Question 1

Trust funds are fiduciary funds used to account for multigovernment external investment pools sponsored by the governmental entity.

Accepted Answer

Trust funds are indeed fiduciary funds used to manage investments in external pools, such as pension funds or other entities sponsored by a governmental entity.

Question 2

Enterprise funds use full accrual accounting procedures.

Accepted Answer

Enterprise funds are accounted for using full accrual accounting procedures which means that all revenues and expenses are recognized when earned or incurred, regardless of when cash is received or paid out. This method of accounting provides a more accurate view of the entity's financial position and performance.

Question 3

GASB Statement No.34 mandates that the indirect method be used for the cash flow statement of proprietary funds.

Accepted Answer

GASB Statement No. 34 allows both the direct and indirect methods for presenting the cash flow statement of proprietary funds, but it requires a reconciliation of net operating revenues to net cash provided (used) by operating activities if the direct method is used.

Question 4

Restricted net position for proprietary funds is composed of restricted assets reduced by liabilities and deferred inflows of resources related to those assets.

Accepted Answer

Restricted net position for proprietary funds is calculated by subtracting the related liabilities and deferred inflows of resources from the restricted assets.

Question 5

Fiduciary funds are to account for assets held in a trustee or agency capacity on behalf of others internal to the governmental entity.

Accepted Answer

Fiduciary funds are used to account for assets held in a trustee or agency capacity for parties external to the governmental entity, not internal.

Question 6

GASB Statement No.9 separates financing activities on the cash flow statement into two components: noncapital and capital related.

Accepted Answer

GASB Statement No.9 does indeed separate financing activities into noncapital and capital related categories on the cash flow statement.

Question 7

The accounting equation for proprietary funds: Current Assets - Noncurrent Assets + Current Liabilities - Noncurrent Liabilities = Net position.

Accepted Answer

The correct accounting equation for proprietary funds is: Current Assets + Noncurrent Assets - Current Liabilities - Noncurrent Liabilities = Net Position.

Question 8

Internal service funds primarily provide goods and services to other departments or agencies.

Accepted Answer

Internal service funds are set up to provide goods and services to other departments or agencies within the same government entity. These funds may include facilities maintenance, centralized purchasing, and technology services.

Question 9

The three financial statements for a proprietary fund: statement of net position; statement of revenues,expenses,and changes in fund net position; and statement of cash flows.

Accepted Answer

These three financial statements are typically used for a proprietary fund, which is a type of accounting entity that is operated like a business and is designed to generate revenue and profit. The statement of net position shows the fund's assets, liabilities, and net position at a given point in time. The statement of revenues, expenses, and changes in fund net position shows the fund's revenues and expenses over a period of time, as well as any changes in net position. The statement of cash flows shows the sources and uses of cash during the period, giving an indication of the fund's liquidity and cash flow position.

Question 10

Enterprise funds primarily provide goods and services to government agencies.

Accepted Answer

Enterprise funds primarily provide goods and services to the general public on a fee-for-service basis, rather than to government agencies.

Quiz 21: Accounting for State and Local Governmental Units - Proprietary and Fiduciary Funds