FAR F6 - NFP Accounting and Governmental
Accounting UPDATED ACTUAL Exam
Questions and CORRECT Answers
Functional classifications: - CORRECT ANSWER - Categorize costs by major classes of
program and support services
Natural classifications: - CORRECT ANSWER - Classifying expenses based on their
account title
Two ways NFP expense need to classified: - CORRECT ANSWER - By functional and
natural classifications
Equity on statement of financial position (balance sheet) is called: - CORRECT
ANSWER - net assets
Net assets without donor restrictions: - CORRECT ANSWER - the portion of the excess of
total assets over total liabilities that may be utilized at the discretion of the governing board of a
not-for-profit entity
Net assets with donor restrictions: - CORRECT ANSWER - Subject to specific, externally
imposed limitations made by a donor
(T/F) Information regarding nature/amount of different types of donor-imposed restrictions
should be either reported within financial statement classification of net assets with donor
restrictions or in the notes to the financial statements - CORRECT ANSWER - True
Internal board designated funds are classified as: - CORRECT ANSWER - Net assets
WITHOUT donor restrictions, don't let exam trick you
, Elements of statement of activities: - CORRECT ANSWER - Change in total net assets,
which gets broken down by changes in with and without donor restrictions
When a donor restriction is satisfied: - CORRECT ANSWER - a reclassification (increase
one net asset class and decrease another) is reported on the statement of activities
(T/F) Donor-imposed restrictions that are satisfied in the same period in which they are received
may be recorded as an increase to net assets without donor restrictions, provided the organization
discloses and consistently applies this accounting policy - CORRECT ANSWER - True
All expenses (other than investment expenses) are reported as: - CORRECT ANSWER -
decreases in net assets without donor restrictions
Investment expense is netted against: - CORRECT ANSWER - investment returns and
classified according to the requirements of the investment revenue and would be shown as part
of a change in the restricted amount
Reporting expenses by nature and function: - CORRECT ANSWER - Group expenses by
functional classification first, then by nature under each functional class
Operating activities include: - CORRECT ANSWER - receipts and payments that do not
stem from transactions defined as investing or financing
Contributions of unrestricted revenue later earmarked (board designated) for construction or
purchase of long-lived assets is classified as: - CORRECT ANSWER - cash flows from
operating activities
Investing activities include: - CORRECT ANSWER - - Investments in PPE
- Investments in works of art
- Proceeds from sale of assets that were received in prior period and whose sale proceeds were
restricted to investment in equipment
Accounting UPDATED ACTUAL Exam
Questions and CORRECT Answers
Functional classifications: - CORRECT ANSWER - Categorize costs by major classes of
program and support services
Natural classifications: - CORRECT ANSWER - Classifying expenses based on their
account title
Two ways NFP expense need to classified: - CORRECT ANSWER - By functional and
natural classifications
Equity on statement of financial position (balance sheet) is called: - CORRECT
ANSWER - net assets
Net assets without donor restrictions: - CORRECT ANSWER - the portion of the excess of
total assets over total liabilities that may be utilized at the discretion of the governing board of a
not-for-profit entity
Net assets with donor restrictions: - CORRECT ANSWER - Subject to specific, externally
imposed limitations made by a donor
(T/F) Information regarding nature/amount of different types of donor-imposed restrictions
should be either reported within financial statement classification of net assets with donor
restrictions or in the notes to the financial statements - CORRECT ANSWER - True
Internal board designated funds are classified as: - CORRECT ANSWER - Net assets
WITHOUT donor restrictions, don't let exam trick you
, Elements of statement of activities: - CORRECT ANSWER - Change in total net assets,
which gets broken down by changes in with and without donor restrictions
When a donor restriction is satisfied: - CORRECT ANSWER - a reclassification (increase
one net asset class and decrease another) is reported on the statement of activities
(T/F) Donor-imposed restrictions that are satisfied in the same period in which they are received
may be recorded as an increase to net assets without donor restrictions, provided the organization
discloses and consistently applies this accounting policy - CORRECT ANSWER - True
All expenses (other than investment expenses) are reported as: - CORRECT ANSWER -
decreases in net assets without donor restrictions
Investment expense is netted against: - CORRECT ANSWER - investment returns and
classified according to the requirements of the investment revenue and would be shown as part
of a change in the restricted amount
Reporting expenses by nature and function: - CORRECT ANSWER - Group expenses by
functional classification first, then by nature under each functional class
Operating activities include: - CORRECT ANSWER - receipts and payments that do not
stem from transactions defined as investing or financing
Contributions of unrestricted revenue later earmarked (board designated) for construction or
purchase of long-lived assets is classified as: - CORRECT ANSWER - cash flows from
operating activities
Investing activities include: - CORRECT ANSWER - - Investments in PPE
- Investments in works of art
- Proceeds from sale of assets that were received in prior period and whose sale proceeds were
restricted to investment in equipment
