Multiple Choice. Choose the best answer.

1. Special purpose governments differ from general purpose governments in that special purpose governments:

a. Provide a single function or limited range of functions.

b. Do not have the power to levy taxes.

c. Derive their power from state governments.

d. All of the above.

2. Which of the following is a true statement about accounting standard-setting bodies?

a. The Financial Accounting Standards Board (FASB) sets accounting and reporting standards for all not-for-profit organizations, but the Governmental Accounting Standards Board (GASB) may also prescribe standards for governmental not-for-profit organizations provided they do not conflict with FASB standards.

b. The GASB sets accounting and reporting standards for all governmental organizations; the FASB sets standards for all business and not-for-profit organizations.

c. Only the FASB and GASB enjoy AICPA Ethics Rule 203 coverage as recognized standard-setting authoritative bodies, not the FASAB. d. The FASB and GASB are administratively supported by the Financial Accounting Foundation; the FASAB draws its support from the federal government.

3. A distinguishing difference between governments and not-for-profit organizations is:

a. Lack of a profit motive.

b. Absence of owners.

c. Taxation as a significant source of funding.

d. Receipt of significant amounts of funding through nonexchange transactions (i.e., resource providers do not get proportional benefits for what they pay to the organization).

4. Which of the following organizations would most likely meet the criteria to be classified as a governmental not-for-profit organization?

a. A religion-affiliated university.

b. A privately founded museum.

c. A public school district.

d. A city-administered community service agency.

5. The concept of interperiod equity refers to whether:

a. Revenues equaled or exceeded expenditures for the year.

b. Current year revenues were sufficient to pay for current year services.

c. Total assets (current and noncurrent) were sufficient to cover total liabilities (current and noncurrent).

d. Future taxpayers can expect to receive the same or higher level of services as current taxpayers.

6. Which of the following is (are) included in the minimum requirements for general purpose external financial reporting of a government?

a. Comprehensive Annual Financial Report.

b. Management?s Discussion and Analysis (MD&A) and basic financial statements.

c. Combining fund financial statements.

d. Statistical section.

7. The basic financial statements of a state or local government include all of the following except:

a. An MD&A.

b. Government-wide financial statements.

c. Fund financial statements.

d. Notes to the financial statements.

8. The modified accrual basis of accounting is used to account for revenues and expenditures reported in the financial statements of:

a. Governmental activities at the government-wide level.

b. Business-type activities at the government-wide level.

c. Governmental funds.

d. Proprietary funds.

9. Separate columns for individual major funds should be provided in which of the following financial statements?

a. Statement of net assets?government-wide; balance sheet?governmental funds; statement of net assets?proprietary funds.

b. Statement of net assets?government-wide; balance sheet?governmental funds; statement of fiduciary net assets?fiduciary funds.

c. Statement of net assets?government-wide; statement of net assets?proprietary funds; statement of fiduciary net assets?fiduciary funds.

d. Balance sheet?governmental funds; statement of net assets?proprietary funds.

Multiple Choice. Choose the best answer.

1. Which of the following would be included as part of a governmental reporting entity?

a. A primary government and any legally separate organization located within the geographic boundaries of the primary government.

b. A primary government and any legally separate organization for which the primary government is financially accountable.

c. A primary government and any legally separate organization that requests to be included.

d. None of the above; a reporting entity consists of only a primary government.

2. Which of the following statements is true regarding the basic financial statements of a state or local government?

a. Separate columns must be provided in the government-wide financial statements for governmental activities, business-type activities, and fiduciary activities.

b. Discretely presented component units should be reported as a separate column on the fund financial statements.

c. Governmental fund financial statements should provide separate columns for each major fund. d. All of the above.

3. In the reporting of governmental activities, fiscal accountability is demonstrated by:

a. Government-wide financial statements.

b. Fund financial statements.

c. Both fund and government-wide financial statements.

d. Neither fund nor government-wide financial statements.

4. The measurement focus and basis of accounting that should be used for the governmental fund financial statements are: Current financial resources Modified accrual . Current financial resources Accrual . Economic resources Modified accrual . Economic resources Accrual 5. Which of the following statements is true regarding the definition of a fund?

a. A fund is a fiscal and accounting entity.

b. A fund has a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances and changes therein.

c. Resources, related liabilities, and residual equities or balances and changes therein are segregated for the purpose of carrying out specific activities or attaining certain objectives.

d. All of the above.

