Chp 16. Accounting

Which of the following is not a governmental fund?

Multiple Choice

Debt service fund

Internal service fund

Special revenue fund

Capital projects fund

Internal service fund

Which of the following statements is correct about the reporting of governmental funds?

Multiple Choice

Fund financial statements measure both economic resources and current financial resources.

Government-wide financial statements measure only current financial resources.

Government-wide financial statements measure economic resources.

Fund financial statements measure only economic resources.

Government-wide financial statements measure economic resources.

Which of the following statements is correct about the reporting of governmental funds?

Multiple Choice

Government-wide financial statements measure revenues and expenses based on modified accrual accounting.

Fund financial statements measure revenues and expenditures based on modified accrual accounting.

Fund financial statements measure revenues and expenses based on accrual accounting.

Government-wide financial statements measure revenues and expenditures based on accrual accounting.

Fund financial statements measure revenues and expenditures based on modified accrual accounting.

The City of Bagranoff holds $90,000 in cash that will be used to make a bond payment when the debt comes due early next year. The assistant treasurer initially made the decision to set this money aside for this purpose. Just before the end of the current year, the city council formally approved using the money in this way. The city council is the highest level of decision-making authority for this government. What impact does the council’s action have on the reporting of fund financial statements?

Multiple Choice

Fund balance—unassigned goes down and fund balance—restricted goes up.

Fund balance—assigned goes down and fund balance—committed goes up.

Fund balance—assigned goes down and fund balance—restricted goes up.

Fund balance—unassigned goes down and fund balance—assigned goes up.

Fund balance—assigned goes down and fund balance—committed goes up.

Which of the following statements is true concerning the recording of a budget?

Multiple Choice

At the beginning of the year, a debit is made to Estimated Revenues.

At the end of the year, a credit is made to Appropriations.

A debit to the Budgetary Fund Balance account indicates an expected surplus for the period.

At the beginning of the year, a debit is made to Appropriations.

At the beginning of the year, a debit is made to Estimated Revenues.

An income tax is an example of which of the following?

Multiple Choice

Government-mandated nonexchange revenue

Voluntary nonexchange transaction

Derived tax revenue

Imposed nonexchange revenue

Derived tax revenue

Which of the following is an example of an interactivity transaction?

Multiple Choice

A city transfers money from the general fund to an enterprise fund.

A city transfers money from a special revenue fund to a debt service fund.

A city transfers money from a capital projects fund to the general fund.

A city transfers money from the general fund to a debt service fund.

A city transfers money from the general fund to an enterprise fund.

The Governmental Accounting Standards Board (GASB) requires state and local governments to prepare two sets of financial statements which include which of the following?

Multiple Choice

Fund financial statements and proprietary financial statements.

Proprietary financial statements and fund-based financial statements.

Fund financial statements and government-wide financial statements.

GAAP-based financial statements and government-wide financial statements.

Statement of net assets and statement of cash flows.

Fund financial statements and government-wide financial statements.

Which group of government financial statements reports all revenues and all costs as well as all assets and liabilities of the governmental entity?

Multiple Choice

GAAP-based financial statements

Fund financial statements

Governmental fund financial statements

Government-wide financial statements

General fund financial statements

Government-wide financial statements

Which of the following describes proprietary funds?

Multiple Choice

Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.

Funds used to account for a government's ongoing activities that are similar to those operated by for-profit organizations.

Funds used to account for monies held by the government in a trustee or agency capacity.

Funds used to account for all financial resources except those required to be accounted for in another fund.

Funds used to account for resources that are restricted or committed for a specific purpose other than debt payments or capital projects.

Funds used to account for a government's ongoing activities that are similar to those operated by for-profit organizations.

Fiduciary funds are

Multiple Choice

funds used to account for the activities of a government that are carried out primarily to provide services to citizens.

funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations.

funds used to account for monies held by the government in a trustee or agency capacity.

funds used to account for all financial resources except those required to be accounted for in another fund.

funds used to account for resources that are restricted or committed for a specific purpose other than debt payments or capital projects.

funds used to account for monies held by the government in a trustee or agency capacity.

