140 test bank for essentials of accounting for governmental and not for profit organizations 10th edition

140 Test Bank for Essentials of Accounting for
Governmental and Not for Profit Organizations 10th
Edition

True False Questions - Free Text Questions Multiple Choice Questions - Page 1
GASB standards contain all of the following in its three-part
budgetary principle except:
1.

A) An annual budget should be adopted by every governmental unit.

2.

B) The accounting system should provide the basis for appropriate budgetary control.

3.

C) Budgetary comparisons should be included in the appropriate financial statement
and schedules for governmental funds for which an annual budget has been adopted.

4.

D) None of the above; all would be included

The GASB sets accounting standards for all of the following
except:
1.

A) State and local governments

2.

B) Libraries owned or controlled by governments

3.

C) Governmentally related not-for-profit universities

4.

D) Nongovernmental not-for-profit hospital

Long-term debt of a governmental unit would be reported in
the:
1.

A) government-wide financial statements and proprietary fund financial statements.

2.

B) government-wide financial statements only.

3.

C) debt service funds of governmental fund financial statements and government-wide
financial statements.

4.

D) notes to the financial statements only.

Under the modified accrual basis of accounting, revenues
should be recognized when they are:
1.

A) authorized by the budget ordinance.

2.

B) earned and measurable.

3.

C) measurable and available to finance expenditures of the current period.

4.

D) realized through collection.

The term “proprietary funds” applies to:
1.

A) enterprise funds only.

2.

B) all funds that use accrual accounting.

3.

C) enterprise, internal service, and private-purpose trust funds.

4.

D) none of the above answers are correct.

Which of the following organizations has authority to establish
accounting and financial reporting standards for the
federal government?
1.

A) Federal Accounting Standards Advisory Board.

2.

B) Office of Management and Budget.

3.

C) Governmental Accounting Standards Board.

4.

D) None of the above; no one has been granted authority to set standards for the
federal government

The FASB has the authority to establish accounting and
financial reporting standards for:
1.

A) Federal government

2.

B) Private not-for-profits

3.

C) Public not-for-profits

4.

D) State and local governments

Which of the following characteristics would define an
organization as governmental?
1.

A) The power to enact and enforce a tax levy.

2.

B) The potential for unilateral dissolution by a government with the net assets reverting
to a government.


3.

C) The receipt of grant money from a state or local government for the purpose of
providing services to the public.

4.

D) Both A and B

A government may have multiple funds for each of the following
fund types except:
1.

A) Permanent

2.

B) General

3.

C) Special revenue

4.

D) Capital projects

Which of the following is most correct with regard to
Management's Discussion and Analysis (MD&A)?
1.

A) State and local governments are required to provide an MD&A.

2.

B) Federal agency financial reports are required to provide an MD&A.

3.

C) Both state and local governments and federal agencies are encouraged, but not
required to provide an MD&A.

4.

D) Both state and local governments and federal agencies are required to provide an
MD&A.

Which of the following is a fiduciary fund?
1.

A) Internal service

2.

B) Permanent

3.

C) Enterprise

4.

D) Investment trust

A city government collects local option sales taxes legally
restricted to pay for the construction of a new
courthouse. Which fund should account for the receipt of
the sales taxes?
1.

A) Special revenue fund

2.

B) Capital projects fund

3.

C) Private-purpose trust fund

4.

D) General fund


Level “A” GAAP for The University of Virginia, a public
institution, would be established by the:
1.

A) Financial Accounting Standards Board.

2.

B) Governmental Accounting Standards Board.

3.

C) American Institute of Certified Public Accountants.

4.

D) National Association of College and University Business Officers.

Governmental funds do not include:
1.

A) Special revenue funds

2.

B) Internal service funds

3.

C) Debt service funds

4.

D) The General fund

Which of the following would not be included in FASB
Statement of Financial Accounting Concepts #4, which
identifies the information needs of the users of nonbusiness financial statements?
1.

A) Format and content of financial statements

2.

B) Assessing services provided by a non-business organization and its ability to
continue to provide those services

3.

C) Assessing managements’ stewardship and performance

4.

D) Evaluation of an organization’s resources, obligations and effects of changes in net
resources

The GASB has the authority to establish accounting and
financial reporting standards for:
1.

