ACCT 405 Test 1 Study Guide | Actual
study | Questions and verified Answers
True - ANSW-T/F Examples of general-purpose governments include cities, towns, and public schools
that receive tax revenue to finance the services they provide.
True - ANSW-T/F The Governmental Accounting Standards Board (GASB) is the body authorized to
establish accounting principles for all state and local governments, both general purpose and special
purpose.
True - ANSW-T/F Neither governments nor not-for-profit entities have residual equity that can be
distributed to owners.
True - ANSW-T/F A characteristic common to governments and not-for-profit organizations is that they
do not exist to provide goods or services at a profit or profit equivalent.
True - ANSW-T/F The Federal Accounting Standards Advisory Board (FASAB) recommends accounting
principles and standards for the federal government and its agencies and departments.
True - ANSW-T/F Interperiod equity refers to the concept that current-year revenues are sufficient to pay
for services provided that year, so that future taxpayers will not be required to assume the burden for
services previously provided.
True - ANSW-T/F The Financial Accounting Foundation has oversight over both the FASB and the GASB.
True - ANSW-T/F A difference in the financial reporting objectives for government entities and not-for-
profit entities is that government entities report on compliance with laws, regulations, and rules that
impact financial reports.
True - ANSW-T/F The Office of Management and Budget (OMB) requires major federal departments and
agencies to prepare an annual performance report.
True - ANSW-T/F The governmental fund financial statements are intended to report on fiscal
accountability.
True - ANSW-T/F Government-wide financial statements are prepared using the accrual basis of
accounting.
State and local government entities and governmentally-related units and agencies, such as utilities,
authorities, hospitals, and colleges and universities. - ANSW-The Governmental Accounting Standards
Board is assigned responsibility for setting accounting and financial reporting standards for:
A primary source of revenue is taxes - ANSW-You are trying to decide if an entity you are reviewing is a
government or a not-for-profit. Which of the following would indicate it is a government rather than a
not-for-profit entity?
Accountability - ANSW-Which of the following is identified by the GASB as the "cornerstone" of all
financial reporting in government?
A) Accountability.
B) Decision usefulness.
C) Stewardship.
D) Interperiod equity.
Federal Accounting Standards Advisory Board. - ANSW-Which of the following organizations issue
standards that focus on both internal and external financial reporting?
,A) Financial Accounting Standards Board.
B) Federal Accounting Standards Advisory Board.
C) Governmental Accounting Standards Board.
D) American Institute of CPAs.
Accountability - ANSW-Which of the following is identified by the FASAB as the foundation for federal
financial reporting?
A) Decision usefulness.
B) Accountability.
C) Budget integrity.
D) Understandability.
Citizens - ANSW-Which of the following groups is considered a primary user of a state or local
government's general-purpose external financial statements?
A) Managers and administrators.
B) Citizens.
C) Employees.
D) Special interest groups
Management's discussion and analysis (MD&A). - ANSW-One of the minimum requirements for general
purpose external financial reporting by governments is
A) Transmittal letter.
B) Statistical information.
C) Management's discussion and analysis (MD&A).
D) Combining and individual fund statements.
Introductory, financial, and statistical. - ANSW-A comprehensive annual financial report (CAFR) prepared
in conformity with the GASB recommendations should include which of the following sections?
Combining and individual fund financial statements. - ANSW-Which of the following would be included
in a properly prepared comprehensive annual financial report (CAFR), but not in the minimum
requirements for general purpose financial reporting specified by GASB standards?
A) Notes to the financial statements.
B) Government-wide financial statements.
C) Combining and individual fund financial statements.
D) Management's discussion and analysis (MD&A).
A comprehensive annual financial report (CAFR) - ANSW-A statistical section should be included in
Summary of the government's current financial position and results of financial activities. - ANSW-Which
of the following would typically not be included in the introductory section of a comprehensive annual
financial report?
A) A description of the government.
B) Summary of the government's current financial position and results of financial activities.
C) Title and contents page.
D) Letter of transmittal.
, Statistical section. - ANSW-The section of the comprehensive annual financial report that presents tables
and charts showing social and economic data in addition to financial trends, fiscal capacity, and
operating information of the government is the:
The basic financial statements, including notes thereto. - ANSW-Which of the following should be
included in the financial section of a comprehensive annual financial report?
A) A description of the government.
B) The basic financial statements, including notes thereto.
C) Tables and charts showing demographic and economic data.
D) Transmittal letter.
Operational accountability. - ANSW-On what do the government-wide financial statements report?
Both GASB and FASAB. - ANSW-Which of the following standard-setting bodies requires a management's
discussion and analysis as a part of the financial report?
A) Both GASB and FASAB.
B) GASB.
C) FASB.
D) FASAB.
Fiscal accountability. - ANSW-On what should the governmental fund financial statements report?
Statistical section. - ANSW-Which of the following sections is not considered a part of a federal agency's
performance and accountability report?
A) Statistical section.
B) Basic financial statements.
C) Annual performance report.
D) Management's discussion and analysis.
Statement of financial position. - ANSW-Which of the following statements is prepared by all not-for-
profit organizations?
A) Statement of changes in net position.
B) Both Statement of financial position and Statement of changes in net position.
C) Statement of financial position.
D) Statement of revenues, expenses, and changes in net position.
Modified accrual. - ANSW-Recognizing revenues when measurable and available for paying current
obligations and expenditures when incurred describes which basis of accounting?
All not-for-profit entities. - ANSW-The FASB requires that a statement showing the relationship of
functional expenses to natural classifications of expense be prepared by which of the following entities?
A) Voluntary health and welfare entities.
B) All not-for-profit entities.
C) Colleges and universities.
D) Health care entities.
