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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 of the following characteristics distinguishes a governmental or not-for-profit entity
from a business entity?
a) There is always a direct link between revenues generated and
expenditures/expenses incurred.
b) Capital assets are used to produce revenues and save costs.
c) Revenues are always indicative of demand for goods and services.
d) The mission of the entity will determine the goods or services provided.
4. The most significant financial document provided by a governmental entity is the
a) The balance sheet.
b) The operating statement.
c) The operating budget.
d) The cash flow statement.
5. Which of the following statements is true?
a) Governments may engage in activities similar to activities engaged in by forprofit
entities.
b) There are a limited number of different types of governments.
c) All governmental entities engage in the same activities.
d) Managers may have a long-term focus and thereby sacrifice the short-term liquidity of
the entity.
6. Which zof zthe zfollowing zactivities zis zNOT zan zactivity zin zwhich za zgovernmental
zentity zmightzengage?
a) Selling zelectric zpower.
b) Operating za zgolf zcourse.
c) Operating za zbookstore.
d) All zof zthe zabove zare zactivities zthat zmight zbe zcarried zout zby za zgovernment.
7. In zwhich zof zthe zfollowing zactivities zis za znot-for-profit zentity zleast zlikely zto zengage?
a) Providing zeducational zservices.
b) Providing zhealth-care zservices.
c) Providing zfor zterrorism zdefense.
d) Retail zsales zof zcookies.
8. Which zof zthe zfollowing zcan zbe zaffected zby zGAAP?
a) Legal zability zto zissue zbonds.
b) Ability zto zbalance zthe zbudget.
c) Amount zreported zas zemployee zpension zplan zcontributions.
d) Claims zand zjudgments zsettled.
9. Which zof zthe zfollowing zcharacteristics zis zunique zto za zgovernmental zentity?
a) The zability zto zhave zactivities zfinanced zwith ztax-exempt zdebt.
b) The zpower zto zimpose zfees.
c) The zability zto zissue ztax-exempt zdebt.
d) The zability zto zhave zactivities zfinanced zby zFederal zgrants.
Granof zTest zBank zChapter z1 Page z2
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10. To zobtain za zcomprehensive zunderstanding zof za zgovernment’s zfiscal zhealth, za zfinancial
zanalystzshould zobtain zan zunderstanding zof zwhich zof zthe zfollowing?
a) All zof zthe zresources zowned zby zthe zgovernmental zentity.
b) All zof zthe zresources zwhich zmay zbe zsummoned zby za zgovernmental zentity.
c) Demographic zdata zabout zthe zresidents zserved zby zthe zgovernmental zentity.
d) All zof zthe zabove.
11. Which zof zthe zfollowing zis zcommon zto zboth zgovernments zand znot-for-profit
zentities zbutzdistinguishes zthese zentities zfrom zfor-profit zentities?
a) The zbudget zis za zlegal, zfinancial zdocument.
b) Revenues zare zusually zindicative zof zdemand zfor zgoods zor zservices.
c) There zis zdirect zmatching zof zrevenues zand zexpenses.
d) There zare zno zdefined zownership zinterests.
12. Which zof zthe zfollowing zis zNOT za zpurpose zof zexternal zfinancial zreporting zby zgovernments?
External zfinancial zreports zshould zallow zusers zto
a) Assess zfinancial zcondition.
b) Compare zactual zresults zwith zthe zbudget.
c) Assess zthe zability zof zelected zofficials zto zeffectively zmanage zpeople.
d) Evaluate zefficiency zand zeffectiveness.
13. Which zof zthe zfollowing zis zNOT za zreason zwhy zusers zneed zgovernmental zand znot-
for-profitzexternal zfinancial zstatements?
a) To zdetermine zthe zability zof zthe zentity zto zmeet zits zobligations.
b) To zdetermine zthe zability zof zthe zentity zto zcontinue zto zprovide zservices.
c) To zpredict zfuture zfiscal zsolvency.
d) To zevaluate zthe zoverall zprofitability zof zthe zentity.
14. Users zof zgovernment zfinancial zstatements zshould zbe zinterested zin zinformation
zaboutzcompliance zwith zlaws zand zregulations zfor zwhich zof zthe zfollowing
zreasons?
a) To zdetermine zif zthe zentity zhas zcomplied zwith zbond zcovenants.
b) To zdetermine zif zthe zentity zhas zcomplied zwith ztaxing zlimitations.
c) To zdetermine zif zthe zentity zhas zcomplied zwith zdonor zrestrictions zon zthe zuse zof zfunds.
d) To zdetermine zall zof zthe zabove.
15. Which zof zthe zfollowing zis zNOT zgenerally zconsidered za zmain zuser zof zgovernment
zand znot-zforprofit zentity zexternal zfinancial zstatements?
a) Investors zand zcreditors.
b) Taxpayers.
c) Donors.
d) Internal zmanagers.
16. Which zof zthe zfollowing zis za zprobable zuse za zdonor zwould zmake zof zthe zexternal
zfinancialzstatements zof za znot-for-profit zentity?
a) To zdetermine zthe zproportion zof zentity zresources zdirected zto zprograms zas
zopposedzto zfund-raising.
b) To zdetermine zthe zcreditworthiness zof zthe zentity zfor zinvestment zpurposes.
