Test Bank For Accounting for Governmental and Nonprofit Entities 17th Edition By Reck and Lowensohn
Chapter 02 Principles of Accounting and Financial
Reporting for State and Local Governments
True / False Questions
1. Governmental activities are to be classified as governmental or business-type.
True False
2. 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
3. Only those governmental and proprietary funds that meet the GASB size criteria for major funds are reported in separate columns of the governmental and proprietary fund financial statements.
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. Governmental funds account for assets but not the liabilities.
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 position.
True False
10. Because budgetary accounts are used by governments, government financial statements can never be said to be in accord with generally accepted accounting principles.
True False
11. The maximum sets of fund financial statements a government would present are three.
True False
12. When revenues are legally restricted by external resource providers or committed by enabling legislation for particular operating purposes, a private purpose trust fund is created.
True False
13. A debt service fund is used to account for financial resources segregated for the purpose of making principal and interest payments on general long-term debt.
True False
14. A deferred inflow of resources is defined as “an acquisition of net assets by the government that is applicable to a future reporting period.”
True False
15. Expenditures are never recorded in governmental funds.
True False
16. Deferred outflow of resources is a type of asset that is unique to government.
True False
17. Revenues is an example of what the GASB terms an inflow of resources.
True False
18. An expenditure is an example of what the GASB terms an outflow of resources.
True False
19. Deferred inflow of resources and deferred outflow of resources would be shown in separate sections of a government’s statement of net position.
True False
20. In accordance with GASB standards, a deferred inflow of resources is reported on the financial statements the same as an unearned revenue.
True False
21. The GASB concept statements indicate that an asset that is going to be converted to cash should be reported at a remeasured amount at the financial statement date.
True False
22. Proprietary funds primarily provide services to the general public for a fee.
True False
23. A permanent endowment is an example of a nonspendable fund balance.
True False
24. Assigned fund balances can be either positive or negative.
True False
25. The General Fund is the only fund that can have a positive unassigned fund balance.
True False
26. The positive fund balance in a special revenue fund must at a minimum be reported as assigned.
True False
27. Nonmajor funds are not reported on the fund financial statements.
True False
Multiple Choice Questions
28. Which of the following is true regarding financial reporting for internal service?
A. Internal service funds are reported in the governmental fund financial statements.
B. Internal service funds are aggregated and reported as a major fund 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.
29. 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 reporting entity.
D. A self-balancing set of accounts.
30. In accounting for state and local governments the modified accrual basis is required for
A. Proprietary and fiduciary funds.
B. Governmental funds.
C. Governmental and fiduciary funds.
D. Governmental and internal service funds.
31. 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.
32. 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.
33. 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.
34. 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.
35. 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.
36. Generally accepted accounting principles applicable to state and local governments require that
A. Only governmental funds and proprietary funds should be established.
B. Only those funds required by law, GASB standards, and sound financial administration should be established.
C. Only those funds required by law and sound financial administration should be established.
D. All categories of funds must be established.
37. Which of the following is a proprietary fund?
A. Special revenue fund.
B. Investment trust fund.
C. Debt service fund.
D. Internal service fund.
38. Which of the following is a fiduciary fund?
A. Investment trust fund.
B. Special revenue fund.
C. Debt service fund.
D. Enterprise fund.
39. Which of the following funds would be most appropriate when 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.
40. 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.
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