Question 1

Which of the following is a distinguishing characteristic of a nonbusiness organization?
A)Its revenues do not exceed its expenses
B)There is an absence of ownership interests that can be sold,transferred,or redeemed
C)It does not depreciate its capital assets
D)It does not charge fees for any of its services

Accepted Answer

A nonbusiness organization does not have ownership interests that can be sold, transferred, or redeemed. Nonbusiness organizations include governmental entities, nonprofit organizations, and non-governmental organizations.

Question 2

Not-for-profit organizations obtain their revenues primarily from
A)Sales to customers
B)Contributions from donors
C)Taxes on personal property
D)Taxes on real property

Accepted Answer

Not-for-profit organizations are generally funded by contributions from donors, rather than sales to customers or taxes on personal or real property. Donors may include individuals, corporations, or governments, who provide funding to support the organization's mission and programs.

Question 3

Which of the following is the most authoritative source of accounting standards for cities and counties?
A)Current practices widely used by not-for-profit entities
B)GASB Statements and Interpretations
C)AICPA Industry Audit Guides
D)Implementation guides published by GASB staff

Accepted Answer

GASB Statements and Interpretations are the most authoritative sources of accounting standards for cities and counties. They are specifically developed by the Governmental Accounting Standards Board (GASB), which is responsible for setting accounting standards for state and local governments in the United States. Current practices widely used by not-for-profit entities, AICPA Industry Audit Guides, and Implementation guides published by GASB staff may provide guidance for specific issues, but they are not considered authoritative sources of accounting standards for cities and counties.

Question 4

For which types of organizations is the Governmental Accounting Standards Board (GASB)responsible for establishing accounting and financial reporting standards?
A)All state,local,and Federal organizations
B)All state and local governmental organizations,except for state and local governmental colleges,universities,health care providers,and utilities
C)All state and local governmental organizations,including government-sponsored colleges,universities,health care providers,and utilities
D)All governmental and not-for-profit organizations

Accepted Answer

The Governmental Accounting Standards Board (GASB) is responsible for establishing accounting and financial reporting standards for all state and local governmental organizations, including government-sponsored colleges, universities, health care providers, and utilities.

Question 5

For which types of organizations is the Financial Accounting Standards Board (FASB)responsible for establishing accounting and financial reporting standards?
A)Business-type organizations and not-for-profit organizations,including not-for-profit colleges,universities and health care providers
B)Business-type organizations;not-for-profit organizations;and all colleges,universities and health care providers,whether organized as not-for-profit or governmental entities
C)Business-type organizations only
D)All entities,except for those under the jurisdiction of the American Institute of CPAs

Accepted Answer

The Financial Accounting Standards Board (FASB) is responsible for establishing accounting and financial reporting standards for business-type organizations and not-for-profit organizations, including not-for-profit colleges, universities, and health care providers. This does not extend to all colleges, universities, and health care providers if they are organized as governmental entities, nor does it cover all entities under the jurisdiction of the American Institute of CPAs.

Question 6

Which basis of accounting is used for the basic governmental functions of state and local governments?
A)Cash basis of accounting
B)Modified accrual basis of accounting
C)Accrual basis of accounting
D)Regulatory basis of accounting

Accepted Answer

The modified accrual basis of accounting is used for the basic governmental functions of state and local governments. This basis of accounting recognizes revenues when they become both measurable and available and recognizes expenditures when the fund liabilities are incurred. It is a hybrid of cash and accrual accounting that is designed to provide a more accurate picture of a government's financial position and operating results.

Question 7

Concepts statements issued by the GASB and the FASAB emphasize which of the following objectives of governmental financial reporting?
A)It should help the chief executive assess the entity's financial condition.
B)It should help department heads assess their department's results of operations.
C)It should help the judiciary determine whether the government has complied with the law.
D)It should help report users assess accountability.

Accepted Answer

The GASB and the FASAB emphasize the objective of governmental financial reporting to help report users assess accountability. This includes assessing whether the government has used its resources effectively, efficiently, and in compliance with laws and regulations. The other choices, such as assessing department results or aiding the judiciary, are not the primary objectives of governmental financial reporting.

Question 8

(Matching organizational characteristics with different types of organizations. )
Listed below are some identifying characteristics of organizations.Indicate with a check mark (Y)in the appropriate column(s)those characteristics that apply to each type of organization.Some characteristics may apply to more than one type of organization.

Accepted Answer

The answer of (Matching organizational characteristics with different types of...

Question 9

(Discussion problem on fund accounting)
Discuss the nature and purpose of "fund accounting."

Accepted Answer

The answer of (Discussion problem on fund accounting)
Discuss the nature...

