WGU - D250 - CHAPTERS 2-6 STUDYGUIDE QUESTIONS AND CORRECT
ANSWERS
Question:
1. Which characteristics distinguishes a government or nonprofit entity from a business?
There is always a direct link between revenues generated and expenditures/expenses
incurred. Capital assets are used to produce revenues and save costs. Revenues are always
indicative of demand for goods and services. The mission of the entity may include goals
other than maximizing profit.
Answer:
The mission of the entity may include goals other than maximizing profit.
Question:
2. What is common to both governments and nonprofit entities but distinguishes these
entities from for-profit entities? The budget is a legal, financial document. Revenues are
usually indicative of demand for goods or services. There is direct matching of revenues and
expenses. There are no defined ownership interests.
Answer:
There are no defined ownership interests.
Question:
3. What is a purpose of external financial reporting by governments? To assess financial
condition To provide information to stockholders To assess the ability of elected officials to
effectively manage people To track cash flow
Answer:
To assess financial condition
Question:
4. Why should users of government financial statements be interested in information about
compliance with laws and regulations? To determine whether the government has complied
with bond covenants To determine whether the government has complied with taxing
limitations To determine whether the government has complied with donor restrictions on
the use of funds To determine all of the above
Answer:
To determine all of the above
Question:
5. For which entity is the Governmental Accounting Standards Board the primary
standard-setting body? All governments All state and local governments All governments
and all nonprofit entities All state and local governments and all nonprofit entities
Answer:
All state and local governments
Question:
,6. governmental nonprofit entities, as established by the FASB? To assess the types of
services provided and the need for those services To assess the services provided and the
entity's ability to earn a profit To make rational decisions about the allocation of resources to
those organizations To determine how managers have managed personnel
Answer:
about the allocation of resources to those organizations
Question:
7. Why do governmental entities use fund accounting? Fund accounting is required by law.
Fund accounting is required by generally accepted accounting principles (GAAP). Fund
accounting promotes control and accountability over restricted resources. Fund accounting
promotes better control over operating activities.
Answer:
Fund accounting promotes control and accountability over restricted resources.
Question:
8. What is a fund in governmental and nonprofit accounting? I. Aseparate legal entity II. A
separate fiscal and accounting entity II only Both I and Il Neither I nor lI
Answer:
II only
Question:
9. What is a deferred inflow of resources? Money that will be collected five years from now.
Money that is in a fiduciary fund until donor restrictions lapse. Money collected in the current
period that are applicable to the future periods. Present obligations that the government has
little or no discretion to avoid.
Answer:
Money collected in the current period that are applicable to the future periods.
Question:
10. How should prepaid insurance be classified? Committed Restricted Assigned
Nonspendable
Answer:
Nonspendable
Question:
11. Which type of fund is an investment trust fund? General fund Fiduciary fund Internal
Service fund
Answer:
Fiduciary fund
Question:
12. Which fund is a governmental fund? Enterprise fund Debt service fund Internal service
fund Custodial fund
, Answer:
Debt service fund
Question:
13. The state collects a gasoline tax that must be used to support highway construction and
maintenance. In which fund should the gasoline tax revenue be accounted for? General fund
Special revenue fund Debt service fund Internal service fund
Answer:
Special revenue fund Special revenue funds are established to account for specific revenue
streams that are legally restricted or committed for specified purposes and are expected to
comprise a substantial portion of the inflows reported in the fund.
Question:
14. To fulfill the printing needs of its various departments and agencies, a city has
established a Central Print Shop, which bills the various departments and agencies of the
city for printing services rendered. counted? Internal service fund Enterprise fund General
fund Special revenue fund
Answer:
Internal service fund Internal service funds provide goods or services to other funds,
departments, same governmental unit (or occasionally to other governments).
Question:
15. Which section is required in the annual comprehensive financial report (ACFR) of a city?
Historical section Forecasting section Statistical section Detailed investment portfolio section
Answer:
Statistical section The ACR is divided into three main sections: introductory, financial, and
statistical. Module 2-EO 6: Explain what is included in an Annual Comprehensive Financial Report
(ACFR).
Question:
16. For which entity is fund accounting mandated for financial reporting? American Hospital
Association City of New York Grace Lutheran Church United Way
Answer:
City of New York
Question:
17. of activities of the city of West Hills? Determining the total expenses by natural
classification Determining the total expenses by function Determining the total revenues by
function Determining the net cost of functions
Answer:
of functions
Question:
18. What is required under the Governmental Accounting Standards Board (GASB)
Statement No. 34 reporting model? Only one set of financial statements, prepared on the full
ANSWERS
Question:
1. Which characteristics distinguishes a government or nonprofit entity from a business?
There is always a direct link between revenues generated and expenditures/expenses
incurred. Capital assets are used to produce revenues and save costs. Revenues are always
indicative of demand for goods and services. The mission of the entity may include goals
other than maximizing profit.
