1. The traditional business model of accounting is inadequate for governments and not-for-profit organizations primarily because businesses differ from governments and not-for-profit organizations in that

a. They have different missions

b. They have fewer assets

c. Their assets are intangible

d. Taxes are a major expenditure of businesses

2. If businesses are "governed by the marketplace," governments are governed by

a. Legislative bodies

b. Taxes

c. Budgets

d. State constitutions

3. The primary objective of a not-for-profit organization or a government is to

a. Maximize revenues

b. Minimize expenditures

c. Provide services to constituents

d. All of the above

4. In governments, in contrast to businesses,

a. Expenditures are driven mainly by the ability of the entity to raise revenues

b. The amount of revenues collected is a signal of the demand for services

c. There may not be a direct relationship between revenues raised and the demand for the entity's

services

d. The amount of expenditures is independent of the amount of revenues collected

5. The organization responsible for setting accounting standards for state and local governments is the

a. FASB

b. GASB

c. FASAB

d. AICPA

6. The number of governmental units in the United States is approximately

a. 900

b. 9,000

c. 90,056

d. 900,000

7. Governments differ from businesses in that they

a. Do not raise capital in the financial markets

b. Do not necessarily engage in transactions in which they "sell" goods or services

c. Are not required to prepare annual financial reports

d. Do not issue common stock

8. Interperiod equity refers to a condition whereby

a. Total tax revenues are approximately the same from year to year

b. Taxes are distributed fairly among all taxpayers, regardless of income level

c. Current-year revenues are sufficient to pay for current-year services

d. Current-year revenues cover both operating and capital expenditures

9. Which of the following is not one of the GASB's financial reporting objectives?

a. Providing information on the extent to which interperiod equity is achieved

b. Ensuring that budgeted revenues are equal to or exceed budgeted expenses

c. Reporting on budgetary compliance

d. Providing information on service efforts and accomplishments

10. Which of the following is not one of the FASB's financial reporting objectives?

a. Providing information about economic resources, obligations, and net resources

b. Providing information to help resource providers make rational decisions

c. Reporting on budgetary compliance

d. Providing information on service efforts and accomplishments

1. Rule 203 of the AICPA's Code of Professional Conduct pertains to

a. CPAs' independence

b. Authorities designated to establish accounting standards

c. Standards of competency

d. Solicitation of new clients by a CPA

2. Which of the following rule-making authorities would establish accounting standards for Stanford

University (a private university)?

a. The AICPA

b. The FASB

c. The FASAB

d. The GASB

3. Which of the following rule-making authorities would establish accounting standards for the University of Wisconsin (a public university)?

a. The AICPA

b. The FASB

c. The FASAB

d. The GASB

4. If the GASB has not issued a pronouncement on a specific issue, which of the following is true with respect to FASB pronouncements?

a. They would automatically govern

b. They could be taken into account but would have no higher standing than other accounting literature

c. They are irrelevant

d. They could be taken into account by the reporting entity but only if the disclosure is made in notes to

the financial statements

5. The FASB is to the GASB as

a. A brother is to a sister

b. A father is to a son

c. A son is to a father

d. An aunt is to a niece

6. Standards promulgated by the FASB are most likely to be adhered to by which of the following governmental units?

a. A police department

b. A public school

c. An electric utility

d. A department of highways

7. Which of the following practices is most likely to undermine interperiod equity?

a. Paying for a new school building out of current operating funds

b. Paying the administrative staff of a school out of current operating funds

c. Issuing 20-year bonds to finance construction of a new highway

d. Recognizing gains and losses on marketable securities as prices increase and decrease

8. The term "independent sector" refers to

a. States that have opted not to receive federal funds

b. Not-for-profit organizations

c. Churches that are unaffiliated with a particular denomination

d. Universities that are not affiliated with a particular athletic conference

9. Which of the following is not an objective of external financial reporting by either the GASB or the

FASB?

a. To enable the statement user to detect fraud

b. To disclose legal or contractual restrictions on the use of resources

c. To provide information about how the organizations meet their cash requirements

d. To provide information that would enable a user to assess the service potential of long-lived assets

10. Which of the following is the least appropriate use of the external financial statements of a government?

a. To assess the entity's financial condition

b. To assess whether the compensation of management is reasonable in relation to that of comparable

entities

c. To compare actual results with the budget

d. To evaluate the efficiency and effectiveness of the entity in achieving its objectives