Deck 2: Principles of Accounting and Financial Reporting for State and Local Governments

Question 1

Expenditures are never recorded in governmental funds.

Answer 1

False

Question 2

An expenditure is an example of what the GASB terms an outflow of resources.

Answer 2

True

Question 3

Revenues is an example of what the GASB terms an inflow of resources.

Answer 3

True

Question 4

The types of funds that may be used in governmental accounting are classified into the three categories of governmental,proprietary,and fiduciary.

Question 5

The maximum sets of fund financial statements a government would present are three.

Question 6

Deferred inflow of resources and deferred outflow of resources would be shown in separate sections of a government's statement of net position.

Question 7

Governments can,in part,demonstrate operational accountability by reporting proprietary and fiduciary fund financial information,as well as all government-wide financial information,using an economic resources measurement focus and the accrual basis of accounting.

Question 8

The governmental funds category includes the General Fund,special revenue funds,debt service funds,capital projects funds,and internal service funds.

Question 9

Because budgetary accounts are used by governments,government financial statements can never be said to be in accord with generally accepted accounting principles.

Question 10

A deferred inflow of resources is defined as "an acquisition of net assets by the government that is applicable to a future reporting period."

Question 11

When revenues are legally restricted by external resource providers or committed by enabling legislation for particular operating purposes,a private purpose trust fund is created.

Question 12

Deferred outflow of resources is a type of asset that is unique to government.

Question 13

All capital assets acquired by or used by a fund should be reported in the fund balance sheet or statement of net position.

Question 14

Governmental activities are to be classified as governmental or business-type.

Question 15

Only those governmental and proprietary funds that meet the GASB size criteria for major funds are reported in separate columns of the governmental and proprietary fund financial statements.

Question 16

Governmental funds are identical to governmental activities,proprietary funds are identical to business-type activities,and fiduciary funds are identical to fiduciary activities of a government.

Question 17

Governmental funds account for assets but not the liabilities.

Question 18

Economic resources are cash or items expected to be converted into cash during the current period,or soon enough thereafter to pay current period liabilities.

Question 19

In accordance with GASB standards,a deferred inflow of resources is reported on the financial statements the same as an unearned revenue.

Question 20

A debt service fund is used to account for financial resources segregated for the purpose of making principal and interest payments on general long-term debt.

Question 21

Nonmajor funds are not reported on the fund financial statements.

Question 22

Which of the following is not a characteristic of a fund as defined by GASB standards?

A) An accounting entity.
B) A fiscal entity.
C) A reporting entity.
D) A self-balancing set of accounts.

Question 23

Which of the following is a proprietary fund?

A) Special revenue fund.
B) Investment trust fund.
C) Debt service fund.
D) Internal service fund.

Question 24

Under the modified accrual basis of accounting,revenues should be recognized when

A) Earned.
B) Collected in cash.
C) Authorized by the budget ordinance.
D) Measurable and available.

Question 25

Assigned fund balances can be either positive or negative.

Question 26

Financial resources set aside to pay principal and interest on general long-term debt may be accounted for in which of the following fund types?

A) Private-purpose trust fund.
B) Debt service fund.
C) Principal and interest trust fund.
D) Internal service fund.

Question 27

The accrual basis of accounting applicable to proprietary fund types requires that exchange revenues be recognized when

A) Earned.
B) Collected in cash.
C) Authorized by the budget ordinance.
D) Measurable and available.

Question 28

The GASB concept statements indicate that an asset that is going to be converted to cash should be reported at a remeasured amount at the financial statement date.

Question 29

According to GASB standards transfers should be recognized

A) When earned.
B) When collected in cash.
C) When authorized by the budget ordinance.
D) In the period the interfund receivable and payable arise.

Question 30

Generally accepted accounting principles applicable to state and local governments require that

A) Only governmental funds and proprietary funds should be established.
B) Only those funds required by law, GASB standards, and sound financial administration should be established.
C) Only those funds required by law and sound financial administration should be established.
D) All categories of funds must be established.

Question 31

In accounting for state and local governments the modified accrual basis is required for

A) Proprietary and fiduciary funds.
B) Governmental funds.
C) Governmental and fiduciary funds.
D) Governmental and internal service funds.

Question 32

The positive fund balance in a special revenue fund must at a minimum be reported as assigned.

Question 33

Which of the following funds would be most appropriate when accounting for an activity that provides goods or services to the public for a fee that is intended to make the activity self-supporting?