6. Capital assets used for governmental activities, such as those of the police department, should be reported in:

a. Governmental fund financial statements only.

b. Government-wide financial statements only.

c. Neither governmental fund nor government-wide financial statements.

d. Both governmental fund and government-wide financial statements.

7. Assets and liabilities of activities for which the government is acting in either an agency or trustee capacity for individuals, organizations, or other governments should be reported in:

a. The fiduciary column of the government-wide financial statements.

b. The fiduciary fund financial statements.

c. Both government-wide and fiduciary fund statements.

d. Neither government-wide nor fiduciary fund statements.

8. Under the modified accrual basis of accounting:

a. Revenues are recognized at the time an exchange transaction occurs.

b. Expenditures are recognized as the cost of an asset expires or is used up in providing governmental services.

c. Revenues are recognized when current financial resources become measurable and available to pay current-period obligations.

d. Expenses are recognized when an obligation occurs for costs incurred in providing services.

9. Which of the following is a difference between financial reporting for internal service and enterprise funds?

a. Internal service funds are reported in the governmental fund financial statements.

b. Internal service funds are reported in the proprietary fund financial statements.

c. Internal service funds are generally reported in the Business-type Activities column of the government-wide financial statements.

d. Internal service funds are generally reported in the Governmental Activities column of the government-wide financial statements.

10. Which of the following must be reported as a major fund?

a. The General Fund.

b. A fund having total assets, liabilities, revenues, or expenditures/expenses equaling at least 10 percent of the total governmental or enterprise fund amount for the same element (assets, liabilities, and so forth), as applicable, and at least 5 percent of the combined governmental and enterprise fund total amount for the same element.

c. Both a and b.

d. Neither a nor b.

2?3 True or False.

Write T if the corresponding statement is true. If the statement is false, write F and state what changes should be made to make it a true statement.

1. Activities of a general purpose government that provide the basis for GASB?s financial accounting and reporting framework consist of governmental, business-type, and fiduciary.

2. The permanent fund is one of the several types of governmental funds.

3. Government-wide financial statements report financial transactions related to the governmental, business-type, and fiduciary activities of the government.

4. A statement of revenues, expenditures, and changes in fund balances is used to report the inflows and outflows of current financial resources of governmental funds.

5. The accounting system for proprietary funds should provide for integration of budgetary accounts.

6. Financial information for component units must be reported by discrete presentation.

7. All assets, both current and noncurrent, and all liabilities, both current and noncurrent, are reported in the government-wide financial statements.

8. All proprietary fund financial information is reported in the Business-type Activities column of the government-wide financial statements.

9. Depreciation should be reported in the financial statements of the General Fund for general capital assets accounted for in the General Fund.

10. In addition to the General Fund, in governmental and proprietary fund financial statements, the only individual funds for which financial information is reported in separate columns are major funds.

2?4 Matching Funds and Identifying Characteristics with Fund and Government-wide Financial Reporting Categories. For each fund or government-wide category listed in the left-hand column, choose the letter(s) of the applicable fund type or characteristic in the right-hand column. Multiple letters may apply to each category.

1. Governmental funds . Operational accountability

2. Proprietary funds . Modified accrual

3. Fiduciary funds . Agency funds

4. Governmental activities, . Statement of cash flows government-wide .

Fiscal accountability

5. Business-type activities, . Debt service funds government-wide

Current and noncurrent assets and liabilities . Internal service funds .

Integrated budgetary accounts Revenues and expenses .

Additions and deductions

2?5 Matching Funds with Transactions. Choose the letter of the sample transaction in the right-hand column that would most likely be reported in the fund listed in the left-hand column.

1. Agency a. Construction of highways, bridges, or parks.

2. Capital projects b. Administrative expenses of the city manager?s

3. Debt service office.

4. Enterprise c. Gifts in which the principal must be invested

5. General and preserved but the investment earnings must

6. Internal service be used to provide scholarships to children of

7. Investment trust police officers who died in the line of duty. .

d. Costs of a central purchasing and warehouse

8. Pension trust function.

9. Permanent e. Assets held for external government partici-

10. Private-purpose trust pants in the government?s investment pool for

11. Special revenue the purpose of earning investment income.

f. Gifts in which the principal must be invested and preserved but the investment earnings can be used for public purposes.

g. Costs of operating a municipal swimming pool.

h. Grant revenues restricted for particular operating purposes.

i. Assets held in trust to provide retirement benefits for municipal workers.

j. Principal and interest payments on general long-term debt.

k. Taxes collected on behalf of another governmental unit.