Net assets with donor restrictions. - ANSW-Which of the following is a net asset category reported by
not-for-profit entities?
study | Questions and verified Answers
True - ANSW-T/F Examples of general-purpose governments include cities, towns, and public schools
that receive tax revenue to finance the services they provide.
True - ANSW-T/F The Governmental Accounting Standards Board (GASB) is the body authorized to
establish accounting principles for all state and local governments, both general purpose and special
purpose.
True - ANSW-T/F Neither governments nor not-for-profit entities have residual equity that can be
distributed to owners.
True - ANSW-T/F A characteristic common to governments and not-for-profit organizations is that they
do not exist to provide goods or services at a profit or profit equivalent.
True - ANSW-T/F The Federal Accounting Standards Advisory Board (FASAB) recommends accounting
principles and standards for the federal government and its agencies and departments.
True - ANSW-T/F Interperiod equity refers to the concept that current-year revenues are sufficient to pay
for services provided that year, so that future taxpayers will not be required to assume the burden for
services previously provided.
True - ANSW-T/F The Financial Accounting Foundation has oversight over both the FASB and the GASB.
True - ANSW-T/F A difference in the financial reporting objectives for government entities and not-for-
profit entities is that government entities report on compliance with laws, regulations, and rules that
impact financial reports.
True - ANSW-T/F The Office of Management and Budget (OMB) requires major federal departments and
agencies to prepare an annual performance report.
True - ANSW-T/F The governmental fund financial statements are intended to report on fiscal
accountability.
True - ANSW-T/F Government-wide financial statements are prepared using the accrual basis of
accounting.
State and local government entities and governmentally-related units and agencies, such as utilities,
authorities, hospitals, and colleges and universities. - ANSW-The Governmental Accounting Standards
Board is assigned responsibility for setting accounting and financial reporting standards for:
A primary source of revenue is taxes - ANSW-You are trying to decide if an entity you are reviewing is a
government or a not-for-profit. Which of the following would indicate it is a government rather than a
not-for-profit entity?
Accountability - ANSW-Which of the following is identified by the GASB as the "cornerstone" of all
financial reporting in government?
A) Accountability.
B) Decision usefulness.
C) Stewardship.
D) Interperiod equity.
Federal Accounting Standards Advisory Board. - ANSW-Which of the following organizations issue
standards that focus on both internal and external financial reporting?
,A) Financial Accounting Standards Board.
B) Federal Accounting Standards Advisory Board.
C) Governmental Accounting Standards Board.
D) American Institute of CPAs.
Accountability - ANSW-Which of the following is identified by the FASAB as the foundation for federal
financial reporting?
A) Decision usefulness.
B) Accountability.
C) Budget integrity.
D) Understandability.
Citizens - ANSW-Which of the following groups is considered a primary user of a state or local
government's general-purpose external financial statements?
A) Managers and administrators.
B) Citizens.
C) Employees.
D) Special interest groups
Management's discussion and analysis (MD&A). - ANSW-One of the minimum requirements for general
purpose external financial reporting by governments is
A) Transmittal letter.
B) Statistical information.
C) Management's discussion and analysis (MD&A).
D) Combining and individual fund statements.
Introductory, financial, and statistical. - ANSW-A comprehensive annual financial report (CAFR) prepared
in conformity with the GASB recommendations should include which of the following sections?
Combining and individual fund financial statements. - ANSW-Which of the following would be included
in a properly prepared comprehensive annual financial report (CAFR), but not in the minimum
requirements for general purpose financial reporting specified by GASB standards?
A) Notes to the financial statements.
B) Government-wide financial statements.
C) Combining and individual fund financial statements.
D) Management's discussion and analysis (MD&A).
A comprehensive annual financial report (CAFR) - ANSW-A statistical section should be included in
Summary of the government's current financial position and results of financial activities. - ANSW-Which
of the following would typically not be included in the introductory section of a comprehensive annual
financial report?
A) A description of the government.
B) Summary of the government's current financial position and results of financial activities.
C) Title and contents page.
D) Letter of transmittal.
, Statistical section. - ANSW-The section of the comprehensive annual financial report that presents tables
and charts showing social and economic data in addition to financial trends, fiscal capacity, and
operating information of the government is the:
The basic financial statements, including notes thereto. - ANSW-Which of the following should be
included in the financial section of a comprehensive annual financial report?
A) A description of the government.
B) The basic financial statements, including notes thereto.
C) Tables and charts showing demographic and economic data.
D) Transmittal letter.
Operational accountability. - ANSW-On what do the government-wide financial statements report?
Both GASB and FASAB. - ANSW-Which of the following standard-setting bodies requires a management's
discussion and analysis as a part of the financial report?
A) Both GASB and FASAB.
B) GASB.
C) FASB.
D) FASAB.
Fiscal accountability. - ANSW-On what should the governmental fund financial statements report?
Statistical section. - ANSW-Which of the following sections is not considered a part of a federal agency's
performance and accountability report?
A) Statistical section.
B) Basic financial statements.
C) Annual performance report.
D) Management's discussion and analysis.
Statement of financial position. - ANSW-Which of the following statements is prepared by all not-for-
profit organizations?
A) Statement of changes in net position.
B) Both Statement of financial position and Statement of changes in net position.
C) Statement of financial position.
D) Statement of revenues, expenses, and changes in net position.
Modified accrual. - ANSW-Recognizing revenues when measurable and available for paying current
obligations and expenditures when incurred describes which basis of accounting?
All not-for-profit entities. - ANSW-The FASB requires that a statement showing the relationship of
functional expenses to natural classifications of expense be prepared by which of the following entities?
A) Voluntary health and welfare entities.
B) All not-for-profit entities.
C) Colleges and universities.
D) Health care entities.
Net assets with donor restrictions. - ANSW-Which of the following is a net asset category reported by
not-for-profit entities?
