINANCIAL MANAGEMENT TEST PAPER
QUESTIONS AND SOLUTIONS GRADED A+
◉ I 2.In financial reporting, consistency of communication means
Answer: Correct Answer: if accounting principles have changed or if
the financial reporting entity has changed, the nature and reason for
the change, as well as the effect of the change, should be disclosed.
◉ I 3.Budgeting is an element of which policy? Answer: Correct
Answer: fiscal
◉ I 4.Another term for the federal government baseline budget is
Answer: Correct Answer: a current level of service budget.
◉ I 5.As described by FASAB, the four groups of people to whom the
government is accountable and are, therefore, potential users of
federal financial statements are Answer: Correct Answer: citizens,
Congress, executives, and program managers.
◉ I 6.When establishing an allowance for doubtful accounts, the
journal entry required is a debit to Answer: Correct Answer: Bad
Debts Expense and a credit to the Allowance for Doubtful Accounts.
,◉ I 7.Street resurfacing is a type of which budget element? Answer:
Correct Answer: program
◉ I 8.Which of the following is a correct accounting entry when one
government agency receives a grant from another government
agency? Answer: Correct Answer: The grantor agency recognizes
liability and the recipient agency recognizes non-exchange revenue
when the recipient agency meets all eligibility requirements.
◉ I 9.Which of the following sources of accounting principles is at
the top of the GASB hierarchy? Answer: Correct Answer: Generally
Accepted Accounting Principles
◉ I 10.The role of the International Public Sector Accounting
Standards Board is to Answer: Correct Answer: set standards for the
general purpose financial statements of international public sector
entities.
◉ I 11.A state needs to determine its indirect cost rate for fringe
benefits as a function of direct salaries costs of $3 million. Based on
the information shown on the left, the indirect cost is Answer:
Correct Answer: 10.8%
◉ I 12.Non-exchange revenue includes inflows of resources arising
from Answer: Correct Answer: taxes, fines and penalties from the
private sector.
,◉ I 13.A group of activities within a function are known as Answer:
Correct Answer: a program.
◉ I 14.In financing capital projects, special assessments are used to
ensure that Answer: Correct Answer: the individuals benefiting from
the project are the ones who pay for it.
◉ I 15.The organizations that establish the standards used by their
constituents for external reporting purposes include FASB, FASAB,
GASB and Answer: Correct Answer: International Public Sector
Accounting Standards Board.
◉ I 16.Which of the following terms describes costs an agency
incurs on behalf of another agency? Answer: Correct Answer: inter-
entity
◉ I 17.State and local governments need cost information to receive
reimbursements for allowable costs for federal grants, while federal
agencies are required to have cost accounting concepts in the
preparation of what type of statements? Answer: Correct Answer:
financial statements
◉ I 18.State and local governments use encumbrances as the major
budgetary control tool to ensure availability of funds prior to
, entering agreements, while the federal government instills
budgetary control using Answer: Correct Answer: commitments and
obligations.
◉ I 19.The equipment department of a municipality rents out
equipment to other departments and wants to set a fee that will
recover expenses. The department estimates 10,000 rentals per
year, with the annual operating costs shown on the left. The
department has $5,000 in annual interest payments and $15,000 in
annual debt service payments for the loan they took out to purchase
the equipment. The annual depreciation on the equipment is $7,500.
Based on this information, the user fee should be set at Answer:
Correct Answer: $91.25 per rental.
◉ I 20.Apportionments and allotments are used by agencies to
ensure Answer: Correct Answer: that outlays do not exceed
appropriations.
◉ I 21.Departments and agencies submit their apportionment
requests for future expenditures during which budget phase?
Answer: Correct Answer: execution
◉ I 22.Which element of the budget structure is represented by
license and permit revenue? Answer: Correct Answer: category or
source
FINANCIAL MANAGEMENT TEST PAPER
QUESTIONS AND SOLUTIONS GRADED A+
◉ I 2.In financial reporting, consistency of communication means
Answer: Correct Answer: if accounting principles have changed or if
the financial reporting entity has changed, the nature and reason for
the change, as well as the effect of the change, should be disclosed.
◉ I 3.Budgeting is an element of which policy? Answer: Correct
Answer: fiscal
◉ I 4.Another term for the federal government baseline budget is
Answer: Correct Answer: a current level of service budget.
◉ I 5.As described by FASAB, the four groups of people to whom the
government is accountable and are, therefore, potential users of
federal financial statements are Answer: Correct Answer: citizens,
Congress, executives, and program managers.
◉ I 6.When establishing an allowance for doubtful accounts, the
journal entry required is a debit to Answer: Correct Answer: Bad
Debts Expense and a credit to the Allowance for Doubtful Accounts.
,◉ I 7.Street resurfacing is a type of which budget element? Answer:
Correct Answer: program
◉ I 8.Which of the following is a correct accounting entry when one
government agency receives a grant from another government
agency? Answer: Correct Answer: The grantor agency recognizes
liability and the recipient agency recognizes non-exchange revenue
when the recipient agency meets all eligibility requirements.
◉ I 9.Which of the following sources of accounting principles is at
the top of the GASB hierarchy? Answer: Correct Answer: Generally
Accepted Accounting Principles
◉ I 10.The role of the International Public Sector Accounting
Standards Board is to Answer: Correct Answer: set standards for the
general purpose financial statements of international public sector
entities.
◉ I 11.A state needs to determine its indirect cost rate for fringe
benefits as a function of direct salaries costs of $3 million. Based on
the information shown on the left, the indirect cost is Answer:
Correct Answer: 10.8%
◉ I 12.Non-exchange revenue includes inflows of resources arising
from Answer: Correct Answer: taxes, fines and penalties from the
private sector.
,◉ I 13.A group of activities within a function are known as Answer:
Correct Answer: a program.
◉ I 14.In financing capital projects, special assessments are used to
ensure that Answer: Correct Answer: the individuals benefiting from
the project are the ones who pay for it.
◉ I 15.The organizations that establish the standards used by their
constituents for external reporting purposes include FASB, FASAB,
GASB and Answer: Correct Answer: International Public Sector
Accounting Standards Board.
◉ I 16.Which of the following terms describes costs an agency
incurs on behalf of another agency? Answer: Correct Answer: inter-
entity
◉ I 17.State and local governments need cost information to receive
reimbursements for allowable costs for federal grants, while federal
agencies are required to have cost accounting concepts in the
preparation of what type of statements? Answer: Correct Answer:
financial statements
◉ I 18.State and local governments use encumbrances as the major
budgetary control tool to ensure availability of funds prior to
, entering agreements, while the federal government instills
budgetary control using Answer: Correct Answer: commitments and
obligations.
◉ I 19.The equipment department of a municipality rents out
equipment to other departments and wants to set a fee that will
recover expenses. The department estimates 10,000 rentals per
year, with the annual operating costs shown on the left. The
department has $5,000 in annual interest payments and $15,000 in
annual debt service payments for the loan they took out to purchase
the equipment. The annual depreciation on the equipment is $7,500.
Based on this information, the user fee should be set at Answer:
Correct Answer: $91.25 per rental.
◉ I 20.Apportionments and allotments are used by agencies to
ensure Answer: Correct Answer: that outlays do not exceed
appropriations.
◉ I 21.Departments and agencies submit their apportionment
requests for future expenditures during which budget phase?
Answer: Correct Answer: execution
◉ I 22.Which element of the budget structure is represented by
license and permit revenue? Answer: Correct Answer: category or
source