Multiple Choice. Choose the best answer. 1. Special purpose governments differ from general purpose governments in that special purpose governments: a. Provide a single function or limited range of functions. b. Do not have the power to levy taxes. c. Derive their power from state governments. d. All of the above. 2. Which of the following is a true statement about accounting standard-setting bodies? a. The Financial Accounting Standards Board (FASB) sets accounting and reporting standards for all not-for-profit organizations, but the Governmental Accounting Standards Board (GASB) may also prescribe standards for governmental not-for-profit organizations provided they do not conflict with FASB standards. b. The GASB sets accounting and reporting standards for all governmental organizations; the FASB sets standards for all business and not-for-profit organizations. c. Only the FASB and GASB enjoy AICPA Ethics Rule 203 coverage as recognized standardsetting authoritative bodies, not the FASAB. d. The FASB and GASB are administratively supported by the Financial Accounting Foundation; the FASAB draws its support from the federal government. 3. A distinguishing difference between governments and not-for-profit organizations is: a. Lack of a profit motive. b. Absence of owners. c. Taxation as a significant source of funding. d. Receipt of significant amounts of funding through nonexchange transactions (i.e., resource providers do not get proportional benefits for what they pay to the organization). 4. Which of the following organizations would most likely meet the criteria to be classified as a governmental not-for-profit organization? a. A religion-affiliated university. b. A privately founded museum. c. A public school district. d. A city-administered community service agency. 5. The concept of interperiod equity refers to whether: a. Revenues equaled or exceeded expenditures for the year. b. Current year revenues were sufficient to pay for current year services. c. Total assets (current and noncurrent) were sufficient to cover total liabilities (current and noncurrent). d. Future taxpayers can expect to receive the same or higher level of services as current taxpayers. 6. Which of the following is (are) included in the minimum requirements for general purpose external financial reporting of a government? a. Comprehensive Annual Financial Report. b. Management's Discussion and Analysis (MD&A) and basic financial statements. c. Combining fund financial statements. d. Statistical section. 7. The basic financial statements of a state or local government include all of the following except: a. An MD&A. b. Government-wide financial statements. c. Fund financial statements. d. Notes to the financial statements. 8. The modified accrual basis of accounting is used to account for revenues and expenditures reported in the financial statements of: a. Governmental activities at the government-wide level. b. Business-type activities at the government-wide level. c. Governmental funds. d. Proprietary funds. 9. Separate columns for individual major funds should be provided in which of the following financial statements? a. Statement of net assetsgovernment-wide; balance sheetgovernmental funds; statement of net assetsproprietary funds. b. Statement of net assetsgovernment-wide; balance sheetgovernmental funds; statement of fiduciary net assetsfiduciary funds. c. Statement of net assetsgovernment-wide; statement of net assetsproprietary funds; statement of fiduciary net assetsfiduciary funds. d. Balance sheetgovernmental funds; statement of net assetsproprietary funds. Multiple Choice. Choose the best answer. 1. Which of the following would be included as part of a governmental reporting entity? a. A primary government and any legally separate organization located within the geographic boundaries of the primary government. b. A primary government and any legally separate organization for which the primary government is financially accountable. c. A primary government and any legally separate organization that requests to be included. d. None of the above; a reporting entity consists of only a primary government. 2. Which of the following statements is true regarding the basic financial statements of a state or local government? a. Separate columns must be provided in the government-wide financial statements for governmental activities, business-type activities, and fiduciary activities. b. Discretely presented component units should be reported as a separate column on the fund financial statements. c. Governmental fund financial statements should provide separate columns for each major fund. d. All of the above. 3. In the reporting of governmental activities, fiscal accountability is demonstrated by: a. Government-wide financial statements. b. Fund financial statements. c. Both fund and government-wide financial statements. d. Neither fund nor government-wide financial statements. 4. The measurement focus and basis of accounting that should be used for the governmental fund financial statements are: Current financial resources Modified accrual . Current financial resources Accrual . Economic resources Modified accrual . Economic resources Accrual 5. Which of the following statements is true regarding the definition of a fund? a. A fund is a fiscal and accounting entity. b. A fund has a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances and changes therein. c. Resources, related liabilities, and residual equities or balances and changes therein are segregated for the purpose of carrying out specific activities or attaining certain objectives. d. All of the above. 