Question 1

The City of Lakeview adopts its budget on a basis of accounting that permits outstanding purchase commitments to be charged against the budget in the year that the goods are ordered instead of in the year they are received.During the year the city ordered and received $4,000 of supplies (of which $3,000 had been paid and $1,000 was unpaid)and had $500 of outstanding purchase commitments for supplies at year-end.In the budget-to-actual comparison, the expenditures for supplies would be:

Accepted Answer

The expenditures for supplies would include both the supplies received ($4,000) and the outstanding purchase commitments ($500), totaling $4,500.

Question 2

A university that formally integrates the budget in the accounting system and uses encumbrance accounting orders some new computers that will cost approximately $20,000.To recognize this event the university should make which of the following entries?

Accepted Answer

The answer of A university that formally integrates the budget...

Question 3

A governmental entity has formally integrated the budget into its accounting records.At year-end the ledger account "Revenues from property taxes" has a debit balance.Which of the following is the best explanation for the debit balance?

Accepted Answer

The answer of A governmental entity has formally integrated the...

Question 4

A city received supplies that had been previously encumbered.The supplies were encumbered for $5,000 and had an actual cost of $4,900.To recognize this event the county should make which of the following entries?

Accepted Answer

The correct entry involves debiting the Reserve for encumbrances for the full encumbered amount ($5,000) and Supplies for the actual cost ($4,900), and crediting Encumbrances for the encumbered amount ($5,000) and Vouchers payable for the actual cost ($4,900).

Question 5

At year-end Oakland County had $3,000 of outstanding purchase commitments on the books.After the appropriate closing entries are made, what is the effect on the total fund balance of Oakland County?

Accepted Answer

The answer of At year-end Oakland County had $3,000 of...

Question 6

A county previously encumbered $15,000 for the acquisition of supplies.The supplies were received at a total cost of $14,700.To recognize this event the county should make which of the following entries?

Accepted Answer

The county should reverse the original encumbrance entry by debiting Reserve for encumbrances and crediting Encumbrances for the original amount of $15,000.

Question 7

To close Encumbrances at the end of the year which of the following entries should be made?

Accepted Answer

The answer of To close Encumbrances at the end of...

Question 8

A public school district formally adopted a budget with estimated revenues of $800 and approved expenditures of $780.Which of the following is the appropriate entry to record the budget?

Accepted Answer

This entry reflects the adoption of the budget, with estimated revenues debited and appropriations credited. The additional $20 in revenue (revenue exceeding expenditures) is credited to the fund balance.

Question 9

Which of the following is the best reason for preparing budgets for government entities on the cash basis?

Accepted Answer

The reason for preparing budgets for government entities on the cash basis is to help the government plan to have cash on hand to pay bills. Cash basis budgeting is focused on the timing of cash inflows and outflows, which helps the government to ensure that it has enough cash to meet its immediate payment obligations. This is especially important for government entities that rely heavily on tax revenues, which can be unpredictable and may not always be received in a timely manner. By preparing budgets on the cash basis, the government can avoid cash flow problems and ensure that it is able to meet its financial obligations on time.

Question 10

GASB requires that government entities present their budget-to-actual comparison data on which of the following bases of accounting?

Accepted Answer

GASB (Governmental Accounting Standards Board) requires that government entities present their budget-to-actual comparison data on the budgetary basis of accounting. This is because budgets are typically prepared and adopted using a budgetary basis, which may differ from the entity's basis of accounting used for financial reporting purposes.

Question 11

To close Reserve for encumbrances at the end of the year which of the following entries should be made?

Accepted Answer

The answer of To close Reserve for encumbrances at the...

Question 12

Which of the following is NOT a reason that legally adopted budgets may not be readily comparable to amounts reported in the GAAP-based financial statements?

Accepted Answer

Differences in recognition is not a reason that legally adopted budgets may not be readily comparable to amounts reported in the GAAP-based financial statements. Adoption of budgets is typically done on a cash basis and recognition principles may not be a concern. The other three options may create differences in amounts reported, making them not directly comparable.

Question 13

When Spruce City receives goods at a cost of $9,700 that were encumbered in the prior year for $10,000, which of the following entries are required (assume that encumbrances lapse at year end)?

Accepted Answer

When goods are received that were previously encumbered, the expenditure is recorded at the actual cost of the goods, and the encumbrance is cleared. The reserve for encumbrances is also adjusted to reflect the actual cost of the goods.

Question 14

A governmental entity has formally integrated the budget into its accounting records and uses encumbrance accounting.During the year the government ordered but had not yet received a new police car.What effect will this event have on the unencumbered balance in the account "Expenditures-capital outlay, police department"?

Accepted Answer

The unencumbered balance in the account "Expenditures-capital outlay, police department" will not be affected until the police car is received because encumbrance accounting has been implemented. Encumbrance accounting means that the government has recorded the committed but not yet paid for orders as encumbrances, which are subtracted from the budget when determining the unencumbered balance. Therefore, until the police car is received and the encumbrance is liquidated, the unencumbered balance will not be affected.

Question 15

During the previous year, Bane County closed its Encumbrances account.At the end of the previous year there was $5,000 of outstanding purchase commitments.To restore these commitments to the accounts, which of the following entries would be required?

Accepted Answer

The answer of During the previous year, Bane County closed...

Question 16

A city formally adopted a budget at the beginning of the current year.Budgeted revenues were $500 and budgeted expenditures were $490.During the year actual revenues were $520 and actual expenditures were $480.Which of the following statements is true?Fund balance at the end of the current year in comparison to fund balance at the end of the preceding year will be

Accepted Answer

The fund balance increased by the difference between actual revenues and actual expenditures, which is $520 - $480 = $40.

Question 17

A county general fund budget includes budgeted revenues of $900 and budgeted expenditures of $890.Actual revenues for the year were $915.To close the estimated revenues account at the end of the year

Accepted Answer

To close the estimated revenues account at the end of the year, you would credit the estimated revenues account for the amount that was initially budgeted, which is $900. This action zeroes out the account for the year.

Question 18

A governmental entity has formally integrated the budget into its accounting records.At the end of the third quarter the ledger account "Expenditures--salaries" has a $100,000 debit balance.Which of the following is a true statement?

Accepted Answer

The debit balance in the "Expenditures--salaries" account represents the amount of salaries that have been incurred but not yet paid. Therefore, choice B is the correct answer. Choice A is incorrect because the available amount for salaries cannot be determined solely from the ledger balance. Choice C is incorrect because the ledger balance does not indicate the amount paid, only the amount incurred. Choice D is incorrect because the budget information is not provided and cannot be determined solely from the ledger balance.

Question 19

Which of the following is NOT true about cash basis budgeting?

Accepted Answer

Cash basis budgeting does not encourage interperiod equity because it recognizes transactions only when cash changes hands, which can lead to a mismatch between when revenues are earned and when they are received, as well as when expenses are incurred and when they are paid. This approach can distort the true financial position and performance of an entity over time, making it challenging to ensure that the costs of providing services are borne by those benefiting from the services in the same period.

Question 20

Which of the following bases of accounting has been established by GASB for use in the preparation of the general fund budget?

Accepted Answer

The answer of Which of the following bases of accounting...

Quiz 3: Issues of Budgeting and Control