Deck 1: Introduction to Accounting and Financial Reporting for Governmental and Not-For-Profit Entities

Question 1

A characteristic common to governmental and not-for-profit organizations is operating purposes that are other than to provide goods or services at a profit or profit equivalent.

Answer 1

True
Explanation: This is one of the characteristics; others include receipt of significant amounts of resources from resource providers who do not expect to receive either repayment or economic benefits proportionate to the resources provided and absence of defined ownership interests that can be sold, transferred, or redeemed, or that convey entitlement to a share of a residual distribution of resources in the event of liquidation of the organization.

Question 2

The Financial Accounting Foundation has oversight over both FASB and GASB.

Answer 2

True
Explanation: As shown in Illustration 1-1, the Financial Accounting Foundation is over both the FASB and the GASB. It appoints members to serve on both boards and supports the boards' operations.

Question 3

The basis of accounting under which revenues are recognized when measurable and available for spending and expenses when resources are consumed is the modified accrual basis of accounting.

Answer 3

False
Explanation: The statement is true regarding revenue recognition. However, under modified accrual, expenditures not expenses are recognized when incurred. Accrual accounting is the basis under which expenses are recognized as resources are consumed.

Question 4

The needs of users of governmental financial reports are the same as those of users of business financial reports.

Question 5

Which of the following organizations issue standards that are intended for both internal and external users of financial information?

A) Federal Accounting Standards Advisory Board.
B) Governmental Accounting Standards Board.
C) Financial Accounting Standards Board.
D) American Institute of CPAs.

Question 6

The body that has been established to recommend accounting and financial reporting standards for the federal government is the

A) Financial Accounting Standards Board (FASB).
B) Governmental Accounting Standards Board (GASB).
C) Government Accountability Office (GAO).
D) Federal Accounting Standards Advisory Board (FASAB).

Question 7

The FASB,GASB,and FASAB all focus their standards on both internal and external financial reporting.

Question 8

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.

Question 9

General purpose governments generally provide a wider range of services to their residents than do special purpose governments.

Question 10

In addition to financial statements and notes,GASB requires governments to provide information on service efforts and accomplishments (SEA)in their reports to the public.

Question 11

Which of the following is identified by the GASB as the "cornerstone" of all financial reporting in government?

A) Understandability.
B) Representational faithfulness.
C) Accountability.
D) Interperiod equity.

Question 12

The Governmental Accounting Standards Board is assigned responsibility for setting accounting and financial reporting standards for

A) Governments; such as federal agencies,states,cities,counties,villages,and townships.
B) State and local government entities and governmentally-related units and agencies,such as utilities,authorities,hospitals,and colleges and universities.
C) Not-for-profit organizations.
D) State and local government and all not-for-profit organizations.

Question 13

The Federal Accounting Standards Advisory Board (FASAB)recommends accounting principles and standards for the federal government and its agencies and departments.

Question 14

The Financial Accounting Standards Board has the responsibility for setting accounting and financial reporting standards for

A) All not-for-profit organizations that are nongovernmental and business entities.
B) All special purpose governments.
C) All not-for-profit organizations.
D) All federal government agencies.

Question 15

Which of the following distinguishes governments from nongovernmental not-for-profit organizations?

A) Absence of profit motive.
B) The power to enact and enforce a tax levy.
C) Resource providers do not expect benefits proportional to the resources provided.
D) Absence of a defined ownership interest that can be sold,transferred,or redeemed.

Question 16

Examples of special purpose governments include cities,towns,and public schools that receive tax revenue to finance the services they provide.

Question 17

Which of the following is not an objective of financial reporting by state and local governments?

A) To assist users in assessing the adequacy of systems and controls.
B) To assist users in assessing financial condition and results of operations.
C) To assist financial report users in comparing actual financial results with the legally adopted budget.
D) To assist in determining compliance with finance-related laws,rules,and regulations.

Question 18

The minimum requirements for general purpose external financial reporting are (1)management's discussion and analysis (MD&A), (2)the basic financial statements,including the notes to the financial statements,and (3)combining and individual fund financial statements.

Question 19

Which of the following is identified by the FASAB as the foundation for federal financial reporting?

A) Decision usefulness.
B) Accountability.
C) Understandability.
D) Budget integrity.

Question 20

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.

Question 21

Why should persons interested in reading financial reports of governmental and not-for-profit entities be familiar with standards set by the GASB and FASB?