6. Capital assets used for governmental activities, such as those of the police department, should be reported in: a. Governmental fund financial statements only. b. Government-wide financial statements only. c. Neither governmental fund nor government-wide financial statements. d. Both governmental fund and government-wide financial statements. 7. Assets and liabilities of activities for which the government is acting in either an agency or trustee capacity for individuals, organizations, or other governments should be reported in: a. The fiduciary column of the government-wide financial statements. b. The fiduciary fund financial statements. c. Both government-wide and fiduciary fund statements. d. Neither government-wide nor fiduciary fund statements. 8. Under the modified accrual basis of accounting: a. Revenues are recognized at the time an exchange transaction occurs. b. Expenditures are recognized as the cost of an asset expires or is used up in providing governmental services. c. Revenues are recognized when current financial resources become measurable and available to pay current-period obligations. d. Expenses are recognized when an obligation occurs for costs incurred in providing services. 9. Which of the following is a difference between financial reporting for internal service and enterprise funds? a. Internal service funds are reported in the governmental fund financial statements. b. Internal service funds are reported in the proprietary fund financial statements. c. Internal service funds are generally reported in the Business-type Activities column of the government-wide financial statements. d. Internal service funds are generally reported in the Governmental Activities column of the government-wide financial statements. 10. Which of the following must be reported as a major fund? a. The General Fund. b. A fund having total assets, liabilities, revenues, or expenditures/expenses equaling at least 10 percent of the total governmental or enterprise fund amount for the same element (assets, liabilities, and so forth), as applicable, and at least 5 percent of the combined governmental and enterprise fund total amount for the same element. c. Both a and b. d. Neither a nor b. 2-3 True or False. Write T if the corresponding statement is true. If the statement is false, write F and state what changes should be made to make it a true statement. 1. Activities of a general purpose government that provide the basis for GASB's financial accounting and reporting framework consist of governmental, business-type, and fiduciary. 2. The permanent fund is one of the several types of governmental funds. 3. Government-wide financial statements report financial transactions related to the governmental, business-type, and fiduciary activities of the government. 4. A statement of revenues, expenditures, and changes in fund balances is used to report the inflows and outflows of current financial resources of governmental funds. 5. The accounting system for proprietary funds should provide for integration of budgetary accounts. 6. Financial information for component units must be reported by discrete presentation. 7. All assets, both current and noncurrent, and all liabilities, both current and noncurrent, are reported in the government-wide financial statements. 8. All proprietary fund financial information is reported in the Business-type Activities column of the government-wide financial statements. 9. Depreciation should be reported in the financial statements of the General Fund for general capital assets accounted for in the General Fund. 10. In addition to the General Fund, in governmental and proprietary fund financial statements, the only individual funds for which financial information is reported in separate columns are major funds. 2-4 Matching Funds and Identifying Characteristics with Fund and Government-wide Financial Reporting Categories. For each fund or government-wide category listed in the left-hand column, choose the letter(s) of the applicable fund type or characteristic in the right-hand column. Multiple letters may apply to each category. 1. Governmental funds . Operational accountability 2. Proprietary funds . Modified accrual 3. Fiduciary funds . 4. Governmental activities, . 5. Business-type activities, . Agency funds Statement of cash flows government-wide . Fiscal accountability Debt service funds government-wide Current and noncurrent assets and liabilities . Internal service funds . Integrated budgetary accounts Revenues and expenses . Additions and deductions 2-5 Matching Funds with Transactions. Choose the letter of the sample transaction in the righthand column that would most likely be reported in the fund listed in the left-hand column. 1. Agency a. Construction of highways, bridges, or parks. 2. Capital projects b. Administrative expenses of the city manager's 3. Debt service office. 4. Enterprise c. Gifts in which the principal must be invested 5. General and preserved but the investment earnings must 6. Internal service be used to provide scholarships to children of 7. Investment trust police officers who died in the line of duty. . d. Costs of a central purchasing and warehouse 8. Pension trust function. 9. Permanent e. Assets held for external government partici10. Private-purpose trust pants in the government's investment pool for 11. Special revenue the purpose of earning investment income. f. Gifts in which the principal must be invested and preserved but the investment earnings can be used for public purposes. g. Costs of operating a municipal swimming pool. h. Grant revenues restricted for particular operating purposes. i. Assets held in trust to provide retirement benefits for municipal workers. j. Principal and interest payments on general long-term debt. k. Taxes collected on behalf of another governmental unit