Test Bank for Essentials of Accounting
for Governmental and Not-for-Profit
Organizations with 100% researched
question an answers.
accounting entity - ANSWERS Where an entity is established for the purpose of
accounting for a certain activity or activities. See fiscal entity.
accrual basis - ANSWERS "Basis of accounting under which revenues are recorded
when earned and expenditures (or expenses) are recorded as soon as they result in
liabilities for benefits received, notwithstanding that the receipt of cash or the payment
of cash may take place, in whole or in part, in another accounting period."
acquisition method - ANSWERS "A method of accounting for mergers among not-
for-profit organizations in which the acquiring entity records the acquired assets and
liabilities at their fair values, not at the acquired entity's book values."
activity - ANSWERS "Specific and distinguishable line of work performed by one or
more organizational components of a governmental unit for the purpose of
accomplishing a function for which the governmental unit is responsible. For example,
"Food Inspection" is an activity performed in the discharge of the "Health" function. See
also Function. "
actuarial basis - ANSWERS Basis used in computing the amount of contributions to
be made periodically to a fund so that the total contributions plus the compounded
earnings thereon will equal the required payments to be made out of the fund. The
factors taken into account in arriving at the amount of these contributions include the
length of time over which each contribution is to be held and the rate of return
compounded on such a contribution over its life. Commonly used to compute annual
required contributions (q.v.) to pension and other postemployment benefit plans.1
additions - ANSWERS "GASB term for fiduciary fund financial reporting, replacing
the term revenues. Additions are reported on the accrual basis."
ad valorem - ANSWERS In proportion to value. Basis for levy of taxes on property.
, advance refunding - ANSWERS "A bond refunding (q.v.) in which the proceeds are
placed in an escrow account pending the call date or the maturity date of the existing
debt. In this case, the debt is said to be defeased (q.v.) for accounting purposes."
advances interfund - ANSWERS Long-term loans between funds. A long-term loan
to another fund would be represented in the account.
adverse opinion - ANSWERS Audit report in which the auditor states that the
financial report "does not present fairly" due to major departures from generally
accepted accounting principles (q.v.).
agency fund - ANSWERS "Fiduciary fund consisting of resources received and held
by the governmental agent for others; for example, taxes collected and held by a
municipality for a school district."
agent multiple-employer defined benefit pension plan - ANSWERS Statewide
pension plan in which separate account balances are maintained for each participating
employer; expected to fund any deficits. Contrast with cost-sharing multiple-employer
defined benefit pension plan.
American Institute of Certified Public Accountants (AICPA) - ANSWERS
"Organization of Certified Public Accountants that provides auditing guidance, including
the GAAP Hierarchy (q.v.) and accounting and auditing guidance, in the case of Audit
and Accounting Guides, when approved by the FASB (q.v.) and/or the GASB (q.v.)."
annual required contributions (ARC) - ANSWERS "Term used by GASB to
determine the amount required by a retirement fund (including other postemployment
benefit plans) to be contributed, including normal cost and funding of past service cost.
Used in the Schedule of Employer Contributions (q.v.)."
annuity - ANSWERS "Series of equal money payments made at equal intervals
during a designated period of time. In governmental accounting, the most frequent
annuities are accumulations of debt service funds for term bonds and payments to
retired employees or their beneficiaries under public employee retirement systems."
appropriation - ANSWERS Authorization granted by a legislative body to incur
liabilities for purposes specified in the appropriation act (q.v.).
appropriations expenditures, and encumbrances ledger - ANSWERS Subsidiary
ledger used by governmental funds in which a budget is recorded to track the
appropriations, expenditures, and encumbrances that apply to the subsidiary account.
Using this ledger, a department head, for example, could determine the unencumbered
balance in the department."
ARC - ANSWERS The actuarially computed annual required contribution by an
entity to pension or other postemployment benefit plans.
