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TEST BANK
FOR
INTRODUCTION TO FUND
ACCOUNTING 4TH EDITION
NORVELLE
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Chapter 1
The Government and Not-For-Profit Environment
TRUE/FALSE (CHAPTER 1)
1. F The main objective of a typical governmental or not-for-profit entity is to earn a profit.
2. TA government’s budget may be backed by the force of law.
3. FGovernmental entities have no need for an accounting system.
4. TA government’s internal managers rely on general purpose financial statements for a
considerable amount of information about their government.
5. FGovernments and not-for-profits may never engage in business-type activities.
6. TLenders use the financial statements of governments and not-for profits just as they would
those of businesses, that is, to help assess the borrower’s credit-worthiness.
7. TFinancial statements, no matter how prepared, do not directly affect the economic worth of
an entity.
8. FThe Financial Accounting Standards Advisory Board’s standards do not apply to the
federal Department of Treasury.
9. TGovernments may be subject to the same pressures that led to accounting scandals like
Enron.
10. FThe Governmental Accounting Standards Board establishes generally accepted accounting
principles for all state and local government entities, as well as all not-for-profit entities.
MULTIPLE CHOICE (CHAPTER 1)
1. A primary characteristic that distinguishes governmental entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
2. A primary characteristic that distinguishes not-for-profit entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
Granof Test Bank Chapter 1 Page 1
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3. Which tof tthe tfollowing tcharacteristics tdistinguishes ta tgovernmental tor tnot-for-profit
tentitytfrom ta tbusiness tentity?
a) There tis talways ta tdirect tlink tbetween trevenues tgenerated
tandtexpenditures/expenses tincurred.
b) Capital tassets tare tused tto tproduce trevenues tand tsave tcosts.
c) Revenues tare talways tindicative tof tdemand tfor tgoods tand tservices.
d) The tmission tof tthe tentity twill tdetermine tthe tgoods tor tservices tprovided.
4. The tmost tsignificant tfinancial tdocument tprovided tby ta tgovernmental tentity tis tthe
a) The tbalance tsheet.
b) The toperating tstatement.
c) The toperating tbudget.
d) The tcash tflow tstatement.
5. Which tof tthe tfollowing tstatements tis ttrue?
a) Governments tmay tengage tin tactivities tsimilar tto tactivities tengaged tin tby
tforprofittentities.
b) There tare ta tlimited tnumber tof tdifferent ttypes tof tgovernments.
c) All tgovernmental tentities tengage tin tthe tsame tactivities.
d) Managers tmay thave ta tlong-term tfocus tand tthereby tsacrifice tthe tshort-term
tliquidity toftthe tentity.
6. Which tof tthe tfollowing tactivities tis tNOT tan tactivity tin twhich ta tgovernmental tentity
tmighttengage?
a) Selling telectric tpower.
b) Operating ta tgolf tcourse.
c) Operating ta tbookstore.
d) All tof tthe tabove tare tactivities tthat tmight tbe tcarried tout tby ta tgovernment.
7. In twhich tof tthe tfollowing tactivities tis ta tnot-for-profit tentity tleast tlikely tto tengage?
a) Providing teducational tservices.
b) Providing thealth-care tservices.
c) Providing tfor tterrorism tdefense.
d) Retail tsales tof tcookies.
8. Which tof tthe tfollowing tcan tbe taffected tby tGAAP?
a) Legal tability tto tissue tbonds.
b) Ability tto tbalance tthe tbudget.
c) Amount treported tas temployee tpension tplan tcontributions.
d) Claims tand tjudgments tsettled.
9. Which tof tthe tfollowing tcharacteristics tis tunique tto ta tgovernmental tentity?
a) The tability tto thave tactivities tfinanced twith ttax-exempt tdebt.
b) The tpower tto timpose tfees.
c) The tability tto tissue ttax-exempt tdebt.
d) The tability tto thave tactivities tfinanced tby tFederal tgrants.
Granof tTest tBank tChapter t1 Page t2
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10. To tobtain ta tcomprehensive tunderstanding tof ta tgovernment’s tfiscal thealth, ta tfinancial
tanalysttshould tobtain tan tunderstanding tof twhich tof tthe tfollowing?
a) All tof tthe tresources towned tby tthe tgovernmental tentity.
b) All tof tthe tresources twhich tmay tbe tsummoned tby ta tgovernmental tentity.
c) Demographic tdata tabout tthe tresidents tserved tby tthe tgovernmental tentity.
d) All tof tthe tabove.
11. Which tof tthe tfollowing tis tcommon tto tboth tgovernments tand tnot-for-profit tentities
tbuttdistinguishes tthese tentities tfrom tfor-profit tentities?
a) The tbudget tis ta tlegal, tfinancial tdocument.
b) Revenues tare tusually tindicative tof tdemand tfor tgoods tor tservices.
c) There tis tdirect tmatching tof trevenues tand texpenses.
d) There tare tno tdefined townership tinterests.
