Question 1

Which of the following statements is false?

Accepted Answer

The principal of a permanent fund must be maintained so it is classified s nonspendable fund balance.

Question 2

Which of the following fund(s)should be used if resources are provided by a donor with the stipulation that they be used for the benefit of the citizenry?

Accepted Answer

Since it is to be used for the benefit of the citizenry and the principal must be maintained, the appropriate fund would be a permanent fund. If the principal may be expended, the appropriate fund would be a special revenue fund.

Question 3

A gift of $1,000,000 to a city,to be invested permanently,with the proceeds to be used to maintain the city war memorials should be accounted for in a special projects fund.

Accepted Answer

This gift should be accounted for in a permanent fund, not a special projects fund. The proceeds from the investment should be used to maintain the city war memorials in perpetuity.

Question 4

What is the correct debit or credit for the following scenario: A contract was issued for the major part of work to be done by a private contractor in the amount of $1,200,000 for a new County court house?

Accepted Answer

Since a contract has been issued but the work is not yet complete, an encumbrance (a reservation of funds for a future payment) should be recorded. Therefore, the correct debit would be to Encumbrances.

Question 5

If a government has debt service due no more than one month after the end of a fiscal year and has the resources available,then it is permitted to accrue expenditures and a fund liability for the debt service.

Accepted Answer

Accruing expenditures and a fund liability for debt service is a common practice for governments to manage their finances and ensure timely payment of debts. As long as the government has the resources available, it is allowed to accrue these expenses even if they are due after the end of the fiscal year.

Question 6

Which of the following funds typically record budgets?

Accepted Answer

Budgets are typically recorded for the general fund and special revenue funds. Budgets are not typically recorded for capital projects, debt service and permanent funds.

Question 7

When taxes and/or special assessments are levied specifically for payment of interest and principal on long-term debt,those taxes are recognized:

Accepted Answer

Taxes and/or special assessments levied specifically for payment of interest and principal on long-term debt are recognized as revenues in the debt service fund, as this fund is specifically created to account for such transactions.

Question 8

With respect to Capital Projects Funds,which of the following is correct?

Accepted Answer

A major source of funding for capital projects funds is the issuance of long-term debt. Fixed assets that are acquired with governmental fund resources are recorded as expenditures in the governmental funds but are displayed as capital assets in the governmental-wide financial statements.

Question 9

With respect to Permanent Funds,which of the following is not true?

Accepted Answer

Permanent Funds do not require that earnings in excess of expenditures be added to the principal corpus; instead, they can be used for the intended public purpose.

Question 10

An encumbrance in a capital project fund is created

Accepted Answer

An encumbrance in a capital project fund is created when a contract is signed or issued. This commitment of funds represents an obligation to pay for goods or services related to the capital project. It is important to record encumbrances in order to properly budget and monitor the use of funds in the project.

Question 11

Which of the following statements is false?

Accepted Answer

The answer of Which of the following statements is false?
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Question 12

Which of the following statements is false?

Accepted Answer

Debt service funds report accrued interest payable as noncurrent liabilities, not current liabilities.

Question 13

Which of the following statements is true?

Accepted Answer

The principal of a permanent fund must be maintained so it is classified s nonspendable fund balance. The remaining unexpended resources would be classified as restricted or assigned fund balance.

Question 14

Which of the following is a major source of funding for capital projects funds?

Accepted Answer

Capital projects funds require large amounts of funding, and all of the options listed can provide significant amounts of funding. Gifts from individuals and corporations, grants, and proceeds from issuance of long-term debt are all commonly used sources of funding for capital projects funds.

Question 15

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the General Fund's fund basis financial statements:

Accepted Answer

In the General Fund's fund basis financial statements, expenditures are recorded when payments are made, not as capital assets or obligations at the inception of the lease.

Question 16

Budgets are typically recorded for which of the following:

Accepted Answer

Budgets are typically recorded for Special Revenue Funds. Special Revenue Funds are used to account for specific sources of revenue that are legally restricted to a particular purpose, such as grants or taxes. Budgets are important in Special Revenue Funds to ensure that the funds are being used appropriately and in accordance with the restrictions placed on them. Capital Projects Funds and Debt Service Funds may also have budgets, but this is not always the case.

Question 17

Encumbrance accounting is only typically used for

Accepted Answer

Encumbrance accounting is typically used for Capital Projects Funds. Encumbrances are commitments related to unperformed contracts for goods or services, and capital projects funds are used to account for the construction or acquisition of major capital assets such as buildings or roads. Encumbrances help to ensure that funds are properly reserved and available for these long-term projects. Encumbrance accounting is not typically used for Permanent Funds or Debt Service Funds.

Question 18

Capital project funds

Accepted Answer

Capital project funds are created to account for and track financial resources used for capital expenditures such as construction or equipment purchases. These funds are typically temporary and only last for the duration of the project for which they are created. They may receive funding from various sources such as taxes, grants, or bond issuances but do not record debt issuances as revenues.

Question 19

If a trust is to be used for the benefit individuals,private organizations or other governments,the following fund(s)should be used:

Accepted Answer

Private purpose fund is designed for the benefit of specific individuals, private organizations, or other governments. The other options (special revenue fund and permanent fund) are not appropriate for this type of trust. Special revenue fund is for designated government programs, while permanent fund is for long-term investments that generate income for government use.

Question 20

With respect to Debt Service Funds,which of the following is not correct?

Accepted Answer

Encumbrances are not recorded for principal payments in Debt Service Funds, only for interest payments. The other statements are correct: transfers from the General or other funds are typical resources for Debt Service Funds, there are two types of debt service expenditures (interest and principal), and interest and principal payments are usually not recorded until payment is due.

Quiz 5: Accounting for Other Governmental Fund Types: Capital Projects, Debt Service, and Permanent

Which of the following statements is false?

Which of the following fund(s) should be used if resources are provided by a donor with the stipulation that they be used for the benefit of the citizenry?

A gift of $1,000,000 to a city,to be invested permanently,with the proceeds to be used to maintain the city war memorials should be accounted for in a special projects fund.

What is the correct debit or credit for the following scenario: A contract was issued for the major part of work to be done by a private contractor in the amount of $1,200,000 for a new County court house?

If a government has debt service due no more than one month after the end of a fiscal year and has the resources available,then it is permitted to accrue expenditures and a fund liability for the debt service.

Which of the following funds typically record budgets?

When taxes and/or special assessments are levied specifically for payment of interest and principal on long-term debt,those taxes are recognized:

With respect to Capital Projects Funds,which of the following is correct?

With respect to Permanent Funds,which of the following is not true?

An encumbrance in a capital project fund is created

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is true?

Which of the following is a major source of funding for capital projects funds?

When a government acquires general fixed assets under a capital lease agreement,the asset should be recorded in the General Fund's fund basis financial statements:

Budgets are typically recorded for which of the following:

Encumbrance accounting is only typically used for

Capital project funds

If a trust is to be used for the benefit individuals,private organizations or other governments,the following fund(s) should be used:

With respect to Debt Service Funds,which of the following is not correct?