Question 1

Capital budgets focus on plans for the acquisition and construction of fixed assets.

Accepted Answer

Capital budgets are specifically designed for planning expenditures on assets that have a long-term use, such as buildings, machinery, and equipment, which are considered fixed assets.

Question 2

Which of the following is a primary benefit of a performance budget?
A) It facilitates control by establishing rigid spending mandates.
B) It encourages accomplishment of objectives by associating expenditures with outcomes.
C) It encourages planning by requiring management to anticipate every type of expenditure.
D) It provides decision-makers with detailed information.

Accepted Answer

Performance budgets focus on outcomes and objectives, linking the funds allocated to the results expected, thereby encouraging the efficient and effective use of resources to achieve specific goals.

Question 3

State and local governments must prepare their GAAP budgetary comparisons on the modified accrual basis of accounting.

Accepted Answer

State and local governments are required to prepare their budgetary comparisons using the budgetary basis of accounting, which may differ from the modified accrual basis of accounting used for their governmental funds financial statements.

Question 4

An appropriations budget applies to
A) The general fund.
B) The proprietary fund.
C) The fiduciary fund.
D) The enterprise fund.

Accepted Answer

Appropriations budgets are typically associated with the general fund, which is used to account for all financial resources except those required to be accounted for in another fund. Proprietary and fiduciary funds, including enterprise funds, operate more like businesses and do not typically use appropriations in their budgeting.

Question 5

For which of the following funds would flexible budgeting be most valuable?
A) Special revenue fund.
B) Capital projects fund.
C) Agency fund.
D) Enterprise fund.

Accepted Answer

Flexible budgeting is most valuable for an enterprise fund because it deals with business-like activities where revenues and expenses can vary significantly, requiring adjustments to the budget based on actual performance.

Question 6

Not-for-profit budgets can rely on levies in addition to fund-raising and donations for revenues.

Accepted Answer

The answer of Not-for-profit budgets can rely on levies in...

Question 7

Most budgets are prepared on a cash or modified cash basis.

Accepted Answer

Most budgets are prepared on a cash or modified cash basis because it provides a straightforward way to track cash flow and manage financial resources effectively.

Question 8

Character, in relation to expenditures, represents
A) The morality of the expenditure.
B) The amount of the expenditure.
C) The type of fund in which the expenditure is recorded.
D) The fiscal period the expenditure will benefit.

Accepted Answer

The character of an expenditure represents the fiscal period the expenditure will benefit.

Question 9

Periodic allocations of funds to departments or agencies are generally called i. Appropriations.
ii. Allotments.
iii. Apportionments.
A) III only
B) I and II
C) II and III
D) I, II and III

Accepted Answer

Appropriations refer to the legislative grants of money to finance government programs or agencies. Allotments are subdivisions of appropriations that specify how much money can be spent for particular purposes within a given time frame. Apportionments are distributions or allocations of funds by the government to its various departments or agencies. Thus, all three terms relate to periodic allocations of funds.

Question 10

Capital budgets concentrate on long-lived assets.

Accepted Answer

Capital budgets focus on investments in long-lived assets that will be used over several years, such as buildings, machinery, and equipment.

Question 11

Encumbrances and expenditures both reduce total fund balances of state and local governments.

Accepted Answer

Encumbrances do not reduce total fund balances because they represent commitments to spend, not actual expenditures. Expenditures, on the other hand, do reduce total fund balances as they reflect actual spending.

Question 12

Which branch of local (city and county) government most commonly prepares the budget?
A) Executive branch.
B) Legislative branch.
C) Judicial branch.
D) None of the above.

Accepted Answer

The executive branch of local government, typically represented by mayors or city managers, is most commonly responsible for preparing the budget. This branch oversees the administrative functions of the government, including financial planning and budgeting.

Question 13

Which of the following is NOT a function of a budget in the governmental environment?
A) Planning.
B) Organizing.
C) Controlling.
D) Evaluating.

Accepted Answer

Organizing is not typically considered a direct function of a budget in the governmental environment. Budgets are primarily used for planning financial activities, controlling expenditures, and evaluating financial performance, rather than organizing the structure or operations of the government entity.

Question 14

GASB, but not FASB, sets standards for budgetary accounting.

Accepted Answer

Both GASB (Governmental Accounting Standards Board) and FASB (Financial Accounting Standards Board) set standards for different types of entities, but neither specifically sets standards solely for budgetary accounting. GASB focuses on state and local governments, while FASB focuses on private sector accounting.

Question 15

Property taxes levied on the citizens of the Hill County would most appropriately be budgeted in which of the following budgets?
A) Operating budget.
B) Capital budget.
C) Flexible budget.
D) All of the above.

Accepted Answer

Property taxes are typically used to fund the day-to-day operations of local governments, making them most appropriate for inclusion in an operating budget. Operating budgets cover recurring expenses such as salaries, utilities, and maintenance.

Question 16

When budgets are integrated into a government's accounting system, estimated revenues are debited.

Accepted Answer

When budgets are integrated into a government's accounting system, estimated revenues are credited, not debited.

Question 17

Cash-basis budgets help governments demonstrate interperiod equity.

Accepted Answer

Cash-basis budgets focus on cash flows within a specific period and do not account for revenues and expenses in the periods they are earned or incurred, making it difficult to demonstrate interperiod equity, which is the concept of ensuring that current-year revenues are sufficient to pay for current-year services.

Question 18

The accounting cycle for most governments is two to three years and the budgeting process is less than six months.

Accepted Answer

The accounting cycle for most governments is typically one year, coinciding with their fiscal year, and the budgeting process, while varying in length, often extends beyond six months to allow for planning, proposal, review, and approval stages.

Question 19

Reserve for encumbrances accounts is a balance sheet account.

Accepted Answer

Reserve for encumbrances is a balance sheet account because it represents a commitment of funds for future expenditures, reflecting obligations that have not yet been paid.

Question 20

State and local governments' budget-to-actual comparisons present both original and final budget amounts.

Accepted Answer

State and local governments' budget-to-actual comparisons typically include both the original budget amounts and the final budget amounts to show adjustments made after the original budget was adopted.

Quiz 3: Issues of Budgeting and Control

Capital budgets focus on plans for the acquisition and construction of fixed assets.

Which of the following is a primary benefit of a performance budget?

State and local governments must prepare their GAAP budgetary comparisons on the modified accrual basis of accounting.

An appropriations budget applies to

For which of the following funds would flexible budgeting be most valuable?

Not-for-profit budgets can rely on levies in addition to fund-raising and donations for revenues.

Most budgets are prepared on a cash or modified cash basis.

Character, in relation to expenditures, represents

Periodic allocations of funds to departments or agencies are generally called i. Appropriations. ii. Allotments. iii. Apportionments.