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Governmental & Not‑for‑Profit Accounting
MCQs – 100 Challenging Exam Questions
A+ 100% Guarantee _NFP_Accounting
Question and Answers Test Bank
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Government_NFP_Accounting_100_MCQs_2025
Sample Questions 1–5
1. Which fund uses modified accrual accounting and focuses on current financial resources?
A. Government‑wide fund
B. Fiduciary fund
C. General fund
D. Enterprise fund
The answer is General fund
Explanation: The General Fund deals with usual operations of a government entity,
recording revenues and expenditures when they’re available and measurable—classic
modified accrual.
2. A state issues $5,000,000 bonds to finance a new school. This is recorded in which fund?
A. Capital Projects Fund
B. General Fund
C. Debt Service Fund
D. Permanent Fund
The answer is Capital Projects Fund
Explanation: A Capital Projects Fund is used to record money raised and spent on
long-lived assets like schools, roads, etc.
3. The government expects $800,000 in property tax revenue for 2025. By December 31, it
collects $500,000. Under modified accrual, how much revenue is recognized in 2025?
A. $500,000
B. $800,000
C. $500,000
D. $300,000
The answer is 500,000
Explanation: Only money that is "available" and collectible within the period gets
recognized. Here, that’s $500k by year-end.
4. A capital outlay of $200,000 for new equipment is included in which section of the
governmental fund statements?
A. Operating expenditures
B. Transfers out
C. Capital outlay expenditures
D. Debt service expenditures
The answer is Capital outlay expenditures
Explanation: Capital purchases like equipment are classified as capital outlay
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expenditures, not routine operating costs.
5. A government’s General Fund reports a $1,000,000 surplus. What happens during the
closing?
A. Carried forward within General Fund
B. Transferred to Capital Projects Fund
C. Closed into fund balance
D. Deferred to next fiscal year
The answer is Closed into fund balance
Explanation: Governmental funds don’t carry surplus into the next year as income;
instead, it's closed into Fund Balance.
6. A town levies property taxes of $2,000,000. Expected to be collectible: 90% within 60
days. Under modified accrual, how much revenue is recognized?
A. $2,000,000
B. $1,800,000
C. $1,800,000
D. $1,500,000
The answer is 1,800,000
Explanation:
Only collectible within the available period is recognized. 90% of $2M = $1.8M.
7. A special revenue fund collected $150,000 in grants, used $120,000 for its purpose, and
held $30,000 at year-end. How is the leftover reported?
A. As revenue
B. As fund balance in the special revenue fund
C. As restricted fund balance
D. As unassigned fund balance
The answer is As restricted fund balance
Explanation:
Since the revenue is for a specific purpose and not spent, it remains in the fund as
restricted fund balance.
8. A school district buys buses costing $500,000, depreciable over 10 years, in the
government‑wide statement. Depreciation per year?
A. $50,000
B. $40,000
C. $25,000
D. $100,000
The answer is 50,000
Explanation:
Governmental & Not‑for‑Profit Accounting
MCQs – 100 Challenging Exam Questions
A+ 100% Guarantee _NFP_Accounting
Question and Answers Test Bank
, 2
Government_NFP_Accounting_100_MCQs_2025
Sample Questions 1–5
1. Which fund uses modified accrual accounting and focuses on current financial resources?
A. Government‑wide fund
B. Fiduciary fund
C. General fund
D. Enterprise fund
The answer is General fund
Explanation: The General Fund deals with usual operations of a government entity,
recording revenues and expenditures when they’re available and measurable—classic
modified accrual.
2. A state issues $5,000,000 bonds to finance a new school. This is recorded in which fund?
A. Capital Projects Fund
B. General Fund
C. Debt Service Fund
D. Permanent Fund
The answer is Capital Projects Fund
Explanation: A Capital Projects Fund is used to record money raised and spent on
long-lived assets like schools, roads, etc.
3. The government expects $800,000 in property tax revenue for 2025. By December 31, it
collects $500,000. Under modified accrual, how much revenue is recognized in 2025?
A. $500,000
B. $800,000
C. $500,000
D. $300,000
The answer is 500,000
Explanation: Only money that is "available" and collectible within the period gets
recognized. Here, that’s $500k by year-end.
4. A capital outlay of $200,000 for new equipment is included in which section of the
governmental fund statements?
A. Operating expenditures
B. Transfers out
C. Capital outlay expenditures
D. Debt service expenditures
The answer is Capital outlay expenditures
Explanation: Capital purchases like equipment are classified as capital outlay
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expenditures, not routine operating costs.
5. A government’s General Fund reports a $1,000,000 surplus. What happens during the
closing?
A. Carried forward within General Fund
B. Transferred to Capital Projects Fund
C. Closed into fund balance
D. Deferred to next fiscal year
The answer is Closed into fund balance
Explanation: Governmental funds don’t carry surplus into the next year as income;
instead, it's closed into Fund Balance.
6. A town levies property taxes of $2,000,000. Expected to be collectible: 90% within 60
days. Under modified accrual, how much revenue is recognized?
A. $2,000,000
B. $1,800,000
C. $1,800,000
D. $1,500,000
The answer is 1,800,000
Explanation:
Only collectible within the available period is recognized. 90% of $2M = $1.8M.
7. A special revenue fund collected $150,000 in grants, used $120,000 for its purpose, and
held $30,000 at year-end. How is the leftover reported?
A. As revenue
B. As fund balance in the special revenue fund
C. As restricted fund balance
D. As unassigned fund balance
The answer is As restricted fund balance
Explanation:
Since the revenue is for a specific purpose and not spent, it remains in the fund as
restricted fund balance.
8. A school district buys buses costing $500,000, depreciable over 10 years, in the
government‑wide statement. Depreciation per year?
A. $50,000
B. $40,000
C. $25,000
D. $100,000
The answer is 50,000
Explanation:
