Question 1

The accounting equation applied by state and local governments is

Accepted Answer

The accounting equation for state and local governments includes deferred outflows and inflows of resources, which adjust the traditional equation to reflect these additional financial elements.

Question 2

During the current fiscal year, Mountain View City's water utility, an enterprise fund, rendered billings for water supplied to the general fund.Which of the following accounts should be debited by the general fund?

Accepted Answer

The general fund should debit the Expenditures account when making payments for services provided by the water utility enterprise fund. Transfers-out and Due to accounts are used to record inter-fund transactions, while Appropriations represent budgetary authority, not actual transactions.

Question 3

Lakeside Art Center, a nongovernmental not-for-profit entity, receives a contribution of $5 million.The donor stipulates that the contribution must be used to acquire paintings by local artists.Lakeside should classify the contribution as

Accepted Answer

The donor's restriction on the use of the contribution indicates that it should be classified as temporarily restricted until the purpose of the restriction has been fulfilled (i.e., when Lakeside has acquired paintings by local artists).

Question 4

When a fax machine purchased by a governmental entity is received, it should be recorded in the general fund as a(n)

Accepted Answer

In governmental accounting, when a fax machine is received, it is recorded as an expenditure in the general fund because it represents a current outflow of resources for the purchase of goods or services.

Question 5

Under the GASB Statement No.34 reporting model, fund financial statements include separate sets of financial statements for:

Accepted Answer

The GASB Statement No. 34 requires fund financial statements to be presented for governmental funds, proprietary funds, and fiduciary funds.

Question 6

Which fund type would all governments normally include in their fund financial statements?

Accepted Answer

The general fund is the primary operating fund for most governments and is used to account for all of a government's activities not accounted for in other funds. All governments must include their general fund in their fund financial statements.

Question 7

Which of the following is NOT included in the financial section of a comprehensive annual financial report?

Accepted Answer

The financial section of a comprehensive annual financial report includes financial statements, notes to the statements, and required supplementary information. The letter of transmittal is generally included in the introductory section of the report.

Question 8

Which of the following funds of Chessie City would be consolidated to form the governmental activities column in the city's government-wide financial statements?

Accepted Answer

The governmental activities column in the government-wide financial statements should include funds that are used to account for the city's primary government operations. The General fund, Debt service fund, and Capital projects fund are all funds that account for the city's primary government operations, and therefore, would be consolidated to form the governmental activities column. The other funds listed do not account for primary government operations and would not be included in the governmental activities column.

Question 9

Wigmore City receives a donation of $10 million from a wealthy citizen who stipulates that the funds be used to acquire and install park benches in the city's Veterans Park.The city should report the donation as an increase in

Accepted Answer

The donation is restricted by the donor's stipulation that the funds be used for a specific purpose, acquiring and installing park benches in Veterans Park. Therefore, the donation should be reported as an increase in the restricted fund balance.

Question 10

A not-for-profit entity's statement of net assets will NOT report which of the following?

Accepted Answer

A not-for-profit entity's statement of net assets will report capital assets, temporarily restricted net assets, and permanently restricted net assets. However, it will not report net assets invested in capital assets, net of related debt, as this information is typically disclosed in the footnotes to the financial statements.

Quiz 2: Fund Accounting