TEST BANK
TO ACCOMPANY
ESSENTIALS OF ACCOUNTING FOR GOVERNMENTAL AND NOT-
FOR-PROFIT ORGANIZATIONS:
THIRTEENTH EDITION
PREPARED BY:
MARY LORETTA MANKTELOW
PAUL A. COPLEY
JAMES MADISON UNIVERSITY
,True/False Questions
1. The Governmental Accounting Standards Board sets financial reporting standards for all units
of government: federal, state, and local.
Answer: False
Learning Objective: 2
Topic: Distinguish between private and public sector organizations
Feedback: The GASB sets standards for state and local governments but not the federal
government. GASB also sets standards for governmentally related not-for-profit
organizations, health care entities, museums, libraries, and performing arts organization
owned or controlled by governments.
2. Fund accounting exists primarily to provide assurance that resources are used according to
legal or donor restrictions.
Answer: True
Learning Objective: 4
Topic: Fund Structure for State and Local Government Accounting and Reporting.
Feedback: Fund accounting allows governments to segregate resources that have
restrictions or limitations on the use of those resources. Each fund can account for the
receipt and use of resources to provide assurance of compliance with legal restrictions or
limitations.
3. The Financial Accounting Standards Board sets financial reporting standards for profit-seeking
businesses and nongovernmental, not-for-profit organizations.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
, Feedback: Accounting and financial reporting standards for profit-seeking businesses and
for nongovernmental not-for-profit organizations are set by the FASB.
4. FASAB, GASB and FASB standards are set forth primarily in documents called statements.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
Feedback: GASB standards are set forth in documents called Statements of Financial
Accounting Standards.
5. FASAB, GASB and FASB standards are set forth primarily in documents called concept
statements.
Answer: False
Learning Objective: 3
Topic: Sources of GAAP
Feedback: Standards are set forth in documents called "Statements", not concept
statements.
6. The FASAB was established to recommend accounting and financial reporting standards for the
federal government.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
Feedback: Accounting and financial reporting standards for the federal government are
published by the FASAB. The standards are technically “recommendations” since, as a
sovereign nation, the federal government cannot relegate authority to an independent
board.
, 7. The GASB does not require supplementary information to be reported with its financial
statements even if it is essential to establish appropriate context for the financial statements
and notes.
Answer: False
Learning Objective: 3
Topic: Objectives of Accounting and Financial Reporting for State and Local governmental
units.
Feedback: Occasionally, the GASB determines that additional information is necessary to
provide context and understanding of information in the statements or notes. In such cases,
the GASB requires the presentation of required supplementary information (RSI).
8. The Financial Accounting Standards Board sets financial reporting standards for private not-
for-profits and investor-owned businesses.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
Feedback: Accounting and financial reporting standards for profit-seeking businesses and
for nongovernmental not-for-profit organizations are set by the FASB.
9. An organization is presumed to be governmental if it has the ability to issue directly debt that is
exempt from federal taxes.
Answer: True
Learning Objective: 3
Topic: Definition of Government
Feedback: Organizations are presumed to be governmental if they have the ability to issue
directly (rather than through a state or municipal authority) debt that pays interest exempt
from federal income taxes.
TO ACCOMPANY
ESSENTIALS OF ACCOUNTING FOR GOVERNMENTAL AND NOT-
FOR-PROFIT ORGANIZATIONS:
THIRTEENTH EDITION
PREPARED BY:
MARY LORETTA MANKTELOW
PAUL A. COPLEY
JAMES MADISON UNIVERSITY
,True/False Questions
1. The Governmental Accounting Standards Board sets financial reporting standards for all units
of government: federal, state, and local.
Answer: False
Learning Objective: 2
Topic: Distinguish between private and public sector organizations
Feedback: The GASB sets standards for state and local governments but not the federal
government. GASB also sets standards for governmentally related not-for-profit
organizations, health care entities, museums, libraries, and performing arts organization
owned or controlled by governments.
2. Fund accounting exists primarily to provide assurance that resources are used according to
legal or donor restrictions.
Answer: True
Learning Objective: 4
Topic: Fund Structure for State and Local Government Accounting and Reporting.
Feedback: Fund accounting allows governments to segregate resources that have
restrictions or limitations on the use of those resources. Each fund can account for the
receipt and use of resources to provide assurance of compliance with legal restrictions or
limitations.
3. The Financial Accounting Standards Board sets financial reporting standards for profit-seeking
businesses and nongovernmental, not-for-profit organizations.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
, Feedback: Accounting and financial reporting standards for profit-seeking businesses and
for nongovernmental not-for-profit organizations are set by the FASB.
4. FASAB, GASB and FASB standards are set forth primarily in documents called statements.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
Feedback: GASB standards are set forth in documents called Statements of Financial
Accounting Standards.
5. FASAB, GASB and FASB standards are set forth primarily in documents called concept
statements.
Answer: False
Learning Objective: 3
Topic: Sources of GAAP
Feedback: Standards are set forth in documents called "Statements", not concept
statements.
6. The FASAB was established to recommend accounting and financial reporting standards for the
federal government.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
Feedback: Accounting and financial reporting standards for the federal government are
published by the FASAB. The standards are technically “recommendations” since, as a
sovereign nation, the federal government cannot relegate authority to an independent
board.
, 7. The GASB does not require supplementary information to be reported with its financial
statements even if it is essential to establish appropriate context for the financial statements
and notes.
Answer: False
Learning Objective: 3
Topic: Objectives of Accounting and Financial Reporting for State and Local governmental
units.
Feedback: Occasionally, the GASB determines that additional information is necessary to
provide context and understanding of information in the statements or notes. In such cases,
the GASB requires the presentation of required supplementary information (RSI).
8. The Financial Accounting Standards Board sets financial reporting standards for private not-
for-profits and investor-owned businesses.
Answer: True
Learning Objective: 3
Topic: Sources of GAAP
Feedback: Accounting and financial reporting standards for profit-seeking businesses and
for nongovernmental not-for-profit organizations are set by the FASB.
9. An organization is presumed to be governmental if it has the ability to issue directly debt that is
exempt from federal taxes.
Answer: True
Learning Objective: 3
Topic: Definition of Government
Feedback: Organizations are presumed to be governmental if they have the ability to issue
directly (rather than through a state or municipal authority) debt that pays interest exempt
from federal income taxes.
