ACCTG471 accounting questions

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1. Governmental
funds are identical to governmental activities, proprietary funds are identical
to business-type activities, and fiduciary funds are identical to fiduciary
activities of a government.
True False

2. An
objective of the accounting system for a state or a local government is to make
it possible both to present fairly the funds and activities of the government
in conformity with generally accepted accounting principles and to demonstrate
compliance with finance-related legal and contractual provisions.
True False

3. Individual
fund financial information is reported in separate columns of governmental and
proprietary fund financial statements for only those funds that meet the GASB
size-related criteria as major funds.
True False

4. Economic
resources are cash or items expected to be converted into cash during the
current period, or soon enough thereafter to pay current period
liabilities.
True False

5. A
fund is an accounting but not a fiscal entity.
True False

6. The
types of funds that may be used in governmental accounting are classified into
the three categories of governmental, proprietary, and fiduciary.
True False

7. The
governmental funds category includes the General Fund, special revenue funds,
debt service funds, capital projects funds, and internal service funds.
True False

8. Governments
can, in part, demonstrate operational accountability by reporting proprietary
and fiduciary fund financial information, as well as all government-wide
financial information, using an economic resources measurement focus and the
accrual basis of accounting.
True False

9. All
capital assets acquired by or used by a fund should be reported in the fund
balance sheet or statement of net assets.
True False

10. Because
budgetary accounts are used by governments, their financial statements can
never be said to be in accord with generally accepted accounting
principles.
True False

Multiple Choice Questions

11. The
accounting system used by a state or local government must make it
possible
A. To present fairly the financial position and results of financial
operations of the government as a whole, as well as fund financial activity in
conformity with GAAP, and to demonstrate compliance with finance-related legal
and contractual provisions.
B. To prepare financial statements as required by the Financial Accounting
Standards Board.
C. To prepare consolidated accrual basis statements for the government as
a whole.
D. To provide Web-based bond offering statements to investment firms.

12. Which
of the following is not a characteristic of a fund as defined by GASB
standards?
A. An accounting entity.
B. A fiscal entity.
C. A segregated quantity of cash and other financial resources on deposit
with a designated trustee.
D. A self-balancing set of accounts.

13. In
accounting for state and local governments the modified accrual basis is
required for
A. Proprietary and fiduciary funds.
B. Governmental funds only.
C. Proprietary funds only.
D. All funds.

14. Under
the modified accrual basis of accounting, revenues should be recognized
when
A. Earned.
B. Collected in cash.
C. Authorized by the budget ordinance.
D. Measurable and available.

15. The
accrual basis of accounting applicable to proprietary fund types requires that
exchange revenues be recognized when
A. Earned.
B. Collected in cash.
C. Authorized by the budget ordinance.
D. Measurable and available.

16. Which
of the following funds is a governmental fund-type?
A. Private-purpose trust fund.
B. Internal service fund.
C. Permanent fund.
D. Enterprise fund.

17. Financial
resources set aside to pay principal and interest on general long-term debt may
be accounted for in which of the following fund types?
A. Private-purpose trust fund.
B. Debt service fund.
C. Principal and interest trust fund.
D. Internal service fund.

18. According
to GASB standards transfers should be recognized
A. When earned.
B. When collected in cash.
C. When authorized by the budget ordinance.
D. In the period the interfund receivable and payable arise.

19. Generally
accepted accounting principles applicable to state and local governments
require that
A. Only governmental funds and proprietary funds should be provided.
B. Only those funds required by law, GASB standards, and sound financial
administration should be provided.
C. Only those funds required by law should be provided.
D. All categories of funds must be provided.

20. Which
of the following is a proprietary fund?
A. Special revenue fund.
B. Investment trust fund.
C. Debt service fund.
D. Internal service fund.

21. Which
of the following is a fiduciary fund?
A. Investment trust fund.
B. Special revenue fund.
C. Debt service fund.
D. Enterprise fund.

22. Which
of the following funds would be most appropriate for accounting for an activity
that provides goods or services to the public for a fee that is intended to
make the activity self-supporting?
A. Investment trust fund.
B. Enterprise fund.
C. Internal service fund.
D. Special revenue fund.

23. Which
of the following funds should be used if resources provided by a federal grant
must be segregated and used for counseling of youthful offenders?
A. Private-purpose trust fund.
B. Enterprise fund.
C. Internal service fund.
D. Special revenue fund.

24. Which
of the following funds would be used to account for an activity that provides
centralized purchasing and sales of goods or services to other departments or
agencies of the governmental, or to other governments, on a cost-reimbursement
basis?
A. Enterprise fund.
B. Fiduciary fund.
C. Internal service fund.
D. Permanent fund.

25. Budgetary
comparison schedules presenting budgeted versus actual revenues and
expenditures are
A. Optional under GASB standards for all funds.
B. Required by GAAP for internal management reports only; not permitted
for external financial reporting.
C. Required by GAAP for the General Fund and major special revenue funds
for which an annual budget has been legally adopted.
D. Required by GAAP for all governmental fund types.

26. In
which of the following funds would it not be appropriate to record
depreciation of capital assets?
A. Special revenue fund.
B. Enterprise.
C. Internal service.
D. Pension trust.

27. Capital
assets used by departments accounted for by the General Fund of a governmental
unit should be accounted for in
A. The General Fund.
B. The governmental activities journal.
C. The business-type activities journal.
D. The general capital assets fund.

28. Reporting
fund financial information in separate columns for each major fund and
aggregate information for nonmajor funds
A. Means that only those funds that meet the GASB’s 10 percent and 5
percent rules are reported in separate columns.
B. Is optional under GAAP, but is generally required by state laws for
governments.
C. Is the same manner of reporting used by business organizations.
D. Is required by generally accepted accounting principles for state and
local governments.

