Govt. and NFP Test 1 UPDATED ACTUAL
Exam Questions and CORRECT Answers
Which of the following is not a distinguishing difference between govt. and for profit agencies:
A. Lack of Profit Motive
B. Revenue may be earned through exchange transactions
C. Absence of owners
D. Resources are provided by individuals and entities that may not directly benefit from
resources - CORRECT ANSWER - B. Revenue may be earned through exchange
transactions
James is reviewing his city's financial reporting because he wants to run for council. He is
concerned that the city is not using its resources effectively. He's primarily interested in:
A. Fiscal Accountability
B. Social Accountability
C. Political Accountability
D. Operational Accountability - CORRECT ANSWER - D. Operational Accountability
The concept of interperiod equity refers to whether:
A. Revenues equaled or exceeded expenditures for the year.
B. Total assets were sufficient to cover total liabilities.
C. Current year revenues were sufficient to pay for current year services.
D. Future taxpayers can expect to receive the same or higher level of services as current
taxpayers. - CORRECT ANSWER - C. - Current year revenues were sufficient to pay for
current year services.
What are the components that are included in the minimum requirements for general purpose
financial reporting?
,A. Introductory section, financial section, and statistical section
B. MD&A, Govt. financial statements, fund financial statements, notes to the financial
statements, and RSI
C. Letter from the the CFO, Govt. Financial Statements, Notes to the financial statements, and
RSI
D. MD&A, Govt. Wide financial statements, notes to the financial statements, and RSI -
CORRECT ANSWER - D. MD&A, Govt. Financial Statements, Notes to the financials,
and RSI
The basic financial statements of a state or local govt. include all of the following except:
A. An MD&A
B. Govt. Wide financial statements
C. Fund Financial Statements
D. Notes to the financials - CORRECT ANSWER - A. An MD&A
Under GASB standards, financial info useful for assessing operational accountability is primarily
reported in which financial statements? - CORRECT ANSWER - Govt. Wdie F/S - Yes
Fund F/S - No
The primary reason that NFP organizations should report expenses incurred for program
purposed separately from those for supporting services is that:
A. GASB standards require it
B. Program managers need info about the cost of activities for which they're responsible
C. Top managers need to know how much they are spending for non-program support
D. Donors and oversight bodies need to know what percentage of total expenses incurred for
carrying out the NFPs programs. - CORRECT ANSWER - D. - Donors and oversight
bodies need to know what % of total expenses incurred are for carrying out the NFP's programs
T/F - Special purpose govts. generally provide a wider range of services to their residents than
general purpose governments. - CORRECT ANSWER - False
,T/F - The GASB is the body authorized to establish accounting principles for all state and local
governments, both general and special purpose. - CORRECT ANSWER - True
T/F - Neither governmental nor NFP entities have residual equity that can be distributed to
owners. - CORRECT ANSWER - True
Which of the following is a true statement regarding the definition of a fund:
A. A fund is a fiscal entity which is designed to provide reporting that demonstrates conformance
with finance-related legal and contractual provisions separately from GAAP reporting.
B. A fund is an accounting entity which is designed to enable reporting in conformity with
GAAP without being restricted by legal provisions.
C. A fund is a mechanism developed to provide accounting for revenue and expenses that are
subject to certain restrictions.
D. A fund exists to assist in carrying on activities and attaining objectives when there are no
specific restrictions. - CORRECT ANSWER - A. A fund is a fiscal entity which is
designed to provide reporting that demonstrates conformance with finance-related legal and
contractual provisions separately from GAAP reporting.
Which of the following statements is true regarding the basic financial statements of a state or
local government:
A. Separate columns should be provided in govt.-wide financial statements for govt. activities
and business-type activities.
B. Govt. fund and proprietary fund financial statements should provide a separate column for
each major fund.
C. Aggregate information about all non-major govt. funds or non-major enterprise funds should
be reported in a single column of the govt. fund or proprietary fund financial statements
D. All of the above - CORRECT ANSWER - D. All of the above
Which of the following sets of elements are common for both govt. financial statements and NFP
financial statements?
A. Assets and net position
B. Deferred outflows of resources and liabilities
, C. Assets and Liabilities
D. Net position and liabilities - CORRECT ANSWER - C. Assets and Liabilities
The measurement focus and basis for accounting that should be used for the govt. fund F/S are: -
CORRECT ANSWER - Current Financial Resources
Modified Accrual
Which of the following amounts that are identified at the end of the fiscal year would be
classified as a restricted fund balance:
A. Resources the city manager has set aside for major street repair
B. A federal grant that is to be used for playground equipment
C. Significant amounts of inventory
D. Endowment resources that the city must maintain in perpetuity - CORRECT
ANSWER - B. Federal grant that is to be used for playground equipment
Separate reporting for major funds is needed because:
A. Users of govt. F/S are usually interested in the details of every fund used by a govt.
B. It is illegal to aggregate funds where the elements of the fund represent at least 5% of the
corresponding element for all funds of the same type
C. Users of govt. F/S need to be able to examine the activities and resources fiduciary funds
D. Users of Govt. F/S need to be able to examine funds that represent large dollar amounts of
govts. resources and activities - CORRECT ANSWER - D. Users of Govt. F/S need to be
able to examine funds that represent large dollar amounts of govts. resources and activities.