, assessed valuation - ANSWERS "Valuation set on real estate or other property by a
government as a basis of levying taxes. A state government may provide that the local
governments within its jurisdiction assess property at 100 percent, 33? percent, or other
percentages of market value."
assessment - ANSWERS (1) Process of making the official valuation of property for
purposes of taxation. (2) Valuation placed on property as a result of this process.
asset impairment - ANSWERS An unexpected decline in the usable capacity of a
capital asset. An asset is deemed to be impaired if the decline is not part of the normal
life cycle of an asset and the amount of the decline in service utility is large.
assets whose use is limited - ANSWERS "Account title used by health care
organizations to indicate those assets that are unrestricted but limited by board action,
bond resolutions, or the like."
assigned fund balance - ANSWERS "A classification of fund balance reported in
governmental-type funds to indicate net resources of the fund that the government
intends for a specific purpose. Assigned resources differ from committed in that
constraints imposed on assigned resources are more easily modified or removed. For
governmental funds other than the General Fund, this is the category for all (positive)
residual fund balances."
attestation agreements - ANSWERS "Under Government Auditing Standards (q.v.),
concerns examining, reviewing, or performing agreed upon procedures on a subject
matter or an assertation about a subject matter and reporting on the results."
audit - ANSWERS "Examination of documents, records, reports, systems of internal
control, accounting and financial procedures, and other evidence and the issuance of a
report relating to the examination."
auditor's report - ANSWERS Report included with financial statements that
expresses an opinion of the fairness of the material presented.
authority - ANSWERS "Governmental unit or public agency created to perform a
single function or a restricted group of related activities. Usually such units are financed
from service charges, fees, and tolls, but in some instances they also have taxing
powers."
auxiliary enterprises - ANSWERS "Activities of a college or university that furnishes
services to students, faculty, or staff on a user-charge basis. Charge is directly related
to, but not necessarily equal to, the cost of the service. Examples are college unions,
residence halls, stores, faculty clubs, and intercollegiate athletics."
, available - ANSWERS One condition that must be met before a revenue can be
recognized under modified accrual accounting. The amount must be available in time to
pay expenditures related to the current period.
balance sheet - ANSWERS Format where assets equal liabilities plus net assets
(fund balance). Required governmental funds basic statement; may be used as
government-wide and proprietary fund statements in lieu of Statement of Net Assets.
basic financial statements - ANSWERS "The primary financial statements required
by the GASB in order for state and local governments to meet GAAP. The nature of the
government (general-purpose, special-purpose) and of the governmental activities
(governmental-type, business-type, and fiduciary-type) determine which statements are
basic."
basis of accounting - ANSWERS "Rule (or rules) used to determine the point in time
when assets, liabilities, revenues, and expenses (expenditures) should be measured
and recorded as such in the accounts of an entity. An organization might use the cash,
modified accrual, or accrual basis of accounting."
blending, blended presentation - ANSWERS One method of reporting the financial
data of a component unit in a manner similar to that in which the financial data of the
primary government are presented. Under this method, the component unit data are
combined with the appropriate fund types of the primary government and reported in the
same columns as the data from the primary government. See discrete presentation. "
bonded debt - ANSWERS That portion of indebtedness represented by outstanding
bonds.
bonds authorized and unissued - ANSWERS Bonds that have been legally
authorized but not issued and that can be issued and sold without further authorization.
Note: This term must not be confused with the term legal debt margin, which represents
the difference between the legal debt limit (q.v.) of a governmental unit and the debt
outstanding against it."
budget - ANSWERS "Plan of financial operation embodying an estimate of proposed
expenditures for a given period and the proposed means of financing them. Used
without any modifier, usually indicates a financial plan for a single fiscal year."
budgetary accounts (federal) - ANSWERS "Accounts that provide a record by which
federal expenditures can be traced back to the budgetary authority granted by Congress
through appropriations. They include appropriations, apportionments, allotments, and
obligations."
budgetary accounts (state and local) - ANSWERS "Accounts that reflect budgetary
operations and conditions, such as Estimated Revenues, Appropriations, and
Encumbrances, as distinguished from proprietary accounts (q.v.). Other examples
for Governmental and Not-for-Profit
Organizations with 100% researched
question an answers.