Governmental funds are

Multiple Choice

funds used to account for the activities of a government that are carried out primarily to provide services to citizens.

funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations.

funds used to account for monies held by the government in a trustee or agency capacity.

funds used to account for all financial resources except those required to be accounted for in another fund.

funds used to account for resources that are restricted or committed for a specific purpose other than debt payments or capital projects.

funds used to account for the activities of a government that are carried out primarily to provide services to citizens.

Special Revenue funds are

Multiple Choice

• funds used to account for the activities of a government that are carried out primarily to provide services to citizens.

• funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations.

• funds used to account for monies held by the government in a trustee or agency capacity.

• funds used to account for all financial resources except those required to be accounted for in another fund.

• funds used to account for resources that are restricted or committed for a specific purpose other than debt payments or capital projects.

funds used to account for resources that are restricted or committed for a specific purpose other than debt payments or capital projects.

The term "current financial resources" refers to

Multiple Choice

those assets that can quickly be converted into cash.

assets that are available to be used for current expenditures.

the government's current assets and current liabilities.

the current value of all net assets owned by the governmental unit.

financial resources used to provide electricity to local citizens.

assets that are available to be used for current expenditures.

What are the broad classifications of funds for a governmental entity such as a city?

Multiple Choice

General, governmental, and trust funds.

Governmental, proprietary, and fiduciary funds.

Revenue, trust, and governmental funds.

Enterprise, revenue, and fiduciary funds.

Governmental, agency, and enterprise funds.

Governmental, proprietary, and fiduciary funds.

Which group of financial statements is prepared using the "modified accrual accounting" approach?

Multiple Choice

GAAP-based financial statements.

Governmental fund financial statements.

Cost-based financial statements.

Government-wide financial statements.

General-purpose financial statements.

Governmental fund financial statements.

Under modified accrual accounting, revenues should be recognized when they are

Multiple Choice

collected.

realizable and estimable.

reasonably estimable.

measurable and available to be used.

earned and collected.

measurable and available to be used.

Which of the following funds is most likely created with an endowed gift?

Multiple Choice

• Enterprise Fund

• Internal Service Fund

• Debt Service Fund

• Capital Projects Fund

• Permanent Fund

• Permanent Fund

A city received a grant of $5,000,000 from a private agency. The money was to be used to build a new city library. In which fund should the money be recorded for the governmental fund financial statements?

Multiple Choice

General Fund

Expendable Trust Fund

Capital Projects Fund

Custodial Fund

Permanent Fund

Capital Projects Fund

Trapper City issued 30-year bonds for the purpose of building a new City Hall. The proceeds of the bonds are deposited in the General Fund. For the governmental fund financial statements, in what fund will Bonds Payable appear?

Multiple Choice

• General Fund

• Internal Service Fund

• Permanent Fund

• Debt Service Fund

• Bonds Payable do not appear in governmental fund financial statements

• Bonds Payable do not appear in governmental fund financial statements

What account is debited in the general fund when equipment is received by a governmental entity?

Multiple Choice

Expenditures

Encumbrances

Plant assets

Accounts Payable

Fund Balance-Reserve for Encumbrances

Expenditures

What is the purpose of a special revenue fund?

Multiple Choice

To account for ongoing activities.

To account for revenues legally or externally restricted as an operating expenditure.

To account for the cost of long-lived assets bought with designated funds.

To account for gifts when only subsequently earned income can be expended.

To account for revenues legally or externally restricted as an operating expenditure.

What is the purpose of enterprise funds?

Multiple Choice

To account for ongoing activities such as the police and fire departments.

To account for asset transfers.

To account for operations financed in whole or in part by outside user charges.

To account for operations that provide services to other departments within a government.

To account for operations financed in whole or in part by outside user charges.

Which of the following statements is true?

Multiple Choice

There are three different types of fiduciary funds.

There are three different types of proprietary funds.

There are five different types of governmental funds.