Assets and Liabilities of activities for which the govt. is acting in either an agency or trustee
capacity for individuals organizations or other govts. should be reported as:
A. The fiduciary column of the govt. wide F/S
B. The fiduciary fund F/S
C. Both govt. wide and fiduciary fund statements
Exam Questions and CORRECT Answers
Which of the following is not a distinguishing difference between govt. and for profit agencies:
A. Lack of Profit Motive
B. Revenue may be earned through exchange transactions
C. Absence of owners
D. Resources are provided by individuals and entities that may not directly benefit from
resources - CORRECT ANSWER - B. Revenue may be earned through exchange
transactions
James is reviewing his city's financial reporting because he wants to run for council. He is
concerned that the city is not using its resources effectively. He's primarily interested in:
A. Fiscal Accountability
B. Social Accountability
C. Political Accountability
D. Operational Accountability - CORRECT ANSWER - D. Operational Accountability
The concept of interperiod equity refers to whether:
A. Revenues equaled or exceeded expenditures for the year.
B. Total assets were sufficient to cover total liabilities.
C. Current year revenues were sufficient to pay for current year services.
D. Future taxpayers can expect to receive the same or higher level of services as current
taxpayers. - CORRECT ANSWER - C. - Current year revenues were sufficient to pay for
current year services.
What are the components that are included in the minimum requirements for general purpose
financial reporting?
,A. Introductory section, financial section, and statistical section
B. MD&A, Govt. financial statements, fund financial statements, notes to the financial
statements, and RSI
C. Letter from the the CFO, Govt. Financial Statements, Notes to the financial statements, and
RSI
D. MD&A, Govt. Wide financial statements, notes to the financial statements, and RSI -
CORRECT ANSWER - D. MD&A, Govt. Financial Statements, Notes to the financials,
and RSI
The basic financial statements of a state or local govt. include all of the following except:
A. An MD&A
B. Govt. Wide financial statements
C. Fund Financial Statements
D. Notes to the financials - CORRECT ANSWER - A. An MD&A
Under GASB standards, financial info useful for assessing operational accountability is primarily
reported in which financial statements? - CORRECT ANSWER - Govt. Wdie F/S - Yes
Fund F/S - No
The primary reason that NFP organizations should report expenses incurred for program
purposed separately from those for supporting services is that:
A. GASB standards require it
B. Program managers need info about the cost of activities for which they're responsible
C. Top managers need to know how much they are spending for non-program support
D. Donors and oversight bodies need to know what percentage of total expenses incurred for
carrying out the NFPs programs. - CORRECT ANSWER - D. - Donors and oversight
bodies need to know what % of total expenses incurred are for carrying out the NFP's programs
T/F - Special purpose govts. generally provide a wider range of services to their residents than
general purpose governments. - CORRECT ANSWER - False
,T/F - The GASB is the body authorized to establish accounting principles for all state and local
governments, both general and special purpose. - CORRECT ANSWER - True
T/F - Neither governmental nor NFP entities have residual equity that can be distributed to
owners. - CORRECT ANSWER - True
Which of the following is a true statement regarding the definition of a fund:
A. A fund is a fiscal entity which is designed to provide reporting that demonstrates conformance
with finance-related legal and contractual provisions separately from GAAP reporting.
B. A fund is an accounting entity which is designed to enable reporting in conformity with
GAAP without being restricted by legal provisions.
C. A fund is a mechanism developed to provide accounting for revenue and expenses that are
subject to certain restrictions.
D. A fund exists to assist in carrying on activities and attaining objectives when there are no
specific restrictions. - CORRECT ANSWER - A. A fund is a fiscal entity which is
designed to provide reporting that demonstrates conformance with finance-related legal and
contractual provisions separately from GAAP reporting.
Which of the following statements is true regarding the basic financial statements of a state or
local government:
A. Separate columns should be provided in govt.-wide financial statements for govt. activities
and business-type activities.
B. Govt. fund and proprietary fund financial statements should provide a separate column for
each major fund.
C. Aggregate information about all non-major govt. funds or non-major enterprise funds should
be reported in a single column of the govt. fund or proprietary fund financial statements
D. All of the above - CORRECT ANSWER - D. All of the above
Which of the following sets of elements are common for both govt. financial statements and NFP
financial statements?
A. Assets and net position
B. Deferred outflows of resources and liabilities
, C. Assets and Liabilities
D. Net position and liabilities - CORRECT ANSWER - C. Assets and Liabilities
The measurement focus and basis for accounting that should be used for the govt. fund F/S are: -
CORRECT ANSWER - Current Financial Resources
Modified Accrual
Which of the following amounts that are identified at the end of the fiscal year would be
classified as a restricted fund balance:
A. Resources the city manager has set aside for major street repair
B. A federal grant that is to be used for playground equipment
C. Significant amounts of inventory
D. Endowment resources that the city must maintain in perpetuity - CORRECT
ANSWER - B. Federal grant that is to be used for playground equipment
Separate reporting for major funds is needed because:
A. Users of govt. F/S are usually interested in the details of every fund used by a govt.
B. It is illegal to aggregate funds where the elements of the fund represent at least 5% of the
corresponding element for all funds of the same type
C. Users of govt. F/S need to be able to examine the activities and resources fiduciary funds
D. Users of Govt. F/S need to be able to examine funds that represent large dollar amounts of
govts. resources and activities - CORRECT ANSWER - D. Users of Govt. F/S need to be
able to examine funds that represent large dollar amounts of govts. resources and activities.
Assets and Liabilities of activities for which the govt. is acting in either an agency or trustee
capacity for individuals organizations or other govts. should be reported as:
A. The fiduciary column of the govt. wide F/S
B. The fiduciary fund F/S
C. Both govt. wide and fiduciary fund statements