Granof zTest zBank zChapter z1 Page z3
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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 of the following characteristics distinguishes a governmental or not-for-profit entity
from a business entity?
a) There is always a direct link between revenues generated and
expenditures/expenses incurred.
b) Capital assets are used to produce revenues and save costs.
c) Revenues are always indicative of demand for goods and services.
d) The mission of the entity will determine the goods or services provided.
4. The most significant financial document provided by a governmental entity is the
a) The balance sheet.
b) The operating statement.
c) The operating budget.
d) The cash flow statement.
5. Which of the following statements is true?
a) Governments may engage in activities similar to activities engaged in by forprofit
entities.
b) There are a limited number of different types of governments.
c) All governmental entities engage in the same activities.
d) Managers may have a long-term focus and thereby sacrifice the short-term liquidity of
the entity.
6. Which zof zthe zfollowing zactivities zis zNOT zan zactivity zin zwhich za zgovernmental
zentity zmightzengage?
a) Selling zelectric zpower.
b) Operating za zgolf zcourse.
c) Operating za zbookstore.
d) All zof zthe zabove zare zactivities zthat zmight zbe zcarried zout zby za zgovernment.
7. In zwhich zof zthe zfollowing zactivities zis za znot-for-profit zentity zleast zlikely zto zengage?
a) Providing zeducational zservices.
b) Providing zhealth-care zservices.
c) Providing zfor zterrorism zdefense.
d) Retail zsales zof zcookies.
8. Which zof zthe zfollowing zcan zbe zaffected zby zGAAP?
a) Legal zability zto zissue zbonds.
b) Ability zto zbalance zthe zbudget.
c) Amount zreported zas zemployee zpension zplan zcontributions.
d) Claims zand zjudgments zsettled.
9. Which zof zthe zfollowing zcharacteristics zis zunique zto za zgovernmental zentity?
a) The zability zto zhave zactivities zfinanced zwith ztax-exempt zdebt.
b) The zpower zto zimpose zfees.
c) The zability zto zissue ztax-exempt zdebt.
d) The zability zto zhave zactivities zfinanced zby zFederal zgrants.
Granof zTest zBank zChapter z1 Page z2
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10. To zobtain za zcomprehensive zunderstanding zof za zgovernment’s zfiscal zhealth, za zfinancial
zanalystzshould zobtain zan zunderstanding zof zwhich zof zthe zfollowing?
a) All zof zthe zresources zowned zby zthe zgovernmental zentity.
b) All zof zthe zresources zwhich zmay zbe zsummoned zby za zgovernmental zentity.
c) Demographic zdata zabout zthe zresidents zserved zby zthe zgovernmental zentity.
d) All zof zthe zabove.
11. Which zof zthe zfollowing zis zcommon zto zboth zgovernments zand znot-for-profit
zentities zbutzdistinguishes zthese zentities zfrom zfor-profit zentities?
a) The zbudget zis za zlegal, zfinancial zdocument.
b) Revenues zare zusually zindicative zof zdemand zfor zgoods zor zservices.
c) There zis zdirect zmatching zof zrevenues zand zexpenses.
d) There zare zno zdefined zownership zinterests.
12. Which zof zthe zfollowing zis zNOT za zpurpose zof zexternal zfinancial zreporting zby zgovernments?
External zfinancial zreports zshould zallow zusers zto
a) Assess zfinancial zcondition.
b) Compare zactual zresults zwith zthe zbudget.
c) Assess zthe zability zof zelected zofficials zto zeffectively zmanage zpeople.
d) Evaluate zefficiency zand zeffectiveness.
13. Which zof zthe zfollowing zis zNOT za zreason zwhy zusers zneed zgovernmental zand znot-
for-profitzexternal zfinancial zstatements?
a) To zdetermine zthe zability zof zthe zentity zto zmeet zits zobligations.
b) To zdetermine zthe zability zof zthe zentity zto zcontinue zto zprovide zservices.
c) To zpredict zfuture zfiscal zsolvency.
d) To zevaluate zthe zoverall zprofitability zof zthe zentity.
14. Users zof zgovernment zfinancial zstatements zshould zbe zinterested zin zinformation
zaboutzcompliance zwith zlaws zand zregulations zfor zwhich zof zthe zfollowing
zreasons?
a) To zdetermine zif zthe zentity zhas zcomplied zwith zbond zcovenants.
b) To zdetermine zif zthe zentity zhas zcomplied zwith ztaxing zlimitations.
c) To zdetermine zif zthe zentity zhas zcomplied zwith zdonor zrestrictions zon zthe zuse zof zfunds.
d) To zdetermine zall zof zthe zabove.
15. Which zof zthe zfollowing zis zNOT zgenerally zconsidered za zmain zuser zof zgovernment
zand znot-zforprofit zentity zexternal zfinancial zstatements?
a) Investors zand zcreditors.
b) Taxpayers.
c) Donors.
d) Internal zmanagers.
16. Which zof zthe zfollowing zis za zprobable zuse za zdonor zwould zmake zof zthe zexternal
zfinancialzstatements zof za znot-for-profit zentity?
a) To zdetermine zthe zproportion zof zentity zresources zdirected zto zprograms zas
zopposedzto zfund-raising.
b) To zdetermine zthe zcreditworthiness zof zthe zentity zfor zinvestment zpurposes.
Granof zTest zBank zChapter z1 Page z3
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