A) Investment trust fund.
B) Enterprise fund.
C) Internal service fund.
D) Special revenue fund.

Question 34

Which of the following funds should be used if resources provided by a federal grant must be segregated and used for counseling of youthful offenders?

A) Private-purpose trust fund.
B) Enterprise fund.
C) Internal service fund.
D) Special revenue fund.

Question 35

The General Fund is the only fund that can have a positive unassigned fund balance.

Question 36

Which of the following is regarding financial reporting for internal service funds?

A) Internal service funds are reported in the governmental fund financial statements.
B) Internal service funds are aggregated and reported as a major fund in the proprietary fund financial statements.
C) Internal service funds are generally reported in the Business-type Activities column of the government-wide financial statements.
D) Internal service funds are generally reported in the Governmental Activities column of the government-wide financial statements.

Question 37

A permanent endowment is an example of a nonspendable fund balance.

Question 38

Proprietary funds primarily provide services to the general public for a fee.

Question 39

Which of the following funds is a governmental fund-type?

A) Private-purpose trust fund.
B) Internal service fund.
C) Permanent fund.
D) Enterprise fund.

Question 40

Which of the following is a fiduciary fund?

A) Investment trust fund.
B) Special revenue fund.
C) Debt service fund.
D) Enterprise fund.

Question 41

Capital assets used by departments accounted for by the General Fund of a governmental unit should be accounted for in

A) The General Fund.
B) The governmental activities journal.
C) The business-type activities journal.
D) The general capital assets fund.

Question 42

Which of the following would be reported as a nonspendable fund balance?

A) Inventory.
B) Restricted assets.
C) Assets whose use is limited.
D) Capital assets.

Question 43

Use the following information to determine whether the Development Special Revenue and the Debt Service Funds should be reported as major funds based on asset amounts provided. P1P1_1.27Development Special Revenue Fund AssetsP1P1_EP1P1_13.97$740,000P1P1_E
P1P1_1.27Debt Service Fund AssetsP1P1_EP1P1_13.97$150,000P1P1_E
P1P1_1.27Total Governmental Fund AssetsP1P1_EP1P1_13.97$7,500,000P1P1_E
P1P1_1.27Total Governmental Fund and Enterprise Fund AssetsP1P1_EP1P1_13.97$8,750,000P1P1_E

A) The Development Special Revenue Fund should be reported as major.
B) The Debt Service Fund should be reported as major.
C) Both the Development Special Revenue Fund and the Debt Service Fund should be reported as major.
D) Neither the Development Special Revenue Fund nor the Debt Service Fund should be reported as major.

Question 44

The following are categories of funds described in Chapter 2:
A.Governmental funds
B.Proprietary funds
C.Fiduciary funds
For each of the following descriptive phrases,indicate the type of fund from the list above that best matches by placing the appropriate letter in the blank space next to the phrase.

Question 45

Which of the following funds would record depreciation of capital assets?

A) Special revenue fund.
B) Permanent fund.
C) Internal service fund.
D) Agency fund.

Question 46

Under GASB standards which of the following funds can report a positive amount for unassigned fund balance?

A) Capital projects fund.
B) Special revenue fund.
C) General Fund.
D) All of the above.

Question 47

Which of the following governmental funds must be reported as a major fund?

A) The General Fund.
B) Any fund with total assets, liabilities, revenues, or expenditures that are 10% or more of the General Fund and 5% or more of total General Fund and Business-type Activities.
C) The government may opt to include or exclude any fund it choses as a major fund.
D) Only the General Fund and special revenue funds that meet the 10% and 5% size criteria.

Question 48

The GASB concept statements indicate that in certain instances a remeasured value for an asset or liability should be reported on the financial statements. Which of the following is not one of the methods recommended by the GASB for remeasured amounts?

A) Historical cost.
B) Lower of cost or market.
C) Fair value.
D) Replacement cost.

Question 49

Which of the following is not one of the seven elements defined by the GASB concept statements?

A) Deferred inflow of resources.
B) Expenses.
C) Assets.
D) Net position.

Question 50

Which of the following funds are proprietary funds?

A) Enterprise funds, investment trust funds, pension trust funds, and the General Fund.
B) Enterprise funds and internal service funds.
C) Internal service funds, special revenue funds, and enterprise funds.
D) Proprietary funds are not used in governmental accounting.

Question 51

Following are some of the county's governmental funds. The county has asked you to determine is any of the funds listed should be classified as major funds based on the GASB size criteria. Clearly indicate which fund(s)you believe should be classified as major and provide support for your choice(s).

