Question 1

The General Fund is the only fund that can have a positive unassigned fund balance.

Accepted Answer

The General Fund is the main operating fund of a governmental entity, and it can have a positive unassigned fund balance, which represents the amount of resources available for future operations after all liabilities and commitments have been met. However, other funds, such as special revenue funds or enterprise funds, may have restrictions on their fund balances and cannot always have a positive unassigned fund balance.

Question 2

Which of the following is True regarding financial reporting for internal service funds?

Accepted Answer

Internal service funds are reported in the Governmental Activities column of the government-wide financial statements because they primarily serve departments within the government itself.

Question 3

Which of the following activities is considered a core government activity?

Accepted Answer

The answer of Which of the following activities is considered...

Question 4

In accounting for state and local governments the modified accrual basis is required for

Accepted Answer

The modified accrual basis is required for governmental funds in accounting for state and local governments. Proprietary and fiduciary funds use the accrual basis of accounting. Internal service funds may use either the modified accrual or accrual basis, depending on the specific circumstances.

Question 5

According to the GASB definition, which of the following represents an inflow of resources?

Accepted Answer

Revenues represent an inflow of resources to a government entity. Expenditures represent an outflow of resources, assets are resources owned by the entity, and deferred inflows represent resources that will be recognized as inflows in a future period.

Question 6

The positive fund balance in a special revenue fund must at a minimum be reported as assigned.

Accepted Answer

According to Governmental Accounting Standards Board (GASB) Statement No. 54, a positive fund balance in a special revenue fund must be reported as either restricted or assigned. Therefore, the statement in the question is true.

Question 7

Assigned fund balances can be either positive or negative.

Accepted Answer

Assigned fund balances are intended to represent amounts that are constrained by the government's intent to be used for specific purposes but are neither restricted nor committed, and they cannot be negative. Negative amounts would be reported as deficits in the unassigned fund balance.

Question 8

Which of the following is not one of the methods recommended by the GASB Concepts Statement 3 for communicating information to external users of government financial reports?

Accepted Answer

The GASB Concepts Statement 3 recommends methods such as recognition in the financial statements, presentation as required supplementary information, and disclosure in the notes to the financial statements for communicating information to external users. Providing a popular report is not mentioned as one of the recommended methods in GASB Concepts Statement 3.

Question 9

Proprietary funds primarily provide services to the general public for a fee.

Accepted Answer

Proprietary funds are used by a government to account for activities that provide services to other parts of the government or to other governments, rather than to the general public. These funds operate in a manner similar to private businesses, where the intent is to cover costs (primarily through user charges) and in some cases to generate profits.

Question 10

Which of the following is not a characteristic of a fund as defined by GASB standards?

Accepted Answer

GASB (Governmental Accounting Standards Board) standards define a fund as an accounting entity, a fiscal entity, and a self-balancing set of accounts, but not specifically as a "reporting entity." Reporting entities are broader concepts that may comprise multiple funds.

Question 11

According to the GASB, information that is essential and useful to placing information in the correct context should be reported as which of the following?

Accepted Answer

Required supplementary information is essential for providing context to the financial statements, as per GASB guidelines.

Question 12

A permanent endowment is an example of a nonspendable fund balance.

Accepted Answer

A permanent endowment is a fund balance that cannot be spent, but the earnings or investment income from the endowment can be used for specific purposes. This makes it a nonspendable fund balance.

Question 13

There are four major activity categories reported by state and local governments: governmental, government-wide, proprietary, and fiduciary.

Accepted Answer

The four major activity categories reported by state and local governments are governmental, proprietary, fiduciary, and component units, not government-wide. Government-wide financial statements provide an overview of the entire government's financial activities.

Question 14

The GASB concept statements indicate that an asset that is going to be converted to cash should be reported at a remeasured amount at the financial statement date.

Accepted Answer

The GASB concept statements state that an asset that is going to be converted to cash should be reported at its fair value, which is a concept called remeasurement. Therefore, the given statement is true.

Question 15

Nonmajor funds are not reported on the fund financial statements.

Accepted Answer

Nonmajor funds are reported on the fund financial statements but are not presented in as much detail as major funds. Only major funds are required to be presented in separate columns on the fund financial statements.

Question 16

Deferred inflow of resources and deferred outflow of resources would be shown in separate sections of a government's statement of net position.

Accepted Answer

Deferred inflow of resources and deferred outflow of resources are shown separately in a government's statement of net position. Deferred inflows are reported as a separate category of assets, while deferred outflows are reported as a separate category of liabilities. This allows for greater transparency and clarity in the reporting of a government's financial position.

Question 17

Which of the following is a primary objective of financial reporting by state and local governments?

Accepted Answer

The primary objective of financial reporting by state and local governments is to provide information that can be used to assess their accountability. While financial reporting may also provide information for capital allocation decisions made by external investors, this is not the primary objective of such reporting. Reporting on legal requirements imposed on the government by its elected officials and fulfilling the government's statutory duty to report on cash received and cash disbursed are also not primary objectives of financial reporting by state and local governments.

Question 18

Governmental activities include the core services provided by a government, such as public safety.

Accepted Answer

Governmental activities typically include providing core services such as public safety, education, healthcare, and infrastructure development.

Question 19

Under the modified accrual basis of accounting, revenues should be recognized when

Accepted Answer

Under the modified accrual basis of accounting, revenues are recognized when they are both measurable and available to finance the expenditures of the current period. This approach is commonly used in governmental accounting.

Question 20

In accordance with GASB standards, a deferred inflow of resources is reported on the financial statements the same as an unearned revenue.

Accepted Answer

Deferred inflows of resources and unearned revenue are reported differently; deferred inflows are recognized in the future as revenue, while unearned revenue is a liability until the service is provided or the revenue is earned.

Quiz 2: Principles of Accounting and Financial Reporting for State and Local Governments