Answer:
The mission of the entity may include goals other than maximizing profit.
Question:
2. What is common to both governments and nonprofit entities but distinguishes these
entities from for-profit entities? The budget is a legal, financial document. Revenues are
usually indicative of demand for goods or services. There is direct matching of revenues and
expenses. There are no defined ownership interests.
Answer:
There are no defined ownership interests.
Question:
3. What is a purpose of external financial reporting by governments? To assess financial
condition To provide information to stockholders To assess the ability of elected officials to
effectively manage people To track cash flow
Answer:
To assess financial condition
Question:
4. Why should users of government financial statements be interested in information about
compliance with laws and regulations? To determine whether the government has complied
with bond covenants To determine whether the government has complied with taxing
limitations To determine whether the government has complied with donor restrictions on
the use of funds To determine all of the above
Answer:
To determine all of the above
Question:
5. For which entity is the Governmental Accounting Standards Board the primary
standard-setting body? All governments All state and local governments All governments
and all nonprofit entities All state and local governments and all nonprofit entities
Answer:
All state and local governments
Question:
,6. governmental nonprofit entities, as established by the FASB? To assess the types of
services provided and the need for those services To assess the services provided and the
entity's ability to earn a profit To make rational decisions about the allocation of resources to
those organizations To determine how managers have managed personnel
Answer:
about the allocation of resources to those organizations
Question:
7. Why do governmental entities use fund accounting? Fund accounting is required by law.
Fund accounting is required by generally accepted accounting principles (GAAP). Fund
accounting promotes control and accountability over restricted resources. Fund accounting
promotes better control over operating activities.
Answer:
Fund accounting promotes control and accountability over restricted resources.
Question:
8. What is a fund in governmental and nonprofit accounting? I. Aseparate legal entity II. A
separate fiscal and accounting entity II only Both I and Il Neither I nor lI
Answer:
II only
Question:
9. What is a deferred inflow of resources? Money that will be collected five years from now.
Money that is in a fiduciary fund until donor restrictions lapse. Money collected in the current
period that are applicable to the future periods. Present obligations that the government has
little or no discretion to avoid.
Answer:
Money collected in the current period that are applicable to the future periods.
Question:
10. How should prepaid insurance be classified? Committed Restricted Assigned
Nonspendable
Answer:
Nonspendable
Question:
11. Which type of fund is an investment trust fund? General fund Fiduciary fund Internal
Service fund
Answer:
Fiduciary fund
Question:
12. Which fund is a governmental fund? Enterprise fund Debt service fund Internal service
fund Custodial fund
, Answer:
Debt service fund
Question:
13. The state collects a gasoline tax that must be used to support highway construction and
maintenance. In which fund should the gasoline tax revenue be accounted for? General fund
Special revenue fund Debt service fund Internal service fund
Answer:
Special revenue fund Special revenue funds are established to account for specific revenue
streams that are legally restricted or committed for specified purposes and are expected to
comprise a substantial portion of the inflows reported in the fund.
Question:
14. To fulfill the printing needs of its various departments and agencies, a city has
established a Central Print Shop, which bills the various departments and agencies of the
city for printing services rendered. counted? Internal service fund Enterprise fund General
fund Special revenue fund
Answer:
Internal service fund Internal service funds provide goods or services to other funds,
departments, same governmental unit (or occasionally to other governments).
Question:
15. Which section is required in the annual comprehensive financial report (ACFR) of a city?
Historical section Forecasting section Statistical section Detailed investment portfolio section
Answer:
Statistical section The ACR is divided into three main sections: introductory, financial, and
statistical. Module 2-EO 6: Explain what is included in an Annual Comprehensive Financial Report
(ACFR).
Question:
16. For which entity is fund accounting mandated for financial reporting? American Hospital
Association City of New York Grace Lutheran Church United Way
Answer:
City of New York
Question:
17. of activities of the city of West Hills? Determining the total expenses by natural
classification Determining the total expenses by function Determining the total revenues by
function Determining the net cost of functions
Answer:
of functions
Question:
18. What is required under the Governmental Accounting Standards Board (GASB)
Statement No. 34 reporting model? Only one set of financial statements, prepared on the full