12. Which tof tthe tfollowing tis tNOT ta tpurpose tof texternal tfinancial treporting tby tgovernments?
External tfinancial treports tshould tallow tusers tto
a) Assess tfinancial tcondition.
b) Compare tactual tresults twith tthe tbudget.
c) Assess tthe tability tof telected tofficials tto teffectively tmanage tpeople.
d) Evaluate tefficiency tand teffectiveness.
13. Which tof tthe tfollowing tis tNOT ta treason twhy tusers tneed tgovernmental tand tnot-for-
profittexternal tfinancial tstatements?
a) To tdetermine tthe tability tof tthe tentity tto tmeet tits tobligations.
b) To tdetermine tthe tability tof tthe tentity tto tcontinue tto tprovide tservices.
c) To tpredict tfuture tfiscal tsolvency.
d) To tevaluate tthe toverall tprofitability tof tthe tentity.
14. Users tof tgovernment tfinancial tstatements tshould tbe tinterested tin tinformation
tabouttcompliance twith tlaws tand tregulations tfor twhich tof tthe tfollowing treasons?
a) To tdetermine tif tthe tentity thas tcomplied twith tbond tcovenants.
b) To tdetermine tif tthe tentity thas tcomplied twith ttaxing tlimitations.
c) To tdetermine tif tthe tentity thas tcomplied twith tdonor trestrictions ton tthe tuse tof tfunds.
d) To tdetermine tall tof tthe tabove.
15. Which tof tthe tfollowing tis tNOT tgenerally tconsidered ta tmain tuser tof tgovernment tand
tnot-tforprofit tentity texternal tfinancial tstatements?
a) Investors tand tcreditors.
b) Taxpayers.
c) Donors.
d) Internal tmanagers.
16. Which tof tthe tfollowing tis ta tprobable tuse ta tdonor twould tmake tof tthe texternal
tfinancialtstatements tof ta tnot-for-profit tentity?
a) To tdetermine tthe tproportion tof tentity tresources tdirected tto tprograms tas
topposedtto tfund-raising.
b) To tdetermine tthe tcreditworthiness tof tthe tentity tfor tinvestment tpurposes.
Granof tTest tBank tChapter t1 Page t3
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TEST BANK
FOR
INTRODUCTION TO FUND
ACCOUNTING 4TH EDITION
NORVELLE
Downloaded by: Ariah |
Distribution of this document is illegal
, Stuvia.com - The Marketplace to Buy and Sell your Study Material
Chapter 1
The Government and Not-For-Profit Environment
TRUE/FALSE (CHAPTER 1)
1. F The main objective of a typical governmental or not-for-profit entity is to earn a profit.
2. TA government’s budget may be backed by the force of law.
3. FGovernmental entities have no need for an accounting system.
4. TA government’s internal managers rely on general purpose financial statements for a
considerable amount of information about their government.
5. FGovernments and not-for-profits may never engage in business-type activities.
6. TLenders use the financial statements of governments and not-for profits just as they would
those of businesses, that is, to help assess the borrower’s credit-worthiness.
7. TFinancial statements, no matter how prepared, do not directly affect the economic worth of
an entity.
8. FThe Financial Accounting Standards Advisory Board’s standards do not apply to the
federal Department of Treasury.
9. TGovernments may be subject to the same pressures that led to accounting scandals like
Enron.
10. FThe Governmental Accounting Standards Board establishes generally accepted accounting
principles for all state and local government entities, as well as all not-for-profit entities.
MULTIPLE CHOICE (CHAPTER 1)
1. A primary characteristic that distinguishes governmental entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
2. A primary characteristic that distinguishes not-for-profit entities from business entities is
a) The need to generate revenues equal to or in excess of expenditures/expenses.
b) The importance of the budget in the governing process.
c) The need to provide goods or services.
d) The correlation between revenues generated and demand for goods or services.
Granof Test Bank Chapter 1 Page 1
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3. Which tof tthe tfollowing tcharacteristics tdistinguishes ta tgovernmental tor tnot-for-profit
tentitytfrom ta tbusiness tentity?
a) There tis talways ta tdirect tlink tbetween trevenues tgenerated
tandtexpenditures/expenses tincurred.
b) Capital tassets tare tused tto tproduce trevenues tand tsave tcosts.
c) Revenues tare talways tindicative tof tdemand tfor tgoods tand tservices.
d) The tmission tof tthe tentity twill tdetermine tthe tgoods tor tservices tprovided.
4. The tmost tsignificant tfinancial tdocument tprovided tby ta tgovernmental tentity tis tthe
a) The tbalance tsheet.
b) The toperating tstatement.
c) The toperating tbudget.
d) The tcash tflow tstatement.