Question 10

(Discussion problem on entity and GAAP hierarchy)
A large private bus company in Empire City went bankrupt.At Empire City's request,the state legislature established a legally separate public benefit corporation named Metro City Bus.In the law establishing Metro City Bus,Empire City was authorized to appoint Metro's entire governing body,and Metro was authorized to issue tax-exempt debt to assume the assets of the private bus company.
When Metro City Bus went to prepare its financial statements,two questions were raised.Was Metro City Bus a government? And if it were a government,how should it prepare its cash flow statement? Research showed that,when the bus company was a private organization,it followed FASB Statement No.95,which required cash flow statements to be prepared using a particular format.However,GASB Statement No.9 did not approve the use of FASB Statement No.95,and instead required governmental enterprises to prepare cash flow statements using a different format.An article published in the Journal of Accountancy suggested that all business-type activities,private or governmental,ought to adopt FASB Statement No.95.
Required:
a.Discuss whether Metro City Bus is or is not a governmental entity.What are the specific factors in this situation that cause Metro to be one or the other?
b.Discuss whether Metro City Bus should prepare its cash flow statements using the FASB format or the GASB format.What are the factors that affect your conclusion?

Accepted Answer

The answer of (Discussion problem on entity and GAAP hierarchy)
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Question 11

Which of the following is not a reason that governmental accounting is different from business accounting?
A)Different users of financial reports
B)Expected long-life of governments
C)Capital assets are used by governments
D)Revenues that are unique to governments

Accepted Answer

Capital assets are used by both governments and businesses, making this not a unique reason for the difference in accounting practices. Governments and businesses both utilize capital assets in their operations, hence the presence of capital assets does not distinguish governmental accounting from business accounting.

Question 12

Which of the following activities is performed by governments but not by not-for-profit organizations?
A)Issuing federal tax-free debt
B)Receiving grants
C)Preparing budgets
D)Providing services to constituents

Accepted Answer

Not-for-profit organizations cannot issue tax-free debt because they do not have the authority to levy taxes like governments do.

Question 13

Government and nonprofit accounting focuses on which of the following?
A)Calculating profit or loss
B)Protecting investors from fraud
C)Demonstrating accountability
D)Reporting to management

Accepted Answer

Government and nonprofit accounting places a strong emphasis on demonstrating accountability. While profit or loss may be relevant in some cases, it is not the primary focus, and protecting investors from fraud and reporting to management are typically more relevant to for-profit businesses.

Question 14

A not-for-profit organization performs all of the following activities except
A)Charging a fee for services provided
B)Paying dividends to shareholders
C)Purchasing long-lived (capital)assets
D)Paying overtime to employees

Accepted Answer

Not-for-profit organizations, by definition, do not have shareholders to pay dividends to. Instead, they use any excess revenue to further their mission and goals. Therefore, option B is not applicable to not-for-profit organizations.

Question 15

To what extent do organizations that use fund accounting also report on the entity as a whole?
A)Organizations that use fund accounting are not required to report on the entity as a whole
B)Organizations that choose to report on the entity as a whole are not permitted to use fund accounting for internal purposes
C)Organizations that use fund accounting are required to report on the entity as a whole
D)Organizations that use fund accounting have the option of reporting either on funds or on the organization as a whole

Accepted Answer

Organizations that use fund accounting, particularly in the public and nonprofit sectors, are required to provide a comprehensive view of their financial position and activities. This includes reporting on the entity as a whole, in addition to the separate fund accounts, to give a complete picture of the organization's financial health and operations. This requirement ensures transparency and accountability, allowing stakeholders to understand the overall financial status of the organization.

Question 16

An activity that is unique to governments is
A)Budgeting
B)Cash management
C)Levying taxes
D)Advertising

Accepted Answer

Levying taxes is a unique activity to governments as it is a power granted to them to raise revenue for public expenses. Budgeting and cash management are important functions in both private and public organizations, while advertising is typically done by private businesses to promote their products or services.

Question 17

Which entity establishes financial accounting standards and principles for the federal government?
A)FASB
B)GASB
C)FASAB
D)None of the above.

Accepted Answer

FASAB (Federal Accounting Standards Advisory Board) establishes financial accounting standards and principles for the federal government. FASB (Financial Accounting Standards Board) establishes standards for the private sector, and GASB (Governmental Accounting Standards Board) establishes standards for state and local governments.

Quiz 1: Governmental and Not-For-Profit

Which of the following is a distinguishing characteristic of a nonbusiness organization?

Not-for-profit organizations obtain their revenues primarily from

Which of the following is the most authoritative source of accounting standards for cities and counties?

For which types of organizations is the Governmental Accounting Standards Board (GASB) responsible for establishing accounting and financial reporting standards?

For which types of organizations is the Financial Accounting Standards Board (FASB) responsible for establishing accounting and financial reporting standards?

Which basis of accounting is used for the basic governmental functions of state and local governments?

Concepts statements issued by the GASB and the FASAB emphasize which of the following objectives of governmental financial reporting?

(Discussion problem on fund accounting) Discuss the nature and purpose of "fund accounting."

Which of the following is not a reason that governmental accounting is different from business accounting?

Which of the following activities is performed by governments but not by not-for-profit organizations?

Government and nonprofit accounting focuses on which of the following?

A not-for-profit organization performs all of the following activities except

To what extent do organizations that use fund accounting also report on the entity as a whole?

An activity that is unique to governments is

Which entity establishes financial accounting standards and principles for the federal government?