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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 of the following activities is NOT an activity in which a governmental entity might
engage?
a) Selling electric power.
b) Operating a golf course.
c) Operating a bookstore.
d) All of the above are activities that might be carried out by a government.
7. In which of the following activities is a not-for-profit entity least likely to engage?
a) Providing educational services.
b) Providing health-care services.
c) Providing for terrorism defense.
d) Retail sales of cookies.
8. Which of the following can be affected by GAAP?
a) Legal ability to issue bonds.
b) Ability to balance the budget.
c) Amount reported as employee pension plan contributions.
d) Claims and judgments settled.
9. Which of the following characteristics is unique to a governmental entity?
a) The ability to have activities financed with tax-exempt debt.
b) The power to impose fees.
c) The ability to issue tax-exempt debt.
d) The ability to have activities financed by Federal grants.
Granof Test Bank Chapter 1 Page 2
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10. Topobtainpapcomprehensivepunderstandingpofpapgovernment’spfiscalphealth,papfinancialpana
lystpshouldpobtainpanpunderstandingpofpwhichpofpthepfollowing?
a) Allpofpthepresourcespownedpbypthepgovernmentalpentity.
b) Allpofpthepresourcespwhichpmaypbepsummonedpbypapgovernmentalpentity.
c) Demographicpdatapaboutpthepresidentspservedpbypthepgovernmentalpentity.
d) Allpofpthepabove.
11. Whichpofpthepfollowingpispcommonptopbothpgovernmentspandpnot-for-
profitpentitiespbutpdistinguishespthesepentitiespfrompfor-profitpentities?
a) Thepbudgetpispaplegal,pfinancialpdocument.
b) Revenuesparepusuallypindicativepofpdemandpforpgoodsporpservices.
c) Therepispdirectpmatchingpofprevenuespandpexpenses.
d) Thereparepnopdefinedpownershippinterests.
12. WhichpofpthepfollowingpispNOTpappurposepofpexternalpfinancialpreportingpbypgovernments?
Externalpfinancialpreportspshouldpallowpuserspto
a) Assesspfinancialpcondition.
b) Comparepactualpresultspwithpthepbudget.
c) Assesspthepabilitypofpelectedpofficialsptopeffectivelypmanageppeople.
d) Evaluatepefficiencypandpeffectiveness.
13. WhichpofpthepfollowingpispNOTpapreasonpwhypuserspneedpgovernmentalpandpnot-for-
profitpexternalpfinancialpstatements?
a) Topdeterminepthepabilitypofpthepentityptopmeetpitspobligations.
b) Topdeterminepthepabilitypofpthepentityptopcontinueptopprovidepservices.
c) Toppredictpfuturepfiscalpsolvency.
d) Topevaluatepthepoverallpprofitabilitypofpthepentity.
14. Userspofpgovernmentpfinancialpstatementspshouldpbepinterestedpinpinformationpab
outpcompliancepwithplawspandpregulationspforpwhichpofpthepfollowingpreasons?
a) Topdeterminepifpthepentityphaspcompliedpwithpbondpcovenants.
b) Topdeterminepifpthepentityphaspcompliedpwithptaxingplimitations.
c) Topdeterminepifpthepentityphaspcompliedpwithpdonorprestrictionsponpthepusepofpfunds.
d) Topdeterminepallpofpthepabove.
15. WhichpofpthepfollowingpispNOTpgenerallypconsideredpapmainpuserpofpgovernmentpandp
not-pforprofitpentitypexternalpfinancialpstatements?
a) Investorspandpcreditors.
b) Taxpayers.
c) Donors.
d) Internalpmanagers.
16. Whichpofpthepfollowingpispapprobablepusepapdonorpwouldpmakepofpthepexternalpfina
ncialpstatementspofpapnot-for-profitpentity?
a) Topdeterminepthepproportionpofpentitypresourcespdirectedptopprogramspaspoppo
sedptopfund-raising.
b) Topdeterminepthepcreditworthinesspofpthepentitypforpinvestmentppurposes.