5. Which tof tthe tfollowing tstatements tis ttrue?
a) Governments tmay tengage tin tactivities tsimilar tto tactivities tengaged tin tby
tforprofittentities.
b) There tare ta tlimited tnumber tof tdifferent ttypes tof tgovernments.
c) All tgovernmental tentities tengage tin tthe tsame tactivities.
d) Managers tmay thave ta tlong-term tfocus tand tthereby tsacrifice tthe tshort-term
tliquidity toftthe tentity.
6. Which tof tthe tfollowing tactivities tis tNOT tan tactivity tin twhich ta tgovernmental tentity
tmighttengage?
a) Selling telectric tpower.
b) Operating ta tgolf tcourse.
c) Operating ta tbookstore.
d) All tof tthe tabove tare tactivities tthat tmight tbe tcarried tout tby ta tgovernment.
7. In twhich tof tthe tfollowing tactivities tis ta tnot-for-profit tentity tleast tlikely tto tengage?
a) Providing teducational tservices.
b) Providing thealth-care tservices.
c) Providing tfor tterrorism tdefense.
d) Retail tsales tof tcookies.
8. Which tof tthe tfollowing tcan tbe taffected tby tGAAP?
a) Legal tability tto tissue tbonds.
b) Ability tto tbalance tthe tbudget.
c) Amount treported tas temployee tpension tplan tcontributions.
d) Claims tand tjudgments tsettled.
9. Which tof tthe tfollowing tcharacteristics tis tunique tto ta tgovernmental tentity?
a) The tability tto thave tactivities tfinanced twith ttax-exempt tdebt.
b) The tpower tto timpose tfees.
c) The tability tto tissue ttax-exempt tdebt.
d) The tability tto thave tactivities tfinanced tby tFederal tgrants.
Granof tTest tBank tChapter t1 Page t2
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10. To tobtain ta tcomprehensive tunderstanding tof ta tgovernment’s tfiscal thealth, ta tfinancial
tanalysttshould tobtain tan tunderstanding tof twhich tof tthe tfollowing?
a) All tof tthe tresources towned tby tthe tgovernmental tentity.
b) All tof tthe tresources twhich tmay tbe tsummoned tby ta tgovernmental tentity.
c) Demographic tdata tabout tthe tresidents tserved tby tthe tgovernmental tentity.
d) All tof tthe tabove.
11. Which tof tthe tfollowing tis tcommon tto tboth tgovernments tand tnot-for-profit tentities
tbuttdistinguishes tthese tentities tfrom tfor-profit tentities?
a) The tbudget tis ta tlegal, tfinancial tdocument.
b) Revenues tare tusually tindicative tof tdemand tfor tgoods tor tservices.
c) There tis tdirect tmatching tof trevenues tand texpenses.
d) There tare tno tdefined townership tinterests.
12. Which tof tthe tfollowing tis tNOT ta tpurpose tof texternal tfinancial treporting tby tgovernments?
External tfinancial treports tshould tallow tusers tto
a) Assess tfinancial tcondition.
b) Compare tactual tresults twith tthe tbudget.
c) Assess tthe tability tof telected tofficials tto teffectively tmanage tpeople.
d) Evaluate tefficiency tand teffectiveness.
13. Which tof tthe tfollowing tis tNOT ta treason twhy tusers tneed tgovernmental tand tnot-for-
profittexternal tfinancial tstatements?
a) To tdetermine tthe tability tof tthe tentity tto tmeet tits tobligations.
b) To tdetermine tthe tability tof tthe tentity tto tcontinue tto tprovide tservices.
c) To tpredict tfuture tfiscal tsolvency.
d) To tevaluate tthe toverall tprofitability tof tthe tentity.
14. Users tof tgovernment tfinancial tstatements tshould tbe tinterested tin tinformation
tabouttcompliance twith tlaws tand tregulations tfor twhich tof tthe tfollowing treasons?
a) To tdetermine tif tthe tentity thas tcomplied twith tbond tcovenants.
b) To tdetermine tif tthe tentity thas tcomplied twith ttaxing tlimitations.
c) To tdetermine tif tthe tentity thas tcomplied twith tdonor trestrictions ton tthe tuse tof tfunds.
d) To tdetermine tall tof tthe tabove.
15. Which tof tthe tfollowing tis tNOT tgenerally tconsidered ta tmain tuser tof tgovernment tand
tnot-tforprofit tentity texternal tfinancial tstatements?
a) Investors tand tcreditors.
b) Taxpayers.
c) Donors.
d) Internal tmanagers.
16. Which tof tthe tfollowing tis ta tprobable tuse ta tdonor twould tmake tof tthe texternal
tfinancialtstatements tof ta tnot-for-profit tentity?
a) To tdetermine tthe tproportion tof tentity tresources tdirected tto tprograms tas
topposedtto tfund-raising.
b) To tdetermine tthe tcreditworthiness tof tthe tentity tfor tinvestment tpurposes.
Granof tTest tBank tChapter t1 Page t3
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