A) Federal government

2.

B) Private not-for-profits

3.

C) State and local governments

4.

D) None of the above


GASB Concepts Statement No. 3, Communication Methods in
General Purpose External Financial Reports that Contain
Basic Financial Statements, states that
1.

A) notes to the financial statements may include management’s objective explanations.

2.

B) required supplementary information must be objective and may not include
predictions or subjective assessments.

3.

C) disclosure in the notes is not an adequate substitute for recognition in the financial
statements.

4.

D) All of the above are correct.

The FASAB has the authority to establish accounting and
financial reporting standards for:
1.

A) Federal government

2.

B) Investor owned business

3.

C) State and local governments

4.

D) Public not-for-profits

The term “proprietary funds” applies to:
1.

A) enterprise and internal service funds.

2.

B) pension, investment trust and enterprise funds

3.

C) enterprise, internal service, and private-purpose trust funds.

4.

D) none of the above answers are correct.

Governmental funds include:
1.

A) Special revenue funds

2.

B) Internal service funds

3.

C) Debt service funds

4.

D) A and C

A city government collects local option sales taxes legally
restricted to pay for the hiring of teachers for hearing
impaired school children. Which fund should account for
the receipt of the sales taxes?
1.

A) Special revenue fund


2.

B) Capital projects fund

3.

C) Private-purpose trust fund

4.

D) General fund

In order for a fund to exist, there must be:
1.

A) A fiscal entity; assets set aside for a specific purpose

2.

B) A double-entry accounting entity

3.

C) Both A & B are required

4.

D) A & B are optional and not required

Fiduciary funds are to use the:
1.

A) economic resources measurement focus and accrual basis of accounting.

2.

B) current financial resources measurement focus and accrual basis of accounting.

3.

C) economic resources measurement focus and modified accrual basis of accounting.

4.

D) none of the above, the fiduciary funds have no revenues.

What is the minimum number of funds to be used by a
governmental unit?
1.

A) One; the General Fund

2.

B) Two; the General Fund and one permanent fund

3.

C) As many as necessary to fulfill legal requirements and sound financial
administration

4.

D) A & C

In order for a fund to exist, there must be
1.

A) assets set aside for specific purposes.

2.

B) a separate revenue stream.

3.

C) a double-entry accounting entity.

4.

D) A and C are correct.

Proprietary funds use the:
1.

A) economic resources measurement focus and modified accrual basis of accounting.

2.

B) current financial resources measurement focus and modified accrual basis of
accounting

3.

C) economic resources measurement focus and accrual basis of accounting.

4.

D) current financial resources measurement focus and accrual basis of accounting.

Government-wide statements use the:
1.

A) current financial resources measurement focus and accrual basis of accounting.

2.

B) economic resources measurement focus and accrual basis of accounting.

3.

C) economic resources measurement focus and modified accrual basis of accounting.

4.

D) none of the above, the fiduciary funds have no revenues.

Which of the following is not a fiduciary fund?
1.

A) Agency

2.

B) Pension trust

3.

C) Enterprise

4.

D) Private-purpose trust

Which fund category must change from modified accrual to
accrual basis when preparing government-wide financial
statements?
1.

A) Governmental

2.

B) Proprietary

3.

C) Fiduciary

4.

D) B & C only

The “Hierarchy of GAAP” is established by the:
1.

A) Financial Accounting Standards Board.

2.

B) Federal Accounting Standards Advisory Board

3.

C) Governmental Accounting Standards Board

4.

D) All of the above have established a hierarchy

The Governmental Accounting Standards Board has been given
authority to establish accounting and financial reporting
standards for:
1.

A) all governmental units and agencies.

2.

B) federal, state, and local governments.

3.

C) all governmental units and all not-for-profit organizations.

4.

D) state and local governmental entities, and governmentally-owned utilities,
authorities, hospitals, and colleges and universities.

Which of the following is not one of the objectives of Federal
Financial Reporting, as outlined in SAFAC 1, which was
issued by the FASAB?
1.

A) Financial reporting should enable evaluation of the service efforts, costs and
accomplishments of the reporting entity.

2.

B) Financial reporting should enable evaluation of the success rate of programs

3.

C) Financial reporting should reveal whether financial systems and controls are
adequate

4.

