1.Which of the following statements is false?

Multiple Choice

• If taxes are levied specifically for payment of interest and principal on long-term debt, those taxes are recognized as revenues of the Debt Service Fund.

• Premiums generated from the issuance of bonds for a capital projects fund are generally transferred to the Debt Service Fund.

• Unmatured principal installments and accrued interest which is due shortly after year end are required to be reported as liabilities in the debt service fund at year end.

• An encumbrance in a capital project fund is created when the contract for the work is signed or issued.

  2.Which of the following statements is correct?

  Multiple Choice

• The General Fund and Special Revenue funds use encumbrance accounting and the Capital Projects, Debt Service and Permanent funds do not.

• The General Fund and Special Revenue Fund have an indefinite life and the Permanent, Capital Projects and Debt Service have limited lives.

• The General Fund, Special Revenue, and Debt Service funds use the modified accrual basis and financial resources focus and the Capital Projects and Permanent funds do not.

• The General Fund and Special Revenue fund provide budget to actual comparisons and the Capital Projects, Debt Service and Permanent Funds do not.

3.Which of the following is incorrect with respect to the determination of the appropriate fund in which to report the trust activities?

Multiple Choice

• If the trust is to benefit individuals, the appropriate trust would be a private-purpose trust fund.

• If the trust is to benefit the government or its citizenry and the principal must be maintained, the appropriate trust is a permanent fund.

• If the trust is to benefit the government or its citizenry and the principal may be expended, the appropriate trust would be a special revenue fund.

• If the trust benefits private organizations or other governments and the principal must be maintained, the appropriate fund would be a custodial fund.