29. Capital
assets used by an enterprise fund should be accounted for in the
A. Enterprise fund and depreciation on the capital assets should be
recorded.
B. Business-type activities journal but no depreciation on the capital
assets should be recorded.
C. Governmental activities journal and depreciation on the capital assets
should be recorded.
D. Enterprise fund but no depreciation on the capital assets should be
recorded.

30. Which
of the following funds are proprietary funds?
A. Enterprise funds, investment trust funds, pension trust funds, and the
General Fund.
B. Enterprise funds and internal service funds.
C. Internal service funds, special revenue funds, and enterprise funds.
D. Proprietary funds are not used in governmental accounting.

31. Which
of the following funds are governmental funds?
A. General Fund, special revenue funds, capital projects funds, debt
service funds, and private-purpose trust funds.
B. General Fund, special revenue funds, private-purpose trust funds.
C. General Fund, special revenue funds, debt service funds, capital
projects funds, and permanent funds.
D. General Fund, special revenue funds, capital projects funds, debt
service funds, and internal service funds.

32. The
activities of a water utility department, which offers its services to the
general public on a user charge basis, should be accounted for in
A. An enterprise fund.
B. A special revenue fund.
C. The General Fund.
D. An internal service fund.

33. The
measurement focus and basis of accounting that are most unlike those
used by business entities are those used by
A. Governmental funds.
B. Fiduciary funds.
C. Proprietary funds.
D. Contribution funds.

34. Which
of the following organizations should not be included as part of the
governmental reporting entity?
A. A primary government.
B. Legally separate organizations for which the primary government is
financially accountable.
C. Organizations for which the nature and significance of their
relationship with the primary government are such that exclusion would cause
the reporting entity’s financial statements to be misleading or incomplete.
D. Organizations which are legally and fiscally independent of a primary
government.

35. Under
GASB reporting entity standards, a component unit is
A. An organization for which the nature and significance of their
relationship with the primary government are such that exclusion would cause
the reporting entity’s financial statements to be misleading or incomplete.
B. A legally separate organization that is financially independent of a
primary government and on which the primary government cannot impose its will.
C. A large department of a primary government.
D. A not-for-profit organization that is authorized to operate within the
boundaries of a city but is not accountable financially or in other way to the
city.

36. The
basis of accounting that should be used in preparing fund financial statements
is:

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A. Choice A
B. Choice B
C. Choice C
D. Choice D

37. A
major governmental fund is one that has one or more elements (e.g., assets,
liabilities, revenues, or expenditures) that is at least:
A. Five percent of the corresponding element(s) of total governmental
funds and 10 percent of the corresponding element(s) of total governmental and
enterprise funds combined.
B. Ten percent of the corresponding element(s) of total governmental funds
and 10 percent of the corresponding element(s) of total governmental and
enterprise funds combined.
C. Five percent of the corresponding element(s) of total governmental
funds and five percent of the corresponding element(s) of total governmental
and enterprise funds combined.
D. Ten percent of the corresponding element(s) of total governmental funds
and 5 percent of the corresponding element(s) of total governmental and
enterprise funds combined.

Short Answer
Questions

38. The
following are key terms in Chapter 2 that relate to principles of accounting
and financial reporting for state and local governments:
A. Fund equity
B. Modified accrual basis
C. Reporting entity
D. Discrete presentation
E. Component unit
F. Accrual basis
G. Blended presentation
H. Governmental activities

For each of the following definitions, indicate the key term from the list
above that best matches by placing the appropriate letter in the blank space
next to the definition.

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39. The
following are categories of funds described in Chapter 2:
A. Governmental funds
B. Proprietary funds
C. Fiduciary funds

For each of the following descriptive phrases, indicate the type of fund from
the list above that best matches by placing the appropriate letter in the blank
space next to the phrase.

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Essay Questions

40. “Generally
accepted accounting principles include both those principles established by the
Governmental Accounting Standards Board and those required by state laws.”
Indicate whether this statement is true or false and explain why.

41. Explain
the difference between measurement focus and basis of accounting. Also, explain
the difference between the economic resources measurement focus and the current
financial resources measurement focus as well as the difference between the
accrual and modified accrual bases of accounting. Which funds and
government-wide activities use each focus and each basis?

42. “The
primary purpose of an accounting system for a state or a local government is to
make it possible for financial statements to demonstrate compliance with
finance-related legal and contractual provisions.” Explain why you believe
this statement to be correct or incorrect.

43. Distinguish
between a blended presentation of financial data for a component unit and a
discrete presentation.

44. “Capital
assets of a government unit should always be reported on the same basis as a
business—depreciated historical cost.” Do you agree? Why or why not?

45. Describe
the basic financial statements required by GASB standards and briefly explain
their purposes.

46. “Because
budgetary accounts are used by governments, their financial statements can
never be said to be in accord with generally accepted accounting
principles.” Comment.

47. List
the seven fund financial statements that are required as part of the basic
financial statements by GASB standards. What measurement focus and basis of
accounting should be used in preparing each of these statements?

48. Explain
the nature of the three major activity categories of a state or local
government: governmental activities, business-type activities, and fiduciary
activities. Provide examples of each.

49. Describe
why a combining balance sheet might be prepared for governmental funds of a
government.

50. Describe
the comprehensive annual financial report (CAFR) described in the Annual
Financial Reports principle. What are the sections of the report and which
components of the organization should it include? Is a CAFR required?

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