D) Financial reporting should demonstrate accountability regarding raising and

expending money according to budgetary process and laws and regulations

Governmental funds are to use the:
1.

A) economic resources measurement focus and accrual basis of accounting.

2.

B) current financial resources measurement focus and accrual basis of accounting.

3.

C) economic resources measurement focus and modified accrual basis of accounting.

4.

D) current financial resources measurement focus and modified accrual basis of
accounting

Which of the following is a governmental fund?
1.

A) Special revenue

2.

B) Enterprise

3.

C) Agency

4.

D) Internal service

Which of the following is not true regarding GASB Concepts
Statement No. 2, Service Efforts and Accomplishments
Reporting:
1.

A) It encourages governments to experiment with reporting more complete information
about an entity's performance than can be displayed in the traditional financial
statements.


2.

B) It outlines categories of information that might be reported.

3.

C) It prescribes detailed standards governing the reporting of service efforts and
accomplishments reporting.

4.

D) None of the above, all are true.

Which of the following characteristics would not define an
organization as governmental?
1.

A) The power to enact and enforce a tax levy.

2.

B) The potential for unilateral dissolution by a government with the net assets reverting
to a government.

3.

C) The receipt of grant money from a state or local government for the purpose of
providing services to the public.

4.

D) All of the above.

Under GASB Statement 34, capital assets:
1.

A) must be reported in government-wide statements but are not reported in any of the
fund financial statements.

2.

B) must be reported in government-wide statements and in proprietary fund financial
statements.

3.

C) are not to be reported in either government-wide or fund financial statements.

4.

D) are to be reported but not depreciated in government-wide and fund financial
statements.

A city government makes its semiannual payment of interest on
revenue bonds issued to pay for the construction of
additional subway stations. Which fund would account for
the payment?
1.

A) Debt service fund

2.

B) Capital projects fund

3.

C) Enterprise fund

4.

D) Internal service fund

Which of the following use current financial resources
measurement focus?
1.

A) Fiduciary fund statements

2.

B) Governmental fund statements

3.

C) Proprietary fund statements

4.

D) Enterprise fund statements

79 Free Test Bank for Essentials of Accounting for
Governmental and Not for Profit Organizations 10th
Edition by Copley Multiple Choice Questions - Page
2
What is the significance of a budget to a government?
1.

A) Used primarily as a planning resource

2.

B) Budgets are not used by governments

3.

C) Budgets carry the full authority of the law

4.

D) None of the above

Which of the following fund types does not use modified
accrual accounting?
1.

A) Debt Service

2.

B) Special Revenue

3.

C) Agency

4.

D) Permanent

A government may have __________________ General Fund(s)
in a given year?

1.

A) As many as needed

2.

B) Only one.

3.

C) The number will vary depending on the needs of the government.

4.

D) None of the above.

Which of the following are the governmental funds?
1.

A) General, special revenue, debt service, capital projects, permanent.


2.

B) General, special revenue, debt service, capital projects, private purpose.

3.

C) General, special revenue, debt service, capital projects, internal service.

4.

D) None of the above.

Which of the following funds is used to account for the payment
of principal and interest of general long term debt of a
government?
1.

A) General Fund

2.

B) Debt Service Fund

3.

C) Agency Fund

4.

D) Capital Projects Fund

Which of the following is not of the information needs of users
of non-business financial statements according to FASB’s
Statement of Financial Accounting Concepts No. 4?
1.

A) Providing information that is useful to recipients of services provided by the nonbusiness organizations.

2.

B) Providing information that is useful to present and potential resource providers in
assessing the services that a non-business organization provides and its ability to
continue to provide those services.

3.

C) Providing information that is useful to present and potential resource providers in
assessing management’s stewardship and performance

4.

D) Providing information that is useful to present and potential resource providers in
evaluating an organization’s economic resource, obligations and effects of changes in
net resources

The ______ Funds are used to account for situations in which
the government is acting as a collecting/disbursing
agent.
1.

A) Special revenue

2.

B) General

3.

C) Enterprise

4.

D) Agency


Financial reports for state and local governments are used for
all the following EXCEPT?
1.

A) Assess financial condition and results of operations

2.

B) Measuring the effectiveness of government services such as police and fire
protection

3.