accounting entity - ANSWERS Where an entity is established for the purpose of
accounting for a certain activity or activities. See fiscal entity.
accrual basis - ANSWERS "Basis of accounting under which revenues are recorded
when earned and expenditures (or expenses) are recorded as soon as they result in
liabilities for benefits received, notwithstanding that the receipt of cash or the payment
of cash may take place, in whole or in part, in another accounting period."
acquisition method - ANSWERS "A method of accounting for mergers among not-
for-profit organizations in which the acquiring entity records the acquired assets and
liabilities at their fair values, not at the acquired entity's book values."
activity - ANSWERS "Specific and distinguishable line of work performed by one or
more organizational components of a governmental unit for the purpose of
accomplishing a function for which the governmental unit is responsible. For example,
"Food Inspection" is an activity performed in the discharge of the "Health" function. See
also Function. "
actuarial basis - ANSWERS Basis used in computing the amount of contributions to
be made periodically to a fund so that the total contributions plus the compounded
earnings thereon will equal the required payments to be made out of the fund. The
factors taken into account in arriving at the amount of these contributions include the
length of time over which each contribution is to be held and the rate of return
compounded on such a contribution over its life. Commonly used to compute annual
required contributions (q.v.) to pension and other postemployment benefit plans.1
additions - ANSWERS "GASB term for fiduciary fund financial reporting, replacing
the term revenues. Additions are reported on the accrual basis."
ad valorem - ANSWERS In proportion to value. Basis for levy of taxes on property.
, advance refunding - ANSWERS "A bond refunding (q.v.) in which the proceeds are
placed in an escrow account pending the call date or the maturity date of the existing
debt. In this case, the debt is said to be defeased (q.v.) for accounting purposes."
advances interfund - ANSWERS Long-term loans between funds. A long-term loan
to another fund would be represented in the account.
adverse opinion - ANSWERS Audit report in which the auditor states that the
financial report "does not present fairly" due to major departures from generally
accepted accounting principles (q.v.).
agency fund - ANSWERS "Fiduciary fund consisting of resources received and held
by the governmental agent for others; for example, taxes collected and held by a
municipality for a school district."
agent multiple-employer defined benefit pension plan - ANSWERS Statewide
pension plan in which separate account balances are maintained for each participating
employer; expected to fund any deficits. Contrast with cost-sharing multiple-employer
defined benefit pension plan.
American Institute of Certified Public Accountants (AICPA) - ANSWERS
"Organization of Certified Public Accountants that provides auditing guidance, including
the GAAP Hierarchy (q.v.) and accounting and auditing guidance, in the case of Audit
and Accounting Guides, when approved by the FASB (q.v.) and/or the GASB (q.v.)."
annual required contributions (ARC) - ANSWERS "Term used by GASB to
determine the amount required by a retirement fund (including other postemployment
benefit plans) to be contributed, including normal cost and funding of past service cost.
Used in the Schedule of Employer Contributions (q.v.)."
annuity - ANSWERS "Series of equal money payments made at equal intervals
during a designated period of time. In governmental accounting, the most frequent
annuities are accumulations of debt service funds for term bonds and payments to
retired employees or their beneficiaries under public employee retirement systems."
appropriation - ANSWERS Authorization granted by a legislative body to incur
liabilities for purposes specified in the appropriation act (q.v.).
appropriations expenditures, and encumbrances ledger - ANSWERS Subsidiary
ledger used by governmental funds in which a budget is recorded to track the
appropriations, expenditures, and encumbrances that apply to the subsidiary account.
Using this ledger, a department head, for example, could determine the unencumbered
balance in the department."
ARC - ANSWERS The actuarially computed annual required contribution by an
entity to pension or other postemployment benefit plans.