Question 52

The activities of a water utility department,which offers its services to the general public on a user charge basis,should be accounted for in

A) An enterprise fund.
B) A special revenue fund.
C) The General Fund.
D) An internal service fund.

Question 53

Which of the following funds are governmental funds?

A) General Fund, special revenue funds, capital projects funds, debt service funds, and private-purpose trust funds.
B) General Fund, special revenue funds, private-purpose trust funds.
C) General Fund, special revenue funds, debt service funds, capital projects funds, and permanent funds.
D) General Fund, special revenue funds, capital projects funds, debt service funds, and internal service funds.

Question 54

A city received resources that the state indicates can only be used for public works projects,such as road construction.Assuming the resources have not been expended by year end,how would the resources the city received be shown in the city's fund balances?

A) Spendable-Designated Fund Balance.
B) Spendable-Committed Fund Balance.
C) Spendable-Restricted Fund Balance.
D) Spendable-Assigned Fund Balance.

Question 55

Which of the following funds would be used to account for an activity that provides centralized purchasing and sales of goods or services to other departments or agencies of the government on a cost-reimbursement basis?

A) Enterprise fund.
B) Fiduciary fund.
C) Internal service fund.
D) Permanent fund.

Question 56

A major governmental fund is one that has one or more elements (e.g.,assets,liabilities,revenues,or expenditures)that is at least:

A) Five percent of the corresponding element(s) of total governmental funds and 10 percent of the corresponding element(s) of total governmental and enterprise funds combined.
B) Ten percent of the corresponding element(s) of total governmental funds and 10 percent of the corresponding element(s) of total governmental and enterprise funds combined.
C) Five percent of the corresponding element(s) of total governmental funds and five percent of the corresponding element(s) of total governmental and enterprise funds combined.
D) Ten percent of the corresponding element(s) of total governmental funds and 5 percent of the corresponding element(s) of total governmental and enterprise funds combined.

Question 57

The measurement focus and basis of accounting that are most unlike those used by business entities are those used by

A) Governmental funds.
B) Fiduciary funds.
C) Proprietary funds.
D) Contribution funds.

Question 58

The basis of accounting that should be used in preparing fund financial statements is:

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 59

The following are fund balance classifications described in Chapter 2:
A.Nonspendable
B.Spendable-Restricted
C.Spendable-Committed
D.Spendable-Assigned
E.Spendable-Unassigned
For each of the following scenarios,indicate how they would be classified for fund balance reporting purposes using the classification list above.Place the appropriate letter in the blank space next to each scenario.
_____ 1.Bond proceeds of $15,000,000 that must be used for construction of a fire substation remain unspent at the end of the fiscal year.
_____ 2.Prepaid rent of $6,000 remains at the end of the fiscal year.
_____ 3.The city council adopted a plan to set aside 2% of revenues over the next three years to help build cash reserves. At the end of the fiscal year 2% of the revenues were set aside.
_____ 4.The state transportation department provided $1,000,000 in state funds to be used for street widening. At the end of the fiscal year $750,000 remained unspent.
_____ 5.The county received a $3,000,000 endowment during the year.

Question 60

Capital assets used by an enterprise fund should be accounted for in the

A) Enterprise fund and depreciation on the capital assets should be recorded.
B) Business-type activities journal but no depreciation on the capital assets should be recorded.
C) Governmental activities journal and depreciation on the capital assets should be recorded.
D) Enterprise fund but no depreciation on the capital assets should be recorded.

Question 61

"The primary purpose of an accounting system for a state or a local government is to make it possible for financial statements to demonstrate compliance with finance-related legal and contractual provisions." Explain why you believe this statement to be correct or incorrect.

Question 62

List the seven fund financial statements that are required as part of the basic financial statements by GASB standards.What measurement focus and basis of accounting should be used in preparing each of these statements?

Question 63

Explain the nature of the three major activity categories of a state or local government: governmental activities,business-type activities,and fiduciary activities.Provide examples of each.

Question 64

Explain the difference between measurement focus and basis of accounting.Also,explain the difference between the economic resources measurement focus and the current financial resources measurement focus as well as the difference between the accrual and modified accrual bases of accounting.Which funds and government-wide activities use each focus and each basis?

Question 65

List the basic financial statements required by GASB standards and briefly explain their purposes.

Question 66

Describe the comprehensive annual financial report (CAFR).What are the sections of the report and which components of the organization should it include? Is a CAFR required?