C) Compare actual results with the legally adopted budget

4.

D) Assist in determining compliance with finance-related laws and regulations

The fund statements for governmental funds are presented
using the
1.

A) Economic Resources Measurement focus and the Accrual Basis of Accounting

2.

B) Current Financial Resources Measurement focus and the Modified Accrual Basis of
Accounting

3.

C) Current Financial Resources Measurement focus and the Accrual Basis of
accounting

4.

D) Economic Resources Measurement focus and the Modified Accrual Basis of
Accounting

Capitalized fixed assets are reported in which financial
statement?
1.

A) Agency fund

2.

B) Proprietary fund

3.

C) Governmental fund

4.

D) All of the above

Which of the following is an environmental difference between
governments and for-profit business enterprises?
1.

A) Relationship with stakeholders

2.

B) Donor restricted assets

3.

C) Fiduciary responsibilities

4.

D) Private inurement of residual earnings


Which of the following is true regarding fund classifications?
1.

A) Governmental funds include the General, special revenue, debt service, capital
projects, and permanent.

2.

B) Proprietary funds include enterprise, internal service, and private-purpose.

3.

C) Both of the above.

4.

D) None of the above.

State and local governmental funds are organized into three
categories including:
1.

A) governmental, proprietary, and restricted

2.

B) proprietary, fiduciary, and restricted

3.

C) governmental, fiduciary, and restricted

4.

D) governmental, proprietary, and fiduciary

Which of the following funds is considered a Fiduciary Fund?
1.

A) Debt Service Fund

2.

B) Enterprise Fund

3.

C) Internal Service Fund

4.

D) Agency Fund

The Financial Accounting Standards Board (FASB) is the
standard setting organization for which of the following
reporting organizations?
1.

A) Private not-for-profits

2.

B) Public not-for-profits

3.

C) Investor owned businesses

4.

D) A and C are both correct.

Which of the following funds is not a Fiduciary Fund?
1.

A) Private Purpose Trust Fund

2.

B) Special Revenue Fund

3.

C) Pension Fund

4.

D) Investment Trust Fund


Under GASB Statement 34, modified accrual accounting would
be found in the:
1.

A) government-wide financial statements only.

2.

B) governmental fund financial statements only.

3.

C) governmental and fiduciary fund financial statements only.

4.

D) governmental, proprietary, and fiduciary fund financial statements but not in the
government-wide financial statements

Which of the following are included in the GASB standards
budgetary principle:
1.

A) Accounting systems should provide the basis for appropriate budgetary control.

2.

B) Annual budgets should be adopted by every governmental unit.

3.

C) Budgetary comparisons should be included in the appropriate financial statements.

4.

D) All of the above

Which of the following statement(s) are not included in the
proprietary funds:
1.

A) Statement of Revenues, Expenses, and Changes in Net Assets

2.

B) Statement of Cash Flows

3.

C) Balance Sheet

4.

D) All of the above are included

Level "A" GAAP for Cook County Hospital, a public hospital,
would be established by the:
1.

A) Governmental Accounting Standards Board.

2.

B) Financial Accounting Standards Board.

3.

C) Hospital Financial Management Association.

4.

D) American Institute of Certified Public Accountants.

Which of the following is not a fiduciary fund type?
1.

A) Agency.

2.

B) Expendable trust.

3.

C) Private-purpose trust.


4.

D) Investment trust.

The ______ Fund accounts for all resources other than those
required to be accounted for in other funds.
1.

A) Special revenue

2.

B) General

3.

C) Enterprise

4.

D) Agency

The GASB is under the oversight of:
1.

A) GAO.

2.

B) FASAB.

3.

C) FAF.

4.

D) FASB.

What are Enterprise funds used for?
1.

A) To account for pension and employee benefit funds for which the governmental unit
is the trustee.

2.

B) To report resources that are legally restricted so only earnings, not principal, may be
expended, and for purposes to benefit the government and its citizenry.

3.

C) To account for most of the basic services provided by the governmental units.

4.

D) To account for resources provided primarily through the use of sales and service
charges to parties external to the government.

A permanent fund classified under governmental funds…
1.

A) Accounts for most of the basic services provided by the governmental unit.

2.

B) Accounts for financial resources intended for major capital projects

3.