There are five different types of fiduciary funds.

There are five different types of governmental funds.

A citizen donates investments valued at $22,000 to the City of Townsend. The citizen stipulates that the investments be held. Any resulting income must be used to help maintain the city’s cemetery. In which fund should the city report this investment?

Multiple Choice

Permanent funds.

General fund.

Special revenue funds.

Capital projects funds.

Permanent funds.

During the current year, the City of West buys land for $80,000. Which of the following is not a possibility?

Multiple Choice

• The land could be reported as an asset by the governmental activities in the government-wide financial statements.

• The land could be reported as an asset by the proprietary funds in the fund financial statements.

• The land could be reported as an asset by the business-type activities in the government-wide financial statements.

• The land could be reported as an asset by the governmental funds in the fund financial statements.

• The land could be reported as an asset by the governmental funds in the fund financial statements.

At the end of the current year, a government reports $9,000 as a fund balance—assigned in connection with an encumbrance. What information does this balance convey?

Multiple Choice

The government has made $9,000 in commitments in one year that will be honored in the subsequent year.

The government spent $9,000 less during the year than was appropriated.

A donor has given the government $9,000 that must be used in a specified fashion.

Encumbrances exceeded expenditures by $9,000 during the current year.

The government has made $9,000 in commitments in one year that will be honored in the subsequent year.

A government buys equipment for its police department at a cost of $54,000. Which of the following is not true?

Multiple Choice

• An expenditure for $54,000 will be reported in the fund financial statements.

• The equipment will not appear within the reported assets in the fund financial statements.

• Equipment will increase by $54,000 in the government-wide financial statements.

• Depreciation in connection with this equipment will be reported in the fund financial statements.

• Depreciation in connection with this equipment will be reported in the fund financial statements.

A city acquires supplies for its fire department and uses the consumption method of accounting. Which of the following statements is true for the fund financial statements?

Multiple Choice

• An expense is recorded as the supplies are consumed.

• An expenditures account is debited at the time of receipt.

• The supplies are recorded within the General Fixed Assets Account Group.

• An inventory account is debited at the time of the acquisition.

• An inventory account is debited at the time of the acquisition.

The state government passes a law requiring all localities to upgrade their water treatment facilities. The state then awards a grant of $500,000 to the Town of Midlothian to help pay for the resulting cost. What type of revenue is this grant?

Multiple Choice

• Derived tax revenue

• Imposed nonexchange revenue

• Voluntary nonexchange transaction

• Government-mandated nonexchange transaction

• Government-mandated nonexchange transaction

A city issues five-year bonds payable to finance construction of a new school. What recording should be made?

Multiple Choice

Report the liability in the government-wide financial statements. Show an other financing source in the fund financial statements.

Report a liability in both the government-wide financial statements and the fund financial statements.

Show an other financing source in both the government-wide financial statements and the fund financial statements.

Show an other financing source in the government-wide financial statements. Report a liability in the fund financial statements.

Report the liability in the government-wide financial statements. Show an other financing source in the fund financial statements.

Which of the following is an example of an interactivity transaction?

Multiple Choice

A city transfers money from the general fund to an enterprise fund.

A city transfers money from a special revenue fund to a debt service fund.

A city transfers money from the general fund to a debt service fund.

A city transfers money from a capital projects fund to the general fund.

A city transfers money from the general fund to an enterprise fund.

A county transfers cash of $60,000 from its general fund to a debt service fund. What is reported on the county's fund financial statements?

Multiple Choice

Other Financing Sources increase by $60,000. Other Financing Uses increase by $60,000.

No reporting is made.

Revenues increase by $60,000. Expenditures increase by $60,000.

Revenues increase by $60,000. Expenses increase by $60,000.

Other Financing Sources increase by $60,000. Other Financing Uses increase by $60,000.

A city received a grant of $5,000,000 from a private agency. The money was to be used to build a new city library. In which fund should the money be recorded for the governmental fund financial statements?

Multiple Choice

The General Fund.

An Expendable Trust Fund.

