Question 1

Income taxes are classified as ad valorem taxes.

Accepted Answer

Income taxes are not classified as ad valorem taxes as they are not based on the value of property or goods, but rather on the amount of income earned by an individual or business. Ad valorem taxes are typically imposed on real estate, personal property, and sometimes automobiles, and are calculated as a percentage of their value.

Question 2

The budgetary measurement focus of governments is determined by applicable state or local laws.

Accepted Answer

The budgetary measurement focus of governments is typically determined by applicable state or local laws. For example, some states may require budgets to be prepared using a modified accrual basis, while others may require a full accrual basis. Local governments may also be subject to different requirements based on their specific legal frameworks.

Question 3

Sales taxes are taxpayer assessed, that is, parties other than the beneficiary government determine the tax base.

Accepted Answer

Sales taxes are collected by the government from the purchaser during a sale transaction, and the tax base is determined by the sale price of the goods or services being sold. Therefore, it is the government that determines the tax base, not parties other than the beneficiary government.

Question 4

The revenue-recognition issues facing governments are simpler to resolve than those of businesses.

Accepted Answer

The revenue-recognition issues facing governments can be complex and difficult to resolve, particularly when it comes to recognizing revenue from taxes and grants. This is because governments often have multiple funding sources with varying restrictions and requirements, and they may also need to consider the timing of revenue recognition in relation to the services or projects being funded. Additionally, there may be political factors that influence revenue recognition decisions.

Question 5

If an entity elects to focus on all economic resources (both current and long-term assets and liabilities), then it should adopt a modified accrual basis of accounting.

Accepted Answer

If an entity elects to focus on all economic resources (both current and long-term assets and liabilities), then it should adopt a full accrual basis of accounting, not a modified accrual basis.

Question 6

Under the accrual basis of accounting used by a governmental entity, investment revenues for the current period should include

Accepted Answer

The answer of Under the accrual basis of accounting used...

Question 7

The modified accrual basis of accounting is used in presenting the fund financial statements of the governmental funds because

Accepted Answer

The answer of The modified accrual basis of accounting is...

Question 8

All intergovernmental grants are accounted for in exactly the same way.

Accepted Answer

Intergovernmental grants can vary in their accounting treatment depending on the specific requirements and conditions of the grant. Some grants may require specific reporting or matching funds, while others may be more flexible. Therefore, there is not a one-size-fits-all approach to accounting for intergovernmental grants.

Question 9

Revenues that cannot be classified as general revenues are by default considered program revenues.

Accepted Answer

The answer of Revenues that cannot be classified as general...

Question 10

Under the accrual basis of accounting, property tax revenues are recognized

Accepted Answer

The answer of Under the accrual basis of accounting, property...

Question 11

In accounting for property taxes, under the modified accrual basis, existing standards provide that, except in unusual circumstances, revenues should be recognized only if cash is expected to be collected within sixty days of year-end.

Accepted Answer

This is true according to existing standards for accounting for property taxes under the modified accrual basis. Revenues should only be recognized if cash is expected to be collected within 60 days of year-end, except in unusual circumstances.

Question 12

Taxes that are imposed on the reporting government's citizens are considered general revenues, even if they are restricted to specific programs.

Accepted Answer

Taxes imposed on a reporting government's citizens are generally considered general revenues, regardless of whether they are restricted to specific programs. This is because the revenue from these taxes can be used for any purpose deemed necessary by the government, including funding the specific programs for which the taxes were originally intended.

Question 13

For fund financial statements, the measurement focus and basis of accounting used by governmental fund types are

Accepted Answer

The measurement focus of governmental fund types is on current financial resources and the basis of accounting used is modified accrual accounting. This means that revenues are recognized when they become available and measurable and expenditures are recognized when the related liability is incurred. This differs from full accrual accounting which recognizes revenues when earned and expenses when incurred, regardless of when the actual inflows and outflows of cash occur.

Question 14

As used in defining the term 'modified accrual basis of accounting', available means

Accepted Answer

The modified accrual basis of accounting recognizes revenue when it is collected within the current period or expected to be collected soon enough to pay current period liabilities. Therefore, the correct option is D, which states that revenue is either collected within the current period or is expected to be collected soon enough to pay current period liabilities. The other options (A, B, and C) do not provide a clear definition of available revenue for accounting purposes.

Question 15

Under the modified accrual basis of accounting used by a governmental entity, investment revenues for the current period should include

Accepted Answer

The answer of Under the modified accrual basis of accounting...

Question 16

Under the modified accrual basis of accounting, the amount of property tax revenues that should be recognized by a governmental entity in the current year related to the current year levy will be

Accepted Answer

The answer of Under the modified accrual basis of accounting,...

Question 17

As used in governmental accounting, interperiod equity refers to a concept of

Accepted Answer

Interperiod equity in governmental accounting means that the government should ensure that it is not passing on costs of current services to future taxpayers. This requires a comparison of current-year revenues to current-year expenses, to ensure that services provided in the current year are paid for with current revenues. This helps ensure that the government is not creating long-term debt or liabilities that future taxpayers will be burdened with, and promotes long-term financial sustainability.

Question 18

Governmental activities tend to derive the majority of their revenues from exchange transactions.

Accepted Answer

Governmental activities tend to derive the majority of their revenues from non-exchange transactions such as taxes and intergovernmental grants.

Question 19

Under the modified accrual basis of accounting, derived nonexchange revenues are recognized by a governmental entity as revenue

Accepted Answer

Under the modified accrual basis of accounting, derived nonexchange revenues (such as taxes and grants) are recognized when the underlying event occurs (such as the passage of a tax law or receipt of a grant award) and the revenue is both measurable and available. "Available" means that the revenue is both collected within the current period or will be collected within the next 60 days and is not subject to a significant future reversal of revenue.

Question 20

Ad valorem taxes are taxes that are based on value.

Accepted Answer

Ad valorem taxes are indeed based on the value of something, such as property or a product.

Quiz 4: Governmental Activities - Recognizing Revenues