C) Accounts for services provided by one department of a government to another

4.

D) Accounts for resources that are legally restricted so only earnings, not principal,
may be expended, and for purposes to benefit the government and its citizenry.


The _______ sets the accounting and financial reporting
standards for both state and local governments and
public not-for-profits.
1.

A) FASAB

2.

B) FASB

3.

C) GASB

4.

D) AICPA

A city government sells police cars no longer in use. No
restrictions have been placed on the proceeds. Which

fund should account for the receipt?
1.

A) Debt service fund

2.

B) Capital projects fund

3.

C) Enterprise fund

4.

D) General fund

Under GASB Statement 34, accrual accounting is used for:
1.

A) government-wide financial statements only.

2.

B) government-wide financial statements and proprietary fund financial statements
only.

3.

C) government-wide, proprietary fund, and fiduciary fund financial statements only.

4.

D) government-wide and all fund financial statements

Notre Dame University, a private institution, has level “A” GAAP
established by the:
1.

A) American Institute of Certified Public Accountants.

2.

B) Governmental Accounting Standards Board.

3.

C) Financial Accounting Standards Board.

4.

D) National Association of College and University Business Officers

Which of the following fund types uses modified accrual
accounting?
1.

A) Debt Service

2.

B) Internal Service


3.

C) Investment Trust

4.

D) Enterprise

Why did governmental accounting practices develop with a
focus on the sources and uses of expendable funds
rather than on net income?
1.

A) The government wants to keep the earnings discrete

2.

B) Net income is solely for private organizations

3.

C) Tax and other non exchange revenues are not equivalent to sales

4.

D) Net income is solely for public organizations

The ______ Funds are used when resources are provided
primarily through the use of sales and service charges to
parties external to the government.
1.

A) Special revenue

2.

B) General

3.

C) Enterprise

4.

D) Agency

Which of the following is not one of the information needs of
users of non-business financial statements according to
FASB’s Statement of Financial Accounting Concepts No.
4?
1.

A) Providing information that is useful to present and potential resource providers in
making decisions about the allocation of resources.

2.

B) Providing information that is useful to present and potential resource providers in
assessing the services that a non-business organization provides and its ability to
continue to provide those services.

3.

C) Providing information that is useful to present and potential resource providers in
assessing management’s stewardship and performance.

4.

D) Providing information that is useful to present and potential resource providers in
evaluating an organization’s service efforts and accomplishments.


Long-term debt paid from proprietary funds is reported as a
liability in
1.

A) the proprietary fund Statement of Net Assets.

2.

B) the government-wide Statement of Net Assets.

3.

C) both A and B.

4.

D) neither A nor B.

Which of the following is not an environmental difference
between governments and for-profit business
enterprises?
1.

A) Organizational purposes.

2.

B) Sources of revenue.

3.

C) Role of the budget.

4.

D) Donor restrictions

What basis of accounting would the Enterprise Fund use?
1.

A) Accrual

2.

B) Modified Accrual

3.

C) Cash

4.

D) Expended Accrual

The ___________ is the government’s official annual report
prepared and published as a matter of public record.
1.

A) comprehensive annual financial report

2.

B) governmental annual financial report

3.

C) independent auditor’s report

4.

D) complete audited financial report

What type of fund is used when resources are provided mainly
through business like transactions to parties external to

the government?
1.

A) Internal Service Funds

2.

B) Capital Projects Funds

3.

C) Agency Funds


4.

D) Enterprise Funds

Which of the following is an objective of federal financial
reporting?
1.

A) Budgetary Integrity

2.

B) Operating Performance

3.

C) Stewardship

4.

D) All of the above

The ______ Fund accounts for and reports the proceeds of
specific revenue sources that are restricted or committed
to expenditure for specified purpose other than debt
service or capital projects.
1.

A) Special revenue

2.

B) General

3.

C) Enterprise

4.

D) Agency


True - False Questions
The GASB recently published a white paper which identifies five
environmental differences between governments and forprofit enterprises.

1.

True

2.

False

Depreciation on capital assets is included as an expense in the
Statement of Revenues, Expenses, and Changes in Fund
Net Assets in the proprietary fund financial statements
1.

True

2.