, assessed valuation - ANSWERS "Valuation set on real estate or other property by a
government as a basis of levying taxes. A state government may provide that the local
governments within its jurisdiction assess property at 100 percent, 33? percent, or other
percentages of market value."
assessment - ANSWERS (1) Process of making the official valuation of property for
purposes of taxation. (2) Valuation placed on property as a result of this process.
asset impairment - ANSWERS An unexpected decline in the usable capacity of a
capital asset. An asset is deemed to be impaired if the decline is not part of the normal
life cycle of an asset and the amount of the decline in service utility is large.
assets whose use is limited - ANSWERS "Account title used by health care
organizations to indicate those assets that are unrestricted but limited by board action,
bond resolutions, or the like."
assigned fund balance - ANSWERS "A classification of fund balance reported in
governmental-type funds to indicate net resources of the fund that the government
intends for a specific purpose. Assigned resources differ from committed in that
constraints imposed on assigned resources are more easily modified or removed. For
governmental funds other than the General Fund, this is the category for all (positive)
residual fund balances."
attestation agreements - ANSWERS "Under Government Auditing Standards (q.v.),
concerns examining, reviewing, or performing agreed upon procedures on a subject
matter or an assertation about a subject matter and reporting on the results."
audit - ANSWERS "Examination of documents, records, reports, systems of internal
control, accounting and financial procedures, and other evidence and the issuance of a
report relating to the examination."
auditor's report - ANSWERS Report included with financial statements that
expresses an opinion of the fairness of the material presented.
authority - ANSWERS "Governmental unit or public agency created to perform a
single function or a restricted group of related activities. Usually such units are financed
from service charges, fees, and tolls, but in some instances they also have taxing
powers."
auxiliary enterprises - ANSWERS "Activities of a college or university that furnishes
services to students, faculty, or staff on a user-charge basis. Charge is directly related
to, but not necessarily equal to, the cost of the service. Examples are college unions,
residence halls, stores, faculty clubs, and intercollegiate athletics."
, available - ANSWERS One condition that must be met before a revenue can be
recognized under modified accrual accounting. The amount must be available in time to
pay expenditures related to the current period.
balance sheet - ANSWERS Format where assets equal liabilities plus net assets
(fund balance). Required governmental funds basic statement; may be used as
government-wide and proprietary fund statements in lieu of Statement of Net Assets.
basic financial statements - ANSWERS "The primary financial statements required
by the GASB in order for state and local governments to meet GAAP. The nature of the
government (general-purpose, special-purpose) and of the governmental activities
(governmental-type, business-type, and fiduciary-type) determine which statements are
basic."
basis of accounting - ANSWERS "Rule (or rules) used to determine the point in time
when assets, liabilities, revenues, and expenses (expenditures) should be measured
and recorded as such in the accounts of an entity. An organization might use the cash,
modified accrual, or accrual basis of accounting."
blending, blended presentation - ANSWERS One method of reporting the financial
data of a component unit in a manner similar to that in which the financial data of the
primary government are presented. Under this method, the component unit data are
combined with the appropriate fund types of the primary government and reported in the
same columns as the data from the primary government. See discrete presentation. "
bonded debt - ANSWERS That portion of indebtedness represented by outstanding
bonds.
bonds authorized and unissued - ANSWERS Bonds that have been legally
authorized but not issued and that can be issued and sold without further authorization.
Note: This term must not be confused with the term legal debt margin, which represents
the difference between the legal debt limit (q.v.) of a governmental unit and the debt
outstanding against it."
budget - ANSWERS "Plan of financial operation embodying an estimate of proposed
expenditures for a given period and the proposed means of financing them. Used
without any modifier, usually indicates a financial plan for a single fiscal year."
budgetary accounts (federal) - ANSWERS "Accounts that provide a record by which
federal expenditures can be traced back to the budgetary authority granted by Congress
through appropriations. They include appropriations, apportionments, allotments, and
obligations."
budgetary accounts (state and local) - ANSWERS "Accounts that reflect budgetary
operations and conditions, such as Estimated Revenues, Appropriations, and
Encumbrances, as distinguished from proprietary accounts (q.v.). Other examples
