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

Question 1

All of the following characteristics may indicate that an organization is governmental in nature except:

A)The organization is a public corporation or body corporate and politic.
B)Popular election of officers or appointment of a controlling majority of the organization's governing board by officials of a state or local government.
C)The organization is legally separate and its governing body has discretion to manage the organization's affairs without approval by a government.
D)The power to enact and enforce a tax levy.

Answer 1

C

Question 2

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.

Answer 2

A

Question 3

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.

Answer 3

False
Explanation: Although the first two items listed are part of the minimum requirements, combining and individual fund statements are included in the typical comprehensive annual report (CAFR), but are not part of the minimum GAAP requirements for governmental financial reporting.

Question 4

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

Question 5

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

Question 6

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

Question 7

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 8

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 9

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

Question 10

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

Question 11

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

Question 12

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 13

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 14

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.

Question 15

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 16

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 17

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 18

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.

Question 19

The statement of net assets and the statement of activities are the two government-wide financial statements required by GASBS 34.

Question 20

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)Cost Accounting Standards Board (CASB).
D)Federal Accounting Standards Advisory Board (FASAB).

Question 21

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

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 22

On what should the governmental fund financial statements report?

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

Question 23

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 discussion and analysis section.
C)Statistical section.
D)Financial section.

Question 24

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 25

The organization that designates which authoritative standard setting body is responsible for establishing accounting and financial reporting standards for particular kinds of organizations (e.g.,federal,state,and local government,not-for-profit,and business organizations)is the:

A)American Institute of Certified Public Accountants.
B)Financial Accounting Foundation.
C)Government Finance Officers Association.
D)Association of Government Accountants.

Question 26

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

Question 27

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

Question 28

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 29

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

A)Letter of transmittal,MD&A,and financial.
B)Introductory,financial,and statistical.
C)Introductory,MD&A,and financial.
D)Letter of transmittal,financial,and supplementary.

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 GASBS 34?

A)Management 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

Members of the Governmental Accounting Standards Board are appointed by the:

A)Financial Accounting Standards Board.
B)Governmental Accounting Standards Board.
C)American Institute of Certified Public Accountants.
D)Financial Accounting Foundation.

Question 32

On what should the government-wide financial statements report?

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

Question 33

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 34

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 35

Which of the following reconciliations is required in the basic financial statements of a state or local government?

A)Total fund balances on the balance sheet-governmental funds to total governmental activities net assets on the government-wide statement of net assets.
B)Total net assets on the statement of net assets-proprietary funds to total business-type activities net assets on the government-wide statement of net assets.
C)Total net assets on the statement of fiduciary net assets to total fiduciary activities net assets on the government-wide statement of net assets.
D)Total fund balances on the balance sheet-governmental funds to total changes in fund balances on the statement of revenues,expenditures,and changes in fund balances-governmental funds.

Question 36

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 37

Explain what distinguishes governmental not-for-profit organizations from nongovernmental,not-for-profit organizations.Why is such a distinction necessary?

Question 38

Enterprise funds are primarily distinguished from internal service funds by the:

A)Type of customers they serve.
B)Different basis of accounting they use.
C)Different kinds of financial statements used to present their financial information.
D)Different budgeting approaches used.

Question 39

Which of the following information 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 40

The fund financial statements for governmental funds should include a

A)Statement of cash flows.
B)Statement of revenues,expenses,and changes in fund net assets.
C)Balance sheet.
D)Statement of activities.

Question 41

What information is the Management Discussion and Analysis (MD&A)intended to provide?

Question 42

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

Question 43

Distinguish between combining financial statements of a governmental entity and basic financial statements.

Question 44

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 45

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

Question 46

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 47

Describe the difference between a comprehensive annual financial report (CAFR)and the GASBS 34 financial reporting model for state and local governments.

Question 48

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.