Government & Not-For-Profit Test 1
T/F The main objective of a typical governmental or not-for profit entity is to earn a profit - Correct
Answers False
T/F A government's budget may be backed by the force of law - Correct Answers True
T/F Governmental entities have no need for an accounting system - Correct Answers False
T/F A government's internal managers rely on general purpose financial statements for a
considerable amount of information about their government. - Correct Answers True
T/F Governments and not-for-profits may never engage in business-type activities - Correct Answers
False
T/F Lenders use the financial statements of governments and not-for-profits just as they would those of
businesses (to assess credit-worthiness) - Correct Answers True
T/F Financial statements, no matter how prepared, do not directly affect the economic worth of an
entity - Correct Answers True
T/F FASAB standards do not apply to the federal Department of Treasury. - Correct Answers False
T/F Governments may be subject to the same pressures that led to accounting scandals like Enron -
Correct Answers True
The Governmental Accounting Standards Board establishes generally accepted accounting
principles for all state and local government entities, as well as all not-for-profit entities. - Correct
Answers False
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. - Correct Answers
The importance of the budget in the governing process
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. - Correct Answers
The importance of the budget in the governing process
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. - Correct Answers 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. - Correct Answers The operating budget
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. - Correct Answers a) Governments may engage in activities similar to activities
engaged in by forprofit
entities.
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. - Correct Answers 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. - Correct Answers c) Providing for terrorism defense
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. - Correct Answers Amount reported as employee pension plan
contributions
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. - Correct Answers The ability to issue tax
exempt debt
10. To obtain a comprehensive understanding of a government's fiscal health, a financial analyst
should obtain an understanding of which of the following?
a) All of the resources owned by the governmental entity.
b) All of the resources which may be summoned by a governmental entity.
c) Demographic data about the residents served by the governmental entity.
d) All of the above. - Correct Answers d) All of the above
11. Which of the following is common to both governments and not-for-profit entities but
distinguishes these entities from for-profit entities?
a) The budget is a legal, financial document.
b) Revenues are usually indicative of demand for goods or services.
c) There is direct matching of revenues and expenses.
d) There are no defined ownership interests. - Correct Answers d) There are no defined ownership
interests.
12. Which of the following is NOT a purpose of external financial reporting by governments?
External financial reports should allow users to
a) Assess financial condition.
b) Compare actual results with the budget.
c) Assess the ability of elected officials to effectively manage people.
d) Evaluate efficiency and effectiveness. - Correct Answers Assess the ability of elected officials to
effectively manage people
13. Which of the following is NOT a reason why users need governmental and not-for-profit
external financial statements?
T/F The main objective of a typical governmental or not-for profit entity is to earn a profit - Correct
Answers False
T/F A government's budget may be backed by the force of law - Correct Answers True
T/F Governmental entities have no need for an accounting system - Correct Answers False
T/F A government's internal managers rely on general purpose financial statements for a
considerable amount of information about their government. - Correct Answers True
T/F Governments and not-for-profits may never engage in business-type activities - Correct Answers
False
T/F Lenders use the financial statements of governments and not-for-profits just as they would those of
businesses (to assess credit-worthiness) - Correct Answers True
T/F Financial statements, no matter how prepared, do not directly affect the economic worth of an
entity - Correct Answers True
T/F FASAB standards do not apply to the federal Department of Treasury. - Correct Answers False
T/F Governments may be subject to the same pressures that led to accounting scandals like Enron -
Correct Answers True
The Governmental Accounting Standards Board establishes generally accepted accounting
principles for all state and local government entities, as well as all not-for-profit entities. - Correct
Answers False
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. - Correct Answers
The importance of the budget in the governing process
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. - Correct Answers
The importance of the budget in the governing process
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. - Correct Answers 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. - Correct Answers The operating budget
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. - Correct Answers a) Governments may engage in activities similar to activities
engaged in by forprofit
entities.
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. - Correct Answers 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. - Correct Answers c) Providing for terrorism defense
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. - Correct Answers Amount reported as employee pension plan
contributions
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. - Correct Answers The ability to issue tax
exempt debt
10. To obtain a comprehensive understanding of a government's fiscal health, a financial analyst
should obtain an understanding of which of the following?
a) All of the resources owned by the governmental entity.
b) All of the resources which may be summoned by a governmental entity.
c) Demographic data about the residents served by the governmental entity.
d) All of the above. - Correct Answers d) All of the above
11. Which of the following is common to both governments and not-for-profit entities but
distinguishes these entities from for-profit entities?
a) The budget is a legal, financial document.
b) Revenues are usually indicative of demand for goods or services.
c) There is direct matching of revenues and expenses.
d) There are no defined ownership interests. - Correct Answers d) There are no defined ownership
interests.
12. Which of the following is NOT a purpose of external financial reporting by governments?
External financial reports should allow users to
a) Assess financial condition.
b) Compare actual results with the budget.
c) Assess the ability of elected officials to effectively manage people.
d) Evaluate efficiency and effectiveness. - Correct Answers Assess the ability of elected officials to
effectively manage people
13. Which of the following is NOT a reason why users need governmental and not-for-profit
external financial statements?