False

The GASB recently published a white paper outlining prohibited
transactions for not-for-profit organizations.
1.

True

2.

False

Measurement focus refers to those items, such as current and

long-term assets, that are being reported on the financial
statements.
1.

True

2.

False

The FASAB was established to recommend accounting and
financial reporting standards for governmental and
commercial enterprises.
1.

True

2.

False

The Federal Accounting Standards Advisory Board requires
less extensive reports than does the FASB or GASB.
1.

True

2.

False

According to GASB standards relating to Budgetary
Accounting, budgetary comparisons should not be
included in the appropriate financial statements or
schedules for governmental funds for which an annual
budget has been adopted.
1.

True

2.

False

A fund represents part of the activities of an organization which
is separated from other activities in the accounting
records to more easily demonstrate compliance with legal
restrictions or limitations.
1.

True

2.

False

Governmental activities fund statements may use modified
accrual basis when preparing government-wide financial
statements.

1.

True

2.

False

Infrastructure may or may not be capitalized by state and local
governmental units.
1.

True

2.

False

FASB sets the reporting standards for private and public notfor-for profits
1.

True

2.

False

An organization is presumed to be governmental if it has the
ability to issue directly debt that is exempt from federal
taxes.

1.

True


2.

False

Common measurement focus and basis of measurement is an
important feature of government-wide financial
statements.
1.

True

2.

False

All Governments must have as many funds as necessary to
fulfill legal requirements and sound financial
administration but must have at a minimum a General
Fund.
1.

True

2.

False

The Federal Accounting Standards Advisory Board and the
Governmental Accounting Standards Board are parallel
bodies under the oversight of the Financial Accounting
Foundation.
1.

True

2.

False

The Governmental Accounting Standards Board considers the
financial reporting entity to include the primary
government and its component units.
1.

True

2.

False

Comparison of the legally approved budget with actual results
of the General Fund is not part of required supplementary
information in the CAFR.
1.

True

2.

False


The Financial Accounting Standards Board sets financial
reporting standards for private sector organizations,
except nongovernmental, not-for-profit organizations.
1.

True

2.

False

Governmental activities fund statements must be changed to
the accrual basis from the modified accrual basis when
preparing government-wide financial statements.
1.

True

2.

False

The GASB Concept Statement on Service Efforts and

Accomplishments Reporting requires state and local
governments to include inputs of nonmonetary resources
in their financial reporting.
1.

True

2.

False

According to GASB standards relating to Budgetary
Accounting, budgetary comparisons should be included
in the appropriate financial statements or schedules for
governmental funds for which an annual budget has been
adopted.
1.

True

2.

False

Long-term debt that is to be paid with tax revenues is reported
both in the government-wide statements and in the
governmental fund statements
1.

True

2.

False


Internal Service funds are treated as governmental activities in
the government-wide statements if the only “buyers” are
departments within the General Fund.
1.

True

2.

False

One objective of the Governmental Accounting Standards
Board is to help users determine compliance with financerelated laws, rules, and regulations.
1.

True

2.

False

The government-wide statements and the fund statements for
proprietary funds and fiduciary funds use the economic
resources measurement focus and the accrual basis of

accounting.
1.

True

2.

False

According to GASB standards relating to Budgetary
Accounting, the accounting system should provide the
basis for appropriate budgetary control.
1.

True

2.

False

The Financial Accounting Standards Board sets financial
reporting standards for private not-for-profits and
investor-owned businesses.
1.

True

2.

False

The Governmental Accounting Standards Board sets financial
reporting standards for all units of government: federal,
state, and local.
1.

True


2.

False

State and local governments may use eleven different fund
types.
1.

True

2.

False

Permanent funds can be either a governmental fund or a
fiduciary fund where only income on donated assets may
be spent.
1.

True

2.

False

Fiduciary funds include agency, pension trust, investment trust,
and private-purpose trust.
1.

True

2.

False

FASAB, GASB and FASB standards are set forth primarily in
documents called statements.
1.

True

2.

False

The GASB Concept Statement on Service Efforts and
Accomplishments Reporting encourages state and local
governments to include inputs of nonmonetary resources
in their financial reporting.
1.

True

2.

False

A Management's Discussion and Analysis is required for state
and local governmental units, but not the federal
government.
1.

True

2.

False