©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 11:22 AM A+
NFP Exam #3 Questions And Answers
|Latest 2025 | Guaranteed Pass.
Proprietary Funds include what - Answer✔internal service funds and enterprise funds
Proprietary Fund - Answer✔
Internal Service Fund - Answer✔Fund established to finance and account or services and
commodities furnished by a designated department or agency to other departments and
agencies within a single government or to other governments. Amounts expended by the fund
are restored thereto either from operating earnings or by transfers from other funds so that the
original fund capital is kept intact
Enterprise Funds - Answer✔Established to finance and account for the acquisition, operating,
and maintenance of governmental facilities and services that are entirely or predominantly self
supporting by user charges or for when the governing body of the government has decided
periodic determination of revenues earned, expenses incurred and or net income is
appropriate. governmentally owned utilities and hospitals are ordinarily accounted for here
What flow focus do proprietary fund have and what basis do they use - Answer✔economic
resources flow using accrual basis of accounting
Proprietary Fund Financial Statements - Answer✔Classified Statement of net position
Statement of Revenues, Expenses, and change in net fund balance
Statement of Cash Flows (Requires direct method)
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, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 11:22 AM A+
Why are internal service funds established? - Answer✔to improve financial management of
government resources
How are internal service funds established - Answer✔though ordinance or other legislative
action which should specify the source or sources of financial resources to be used for fund
operations
What is the financial objective of an internal service fund - Answer✔recover from operating
revenues the full cost of operations including future needs for equipment replacements and
upgrades to meet the needs of using funds and departments whose scale of operations is
increasing or changing
Administration and governing bodies of internal service funds need what kinds of information?
- Answer✔information that will allow them to determine that the costs of operating the fund
are reasonable in relation to the benefits provided by the fund
For external reporting purposes how are internal service fund financial information reported? -
Answer✔it is aggregated and reported as a separate column in the statement of net position -
proprietary funds; statement of revenues, expenses, and changes in net position - proprietary
funds; and statement of cash flows - proprietary funds.
How is internal service funds reported in the government wide statement of net position and
statement of activites - Answer✔it is collapsed and reported in the governmental activities
column of both government wide financial statements, unless enterprise funds are the
predominant participants in an internal service fund.
Three steps that need to be taken before an internal service fund can be dissoloved -
Answer✔transfer assets to another fund to continue activity, distribute assets to another fund,
convert non cash assets to cash and distribute
Can internal service funds be used to produce product - Answer✔yes
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, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 11:22 AM A+
Can internal service funds be used to finanicae risk management, equipment purchases and
operations - Answer✔yes
What types of guidelines are risk management internal service funds subject to? - Answer✔the
same basic guidelines as public entity risk pools
Under GASB standards, a government must report certain activities in an enterprise fund if any
of the follow criteria are met - Answer✔1) the activity is financed with debt that is secured
solely by a pledge of the revenues from fees and charges of an activity 2) laws or regulations
require that the activity's costs of providing services including capital costs be recovered with
feeds and charges, rather than with taxes or similar revenues 3) pricing polices are designed to
recover the costs of the activity including capital costs
what basis do enterprise fund used - Answer✔accrual, including all assets used in the activity,
as well as any long-term debt to be serviced by the fund
Governmental business-type activities` generally have what type of counterparts? -
Answer✔investor-owned and they can take advantage of the accounting structures developed
in the private sector
What is the most common example of a enterprise fund - Answer✔Public utilities
What are the enterprise fund financial statements - Answer✔statement of net position
statement of revenues, expenses, and changes in fund net position
Statement of cash flows
Enterprise funds are included in what column of the government wide financial statemetns -
Answer✔business type
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NFP Exam #3 Questions And Answers
|Latest 2025 | Guaranteed Pass.
Proprietary Funds include what - Answer✔internal service funds and enterprise funds
Proprietary Fund - Answer✔
Internal Service Fund - Answer✔Fund established to finance and account or services and
commodities furnished by a designated department or agency to other departments and
agencies within a single government or to other governments. Amounts expended by the fund
are restored thereto either from operating earnings or by transfers from other funds so that the
original fund capital is kept intact
Enterprise Funds - Answer✔Established to finance and account for the acquisition, operating,
and maintenance of governmental facilities and services that are entirely or predominantly self
supporting by user charges or for when the governing body of the government has decided
periodic determination of revenues earned, expenses incurred and or net income is
appropriate. governmentally owned utilities and hospitals are ordinarily accounted for here
What flow focus do proprietary fund have and what basis do they use - Answer✔economic
resources flow using accrual basis of accounting
Proprietary Fund Financial Statements - Answer✔Classified Statement of net position
Statement of Revenues, Expenses, and change in net fund balance
Statement of Cash Flows (Requires direct method)
1|P a g e
, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 11:22 AM A+
Why are internal service funds established? - Answer✔to improve financial management of
government resources
How are internal service funds established - Answer✔though ordinance or other legislative
action which should specify the source or sources of financial resources to be used for fund
operations
What is the financial objective of an internal service fund - Answer✔recover from operating
revenues the full cost of operations including future needs for equipment replacements and
upgrades to meet the needs of using funds and departments whose scale of operations is
increasing or changing
Administration and governing bodies of internal service funds need what kinds of information?
- Answer✔information that will allow them to determine that the costs of operating the fund
are reasonable in relation to the benefits provided by the fund
For external reporting purposes how are internal service fund financial information reported? -
Answer✔it is aggregated and reported as a separate column in the statement of net position -
proprietary funds; statement of revenues, expenses, and changes in net position - proprietary
funds; and statement of cash flows - proprietary funds.
How is internal service funds reported in the government wide statement of net position and
statement of activites - Answer✔it is collapsed and reported in the governmental activities
column of both government wide financial statements, unless enterprise funds are the
predominant participants in an internal service fund.
Three steps that need to be taken before an internal service fund can be dissoloved -
Answer✔transfer assets to another fund to continue activity, distribute assets to another fund,
convert non cash assets to cash and distribute
Can internal service funds be used to produce product - Answer✔yes
2|P a g e
, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 11:22 AM A+
Can internal service funds be used to finanicae risk management, equipment purchases and
operations - Answer✔yes
What types of guidelines are risk management internal service funds subject to? - Answer✔the
same basic guidelines as public entity risk pools
Under GASB standards, a government must report certain activities in an enterprise fund if any
of the follow criteria are met - Answer✔1) the activity is financed with debt that is secured
solely by a pledge of the revenues from fees and charges of an activity 2) laws or regulations
require that the activity's costs of providing services including capital costs be recovered with
feeds and charges, rather than with taxes or similar revenues 3) pricing polices are designed to
recover the costs of the activity including capital costs
what basis do enterprise fund used - Answer✔accrual, including all assets used in the activity,
as well as any long-term debt to be serviced by the fund
Governmental business-type activities` generally have what type of counterparts? -
Answer✔investor-owned and they can take advantage of the accounting structures developed
in the private sector
What is the most common example of a enterprise fund - Answer✔Public utilities
What are the enterprise fund financial statements - Answer✔statement of net position
statement of revenues, expenses, and changes in fund net position
Statement of cash flows
Enterprise funds are included in what column of the government wide financial statemetns -
Answer✔business type
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