Deck 2: Overview of Financial Reporting for State and Local Governments

Question 1

The GASB Concept Statement on Service Efforts and Accomplishments Reporting encourages state and local governments to include inputs of nonmonetary resources in their financial reporting.

Answer 1

True

Question 2

An organization is presumed to be governmental if it has the ability to issue directly debt that is exempt from federal taxes.

Answer 2

True

Question 3

Although certain supplementary information may not be required, if presented, it must follow GASB guidance regarding its format and content.

Answer 3

True

Question 4

Fund-basis statements are presented for three categories of government activities: general, proprietary and fiduciary.

Question 5

GASB and FASB Concept Statements establish accounting standards that must be complied with to receive an unqualified audit opinion.

Question 6

The Federal Accounting Standards Advisory Board and the Governmental Accounting Standards Board are parallel bodies under the oversight of the Financial Accounting Foundation.

Question 7

Under modified accrual accounting, revenues are recognized when measurable and available to finance expenditures of the current period.

Question 8

A Management's Discussion and Analysis is required for state and local governmental units, but not the federal government.

Question 9

Fund accounting exists primarily to provide assurance that resources are used according to legal or donor restrictions.

Question 10

The Governmental Accounting Standards Board considers the financial reporting entity to include the primary government and its component units.

Question 11

The government-wide statements and the fund statements for proprietary funds and fiduciary funds use the economic resources measurement focus and the accrual basis of accounting.

Question 12

Governmental activities fund statements must be changed to the accrual basis from the modified accrual basis when preparing government-wide financial statements.

Question 13

All funds of a governmental unit use the current financial resources measurement focus and modified accrual basis of accounting

Question 14

Comparison of the legally approved budget with actual results of the General Fund is included as part of required supplementary information in the CAFR.

Question 15

The Governmental Accounting Standards Board sets financial reporting standards for all units of government: federal, state and local.

Question 16

Common measurement focus and basis of measurement is an important feature of government-wide financial statements.

Question 17

The Financial Accounting Standards Board sets financial reporting standards for private sector organizations, except nongovernmental, not-for-profit organizations.

Question 18

One objective of the Governmental Accounting Standards Board is to help users determine compliance with finance-related laws, rules and regulations

Question 19

General fixed assets of the government are reported both in the government-wide financial statements and the governmental fund financial statements.

Question 20

The Federal Accounting Standards Advisory Board requires less extensive reports than does the FASB or GASB.

Question 21

According to GASB standards relating to Budgetary Accounting, budgetary comparisons should be included in the appropriate financial statements or schedules for governmental funds for which an annual budget has been adopted.

Question 22

According to GASB standards relating to Budgetary Accounting, an annual budget should be adopted by every governmental unit.

Question 23

Depreciation on capital assets is included as an expense in the Statement of Revenues, Expenses and Changes in Fund Net Assets in the proprietary fund financial statements

Question 24

The Governmental Accounting Standards Board has been given authority to establish accounting and financial reporting standards for:

A) All governmental units and agencies
B) Federal, state and local governments
C) All governmental units and all not-for-profit organizations
D) State and local governmental entities and governmentally-owned utilities, authorities, hospitals and colleges and universities

Question 25

Measurement focus refers to those items, such as current and long-term assets, that are being reported on the financial statements.

Question 26

A fund represents part of the activities of an organization which is separated from other activities in the accounting records to more easily demonstrate compliance with legal restrictions or limitations.

Question 27

Level "A" GAAP for The University of Virginia, a public institution, would be established by the:

A) Financial Accounting Standards Board
B) Governmental Accounting Standards Board
C) American Institute of Certified Public Accountants
D) National Association of College and University Business Officers

Question 28

Internal Service funds are treated as governmental funds when the only "buyer" is a governmental unit.

Question 29

Fiduciary funds include agency, pension trust, investment trust and private-purpose trust.

Question 30

Long-term debt that is to be paid with tax revenues is reported both in the government-wide statements and in the governmental fund statements

Question 31

Permanent funds can be either a governmental fund or a fiduciary fund where only income on donated assets may be spent.

Question 32

According to GASB standards relating to Budgetary Accounting, the accounting system should provide the basis for appropriate budgetary control.

Question 33

Depreciation on capital assets is included as an expense in the Statement of Activities in the government-wide financial statements

Question 34

The GASB recently published a white paper outlining prohibited transactions for not-for-profit organizations.

Question 35

The GASB recently published a white paper which identifies five environmental differences between governments and for-profit enterprises.

Question 36

Which of the following characteristics would not define an organization as governmental?

A) The power to enact and enforce a tax levy
B) The potential for unilateral dissolution by a government with the net assets reverting to a government
C) The receipt of grant money from a state or local government for the purpose of providing services to the public
D) All of the above

Question 37

Infrastructure may or may not be capitalized by state and local governmental units.

