Select the best answer for each of the following multiple-choice questions.
1. What is the underlying reason a governmental unit uses separate funds to account for its transactions?
a. Governmental units are so large that it would be unduly cumbersome to account for all transactions as a single unit.
b. Because of the diverse nature of the services offered and legal provisions regarding activities of a governmental unit, it is necessary to segregate activities by functional nature.
c. Generally accepted accounting principles require that not-for-profit entities report on a funds basis.
d. Many activities carried on by governmental units are short lived, and their inclusion in a general set of accounts could cause undue probability of error and omission.
2. The primary authoritative body for determining the measurement focus and basis of accounting standards for governmental fund operating statements is the
a. Governmental Accounting Standards Board (GASB).
b. National Council on Governmental Accounting (NCGA).
c. Government Accounting and Auditing Committee of the AICPA (GAAC).
d. Financial Accounting Standards Board (FASB).
3. The measurement focus for governmental funds is the
a. Flow of cash.
b. Flow of financial resources.
c. Amount of gross revenue.
d. Matching of revenues and expenditures.
4. Inter-period equity measurement for governmental funds determines whether
a. There is a positive cash flow.
b. There is a profit.
c. Current-year revenues are sufficient to pay for current-year services.
d. Actual amounts exceed budgeted amounts.
5. The proceeds of a long-term bond issue were used by a county to acquire general fixed assets.
The long-term liability is recorded
a. Only in the general long-term debt account group.
b. Only in the general fund.
c. Both in the general fund and in the general long-term debt account group.
d. In the appropriate governmental fund, depending on the nature of the asset involved.
6. An expenditure for general obligation long-term debt is always recorded at year-end in the governmental funds for
a. Accrued interest and accrued principal.
b. Accrued principal but not accrued interest.
c. Accrued interest but not accrued principal.
d. Neither accrued interest nor accrued principal.
7. Encumbrances outstanding at year-end in a state’s general fund should be reported as a
a. Liability in the general fund.
b. Fund balance reserve in the general fund.
c. Liability in the general long-term debt account group.
d. Fund balance designation in the general fund.