GranofpTestpBankpChapterp1 Pagep3
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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 of the following activities is NOT an activity in which a governmental entity might
engage?
a) Selling electric power.
b) Operating a golf course.
c) Operating a bookstore.
d) All of the above are activities that might be carried out by a government.
7. In which of the following activities is a not-for-profit entity least likely to engage?
a) Providing educational services.
b) Providing health-care services.
c) Providing for terrorism defense.
d) Retail sales of cookies.
8. Which of the following can be affected by GAAP?
a) Legal ability to issue bonds.
b) Ability to balance the budget.
c) Amount reported as employee pension plan contributions.
d) Claims and judgments settled.
9. Which of the following characteristics is unique to a governmental entity?
a) The ability to have activities financed with tax-exempt debt.
b) The power to impose fees.
c) The ability to issue tax-exempt debt.
d) The ability to have activities financed by Federal grants.
Granof Test Bank Chapter 1 Page 2
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10. Topobtainpapcomprehensivepunderstandingpofpapgovernment’spfiscalphealth,papfinancialpana
lystpshouldpobtainpanpunderstandingpofpwhichpofpthepfollowing?
a) Allpofpthepresourcespownedpbypthepgovernmentalpentity.
b) Allpofpthepresourcespwhichpmaypbepsummonedpbypapgovernmentalpentity.
c) Demographicpdatapaboutpthepresidentspservedpbypthepgovernmentalpentity.
d) Allpofpthepabove.
11. Whichpofpthepfollowingpispcommonptopbothpgovernmentspandpnot-for-
profitpentitiespbutpdistinguishespthesepentitiespfrompfor-profitpentities?
a) Thepbudgetpispaplegal,pfinancialpdocument.
b) Revenuesparepusuallypindicativepofpdemandpforpgoodsporpservices.
c) Therepispdirectpmatchingpofprevenuespandpexpenses.
d) Thereparepnopdefinedpownershippinterests.
12. WhichpofpthepfollowingpispNOTpappurposepofpexternalpfinancialpreportingpbypgovernments?
Externalpfinancialpreportspshouldpallowpuserspto
a) Assesspfinancialpcondition.
b) Comparepactualpresultspwithpthepbudget.
c) Assesspthepabilitypofpelectedpofficialsptopeffectivelypmanageppeople.
d) Evaluatepefficiencypandpeffectiveness.
13. WhichpofpthepfollowingpispNOTpapreasonpwhypuserspneedpgovernmentalpandpnot-for-
profitpexternalpfinancialpstatements?
a) Topdeterminepthepabilitypofpthepentityptopmeetpitspobligations.
b) Topdeterminepthepabilitypofpthepentityptopcontinueptopprovidepservices.
c) Toppredictpfuturepfiscalpsolvency.
d) Topevaluatepthepoverallpprofitabilitypofpthepentity.
14. Userspofpgovernmentpfinancialpstatementspshouldpbepinterestedpinpinformationpab
outpcompliancepwithplawspandpregulationspforpwhichpofpthepfollowingpreasons?
a) Topdeterminepifpthepentityphaspcompliedpwithpbondpcovenants.
b) Topdeterminepifpthepentityphaspcompliedpwithptaxingplimitations.
c) Topdeterminepifpthepentityphaspcompliedpwithpdonorprestrictionsponpthepusepofpfunds.
d) Topdeterminepallpofpthepabove.
15. WhichpofpthepfollowingpispNOTpgenerallypconsideredpapmainpuserpofpgovernmentpandp
not-pforprofitpentitypexternalpfinancialpstatements?
a) Investorspandpcreditors.
b) Taxpayers.
c) Donors.
d) Internalpmanagers.
16. Whichpofpthepfollowingpispapprobablepusepapdonorpwouldpmakepofpthepexternalpfina
ncialpstatementspofpapnot-for-profitpentity?
a) Topdeterminepthepproportionpofpentitypresourcespdirectedptopprogramspaspoppo
sedptopfund-raising.
b) Topdeterminepthepcreditworthinesspofpthepentitypforpinvestmentppurposes.
GranofpTestpBankpChapterp1 Pagep3
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