Question 38

FASB sets the reporting standards for private and public not-for-for profits
Answer False

Question 39

The Financial Accounting Standards Board has authority to establish accounting and financial reporting standards for both private and state universities.

Question 40

According to GASB standards relating to Budgetary Accounting, the budget, when adopted according to procedures specified by state laws is binding upon the administrators of a governmental unit.

Question 41

Fiduciary funds are to use the:

A) Economic resources measurement focus and accrual basis of accounting
B) Current financial resources measurement focus and accrual basis of accounting
C) Economic resources measurement focus and modified accrual basis of accounting
D) None of the above, the fiduciary funds have no revenues

Question 42

A city government collects local option sales taxes legally restricted to pay for the hiring of teachers for hearing impaired school children. Which fund should account for the receipt of the sales taxes?

A) Special revenue fund
B) Capital projects fund
C) Private-purpose trust fund
D) General fund

Question 43

Under GASB Statement 34, modified accrual accounting would be found in the:

A) Government-wide financial statements only
B) Governmental fund financial statements only
C) Governmental and fiduciary fund financial statements only
D) Governmental, proprietary and fiduciary fund financial statements but not in the government-wide financial statements

Question 44

A city government sells police cars no longer in use. No restrictions have been placed on the proceeds. Which fund should account for the receipt?

A) Debt service fund
B) Capital projects fund
C) Enterprise fund
D) General fund

Question 45

In order for a fund to exist, there must be

A) Assets set aside for specific purposes
B) A separate revenue stream
C) A double-entry accounting entity
D) A and C are correct

Question 46

Which of the following is most correct with regard to Management's Discussion and Analysis (MD&A)?

A) State and local governments are required to provide an MD&A
B) Federal agency financial reports are required to provide an MD&A
C) Both state and local governments and federal agencies are encouraged, but not required to provide an MD&A
D) Both state and local governments and federal agencies are required to provide an MD&A

Question 47

The term "proprietary funds" applies to:

A) Enterprise funds only
B) All funds that use accrual accounting
C) Enterprise, internal service and private-purpose trust funds
D) None of the above answers are correct

Question 48

Governmental funds do not include:

A) Special revenue funds
B) Internal service funds
C) Debt service funds
D) The General fund

Question 49

A city government collects local option sales taxes legally restricted to pay for the construction of a new courthouse. Which fund should account for the receipt of the sales taxes?

A) Special revenue fund
B) Capital projects fund
C) Private-purpose trust fund
D) General fund

Question 50

Long-term debt of a governmental unit would be reported in the:

A) Government-wide financial statements and proprietary fund financial statements
B) Government-wide financial statements only
C) Debt service funds of governmental fund financial statements and government-wide financial statements
D) Notes to the financial statements only

Question 51

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

A) Authorized by the budget ordinance
B) Earned and measurable
C) Measurable and available to finance expenditures of the current period
D) Realized through collection

Question 52

Which of the following is not a fiduciary fund type?

A) Agency
B) Expendable trust
C) Private-purpose trust
D) Investment trust

Question 53

Under GASB Statement 34, capital assets:

A) Must be reported in government-wide statements but are not reported in any of the fund financial statements
B) Must be reported in government-wide statements and in proprietary fund financial statements
C) Are not to be reported in either government-wide or fund financial statements
D) Are to be reported but not depreciated in government-wide and fund financial statements

Question 54

Under GASB Statement 34, accrual accounting is used for:

A) Government-wide financial statements only
B) Government-wide financial statements and proprietary fund financial statements only
C) Government-wide, proprietary fund and fiduciary fund financial statements only
D) Government-wide and all fund financial statements

Question 55

GASB Concepts Statement No. 3, Communication Methods in General Purpose External Financial Reports that Contain Basic Financial Statements, states that

A) Notes to the financial statements may include management's objective explanations
B) Required supplementary information must be objective and may not include predictions or subjective assessments
C) Disclosure in the notes is not an adequate substitute for recognition in the financial statements
D) All of the above are correct

Question 56

The "Hierarchy of GAAP" is established by the:

A) Financial Accounting Standards Board
B) Securities and Exchange Commission
C) American Institute of Certified Public Accountants
D) Financial Accounting Standards Board and the Governmental Accounting Standards Board, acting jointly

Question 57

Which of the following is not true regarding GASB Concepts Statement No. 2, Service Efforts and Accomplishments Reporting:

A) It encourages governments to experiment with reporting more complete information about an entity's performance than can be displayed in the traditional financial statements
B) It outlines categories of information that might be reported
C) It prescribes detailed standards governing the reporting of service efforts and accomplishments reporting
D) None of the above, all are true

Question 58

Level "A" GAAP for Cook County Hospital, a public hospital, would be established by the:

A) Governmental Accounting Standards Board
B) Financial Accounting Standards Board
C) Hospital Financial Management Association
D) American Institute of Certified Public Accountants

Question 59

Which of the following organizations has authority to establish accounting and financial reporting standards for the federal government?