Question 22

GASB and FASB standards are concerned only with external financial reporting; whereas,FASAB standards are concerned with both internal and external financial reporting.Do you agree with this statement? Why or why not?

Question 23

On what should the government-wide financial statements report?

A) Net position and results of financial operations of the government as a whole.
B) Fiscal accountability.
C) The cost of government services.
D) Budgetary compliance.

Question 24

Which of the following types of organizations may be subject to FASB jurisdiction?

A) A state hospital.
B) A college or university.
C) A public school district.
D) A public sanitation district.

Question 25

Which of the following groups is considered a primary user of a state or local government's general-purpose external financial statements?

A) Citizens.
B) Managers and administrators.
C) Employees.
D) Special interest groups.

Question 26

One of the minimum requirements for general purpose external financial reporting is:

A) Management's discussion and analysis (MD&A).
B) Consolidated financial statements.
C) Other supplementary information,such as combining and individual fund statements.
D) Statistical information.

Question 27

A comprehensive annual financial report (CAFR)prepared in conformity with GASB recommendations should include which of the following sections?

A) Letter of transmittal,management's discussion and analysis (MD&A),and financial.
B) Introductory,financial,and statistical.
C) Introductory,MD&A,and financial.
D) Letter of transmittal,financial,and supplementary.

Question 28

Which of the following standard-setting bodies requires a management's discussion and analysis as a part of the financial report?

A) GASB.
B) FASB.
C) FASAB.
D) Both A and C.

Question 29

Identify and explain the characteristics that distinguish governmental and not-for-profit entities from business entities.

Question 30

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) Management's discussion and analysis (MD&A).
B) Government-wide financial statements.
C) Notes to the financial statements.
D) Combining and individual fund financial statements.

Question 31

Which of the following should be included in the financial section of a comprehensive annual financial report?

A) Transmittal letter.
B) The basic financial statements,including notes thereto.
C) Tables and charts showing demographic and economic data.
D) A description of the government.

Question 32

Explain in your own words why accountability is the cornerstone of all financial reporting in government.

Question 33

On what should the governmental fund financial statements report?

A) Net position and results of financial operations of the government as a whole.
B) Fiscal accountability.
C) Operational accountability.
D) Cost of government services.

Question 34

Which of the following sections is not considered a part of a federal agency's performance and accountability report?

A) Basic financial statements.
B) Annual performance report.
C) Statistical section.
D) Management's discussion and analysis.

Question 35

Recognizing revenues when measurable and available for paying current obligations and expenditures when incurred describes which basis of accounting?

A) Accrual.
B) Modified accrual.
C) Modified cash.
D) Budgetary.

Question 36

Explain the essential differences between general purpose and special purpose governments and give several examples of each.

Question 37

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:

A) Introductory section.
B) Management's discussion and analysis section.
C) Statistical section.
D) Financial section.

Question 38

Which of the following statements is prepared by all not-for-profit organizations?

A) Statement of financial position.
B) Statement of functional expenses.
C) Statement of revenues,expenses,and changes in net position.
D) Both A and B.

Question 39

Which of the following would typically not be included in the introductory section of a comprehensive annual financial report?

A) Title and contents page.
B) Letter of transmittal.
C) A description of the government.
D) Summary of the government's current financial position and results of financial activities.

Question 40

A statistical section should be included in

A) A comprehensive annual financial report (CAFR).
B) The basic financial statements.
C) The notes to the financial statements.
D) Required supplementary information,other than MD&A.

Question 41

In your own words state the primary uses the GASB believes external users have for financial reports of state and local governments.For contrast,state the uses the FASB believes external users have for the financial reports of not-for-profit organizations.

Question 42

Why is it necessary to reconcile total fund balances reported on the balance sheet-governmental funds to total net position reported for governmental activities on the government-wide statement of net position,and net changes in fund balances-total governmental funds to the change in net position reported for governmental activities on the government-wide statement of activities?

Question 43

The governmental fund financial statements are intended to report on fiscal accountability.

Question 44

Identify and briefly explain the four sections of the performance and accountability report (PAR)that the Office of Management and Budget requires major federal departments and agencies to prepare.

Question 45

Explain the concepts fiscal and operational accountability and the basis of accounting used to capture each concept.

Question 46

Describe the difference between a comprehensive annual financial report (CAFR)and the GASB financial reporting model for state and local governments.