A Capital Projects Fund.

An Agency Fund.

A Permanent Fund.

A Capital Projects Fund.

Who are the primary users for whom Government Accounting rules were designed?

Stockholders

The Internal Revenue Service

Foreign governments

Taxpayers and other citizens

Taxpayers and other citizens

What is the name of the body authorized to issue state and local government accounting standards?

The FASB

The AICPA

The IASB

The GASB

The GASB

When should revenues be recognized under modified accrual accounting?

When cash is reasonably expected to be received

When they are measurable and available to be used

When the performance obligations have been satisfied

When cash has been received

When they are measurable and available to be used

When should expenditures be recognized under modified accrual accounting?

When they reduce current financial resources.

When the commitment to spend the money has been made

When cash has been paid

When the cash payment is first budgeted

When they reduce current financial resources.

How many days after the fiscal year end can property taxes be collected and still be counted as revenue in the current fiscal year?

Up to 90 days

Up to 30 days

Up to 60 days

Up to 120 days

Up to 60 days

Which set of government financial statements use full accrual accounting similar to U.S. GAAP in the private sector?

The balance sheet

Government-wide financial statements

The statement of revenues, expenditures, and other changes in fund balances

Governmental fund financial statements

Government-wide financial statements

What are the three major types of fund categories under fund accounting? Mark all that apply.

Proprietary funds

Governmental funds

Pension trust funds

Fiduciary funds

Fiduciary funds
Proprietary funds
Governmental funds

Proprietary funds use full accrual accounting rather than modified accrual accounting.

Correct answer:

True

False

True

Fiduciary funds are included in government-wide financial statements.

True

False

False

Government-wide financial statements break out all activities into which two categories? Mark all that apply.

Program services

Supporting services

Governmental activities

Business-type activities

Governmental activities

Business-type activities

Which of the following are government-wide financial statements? Mark all that apply.

The statement of revenues, expenditures, and other changes in fund balances

The statement of activities

The balance sheet

The statement of net position

The statement of activities
The statement of net position

Which of the following are governmental fund financial statements? Mark all that apply.

Statement of Activities

Statement of functional expenses

Balance sheet

Statement of revenues, expenditures, and other changes in fund balances

Balance sheet

Statement of revenues, expenditures, and other changes in fund balances

Funds must be separately reported as major funds in governmental fund financial statements of the assets, liabilities, revenues, or expenditures/expenses of that fund are at least

10%

of the corresponding total of that fund type, AND at least

5%

of the corresponding total for all governmental and enterprise funds combined.

The journal entry to record a budget debits estimated revenues, credits "Appropriations" for estimated expenses, and credits the budgeted surplus into an account called:

Excess budget balance

Budgetary fund balance

Available fund balance

Net budgeted surplus

Budgetary fund balance

What is an encumbrance?

A negative budgetary fund balance

An excess of budgetary funds

Another term meaning "liability" used by state and local governments

A commitment to purchase an item

A commitment to purchase an item

What are the alternative methods for recording the acquisition of supplies and prepaid items in governmental fund accounting? Mark all that apply.

Consumption method

Pooling method

Acquisition method

Purchases method

Consumption method
Purchases method

Match each category of nonexchange revenue with its appropriate description.

Imposed nonexchange revenues

Includes property taxes, fines, and penalties

Voluntary nonexchange transactions

Money conveyed to a government for a particular purpose but not for a required program

Government-mandated nonexchange transactions

Grants conveyed from one government to another to help cover the cost of a required program

Derived tax revenues

Occur when an underlying triggering event takes place

Which of the following statements about intra-activity or inter-activity transfers is FALSE?

Intra-activity transfers are within governmental funds or within proprietary funds.

A transfer from the general fund to a debt service fund is an example of an intra-activity transfer.

A transfer from an enterprise fund to a capital projects fund is an example of an intra-activity transfer.

Inter-activity transfers are from a governmental fund to a proprietary fund, or vice-versa.

A transfer from an enterprise fund to a capital projects fund is an example of an intra-activity transfer.