A) Federal Accounting Standards Advisory Board
B) Office of Management and Budget
C) Governmental Accounting Standards Board
D) None of the above; no one has been granted authority to set standards for the federal government

Question 60

A city government makes its semiannual payment of interest on revenue bonds issued to pay for the construction of additional subway stations. Which fund would account for the payment?

A) Debt service fund
B) Capital projects fund
C) Enterprise fund
D) Internal service fund

Question 61

A permanent fund classified under governmental funds.....

A) Accounts for most of the basic services provided by the governmental unit
B) Accounts for financial resources intended for major capital projects
C) Accounts for services provided by one department of a government to another
D) Accounts for resources that are legally restricted so only earnings, not principal, may be expended and for purposes to benefit the government and its citizenry

Question 62

What basis of accounting would the Enterprise Fund use?

A) Accrual
B) Modified Accrual
C) Cash
D) Expended Accrual

Question 63

Which of the following are the governmental funds?

A) General, special revenue, debt service, capital projects, permanent
B) General, special revenue, debt service, capital projects, private purpose
C) General, special revenue, debt service, capital projects, internal service
D) None of the above

Question 64

The _______ sets the accounting and financial reporting standards for both state and local governments and public not-for-profits.

A) FASAB
B) FASB
C) GASB
D) AICPA

Question 65

Which of the following is an objective of federal financial reporting?

A) Budgetary Integrity
B) Operating Performance
C) Stewardship
D) All of the above

Question 66

Which of the following is not an environmental difference between governments and for-profit business enterprises?

A) Organizational purposes
B) Sources of revenue
C) Role of the budget
D) Donor restrictions

Question 67

Long-term debt paid from proprietary funds is reported as a liability in

A) The proprietary fund Statement of Net Assets
B) The government-wide Statement of Net Assets
C) Both A and B
D) Neither A nor B

Question 68

What are Enterprise funds used for?

A) To account for pension and employee benefit funds for which the governmental unit is the trustee
B) To report resources that are legally restricted so only earnings, not principal, may be expended and for purposes to benefit the government and its citizenry
C) To account for most of the basic services provided by the governmental units
D) To account for resources provided primarily through the use of sales and service charges to parties external to the government

Question 69

The ______ Fund accounts for all resources other than those required to be accounted for in other funds.

A) Special revenue
B) General
C) Enterprise
D) Agency

Question 70

Which of the following fund types uses modified accrual accounting?

A) Debt Service
B) Internal Service
C) Investment Trust
D) Enterprise

Question 71

Which of the following statement(s) are NOT included in the proprietary funds:

A) Statement of Revenues, Expenses and Changes in Net Assets
B) Statement of Cash Flows
C) Balance Sheet
D) All of the above are included

Question 72

Which of the following is true regarding fund classifications?

A) Governmental funds include the General, special revenue, debt service, capital projects and permanent
B) Proprietary funds include enterprise, internal service and private-purpose
C) Both of the above
D) Neither of the above

Question 73

State and local governmental funds are organized into three categories including:

A) Governmental, proprietary and restricted
B) Proprietary, fiduciary and restricted
C) Governmental, fiduciary and restricted
D) Governmental, proprietary and fiduciary

Question 74

Which of the following is an environmental difference between governments and for-profit business enterprises?

A) Relationship with stakeholders
B) Donor restricted assets
C) Fiduciary responsibilities
D) Private inurement of residual earnings

Question 75

Which of the following are included in the GASB standards budgetary principle:

A) Accounting systems should provide the basis for appropriate budgetary control
B) Annual budgets should be adopted by every governmental unit
C) Budgetary comparisons should be included in the appropriate financial statements
D) All of the above

Question 76

The ___________ is the government's official annual report prepared and published as a matter of public record.

A) Comprehensive annual financial report
B) Governmental annual financial report
C) Independent auditor's report
D) Complete audited financial report

Question 77

Capitalized fixed assets are reported in which financial statement?

A) Fiduciary fund
B) Proprietary fund
C) Governmental fund
D) All of the above

Question 78

Which of the following funds is considered a Fiduciary Fund?

A) Debt Service Fund
B) Enterprise Fund
C) Internal Service Fund
D) Agency Fund

Question 79

Which of the following funds is NOT a Fiduciary Fund?

A) Private Purpose Trust Fund
B) Special Revenue Fund
C) Pension Fund
D) Investment Trust Fund

Question 80

Notre Dame University, a private institution, has level "A" GAAP established by the:

A) American Institute of Certified Public Accountants
B) Governmental Accounting Standards Board
C) Financial Accounting Standards Board
D) National Association of College and University Business Officers