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Sample Test Accounting for Governmental and Nonprofit Entities, 18e (Reck) Chapter 3 Governmental Operating Statement Accounts; Budgetary Accounting 1) The governmentwide statement of net position displays the net expense or revenue for each function or program of the government. Answer: FALSE Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember
AACSB: Knowledge Application AICPA: FN Reporting 2) Program revenues are distinguished from general revenues on the governmentwide statement of activities under GASB standards. Answer: TRUE Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 3) Three categories of program revenues are reported in the statement of activities: charges for services, operating grants and contributions, and capital grants and contributions. Answer: TRUE Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting
4) All purchases of goods and services and all interfund transfers of the General Fund are recorded as Expenditures. Answer: FALSE Difficulty: 1 Easy Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 5) Interfund transfers are shown as general revenues on the governmentwide statement of activities. Answer: FALSE Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting
6) Contributions to permanent funds are shown on a separate line below the general revenues on the governmentwide statement of activities. Answer: TRUE Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 7) On the governmentwide statement of activities, depreciation expense for assets that essentially benefit all functions, such as the city hall, may be reported as a separate line item or on the same line as the General Government or similar function. Answer: TRUE Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting
8) Other financing sources and uses are disclosed in a separate section below expenditures on the statement of revenues, expenditures, and changes in fund balances. Answer: TRUE Difficulty: 1 Easy Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 9) Expenses represent the costs to purchase goods or services, whereas expenditures represent the costs of goods or services consumed or expired during the period. Answer: FALSE Difficulty: 1 Easy Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting
10) Other financing sources increase fund balance in the same manner as revenues. Answer: TRUE Difficulty: 1 Easy Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 11) Budgetary accounts used in the General Fund include Estimated Revenues, Estimated Other Financing Sources, Appropriations, Estimated Other Financing Uses, and Encumbrances. Answer: TRUE Difficulty: 1 Easy Topic: Reporting budgeted and actual results Learning Objective: 0303 Discuss budgetary reporting. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 12) All encumbrances must be closed at yearend.
Answer: FALSE Difficulty: 1 Easy Topic: Reporting budgeted and actual results Learning Objective: 0303 Discuss budgetary reporting. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 13) An encumbrance represents the estimated future liability for goods or services resulting from placing a purchase order or signing a contract. Answer: TRUE Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 14) GASB standards require that all state and local governments present a statement of revenues, expenditures, and changes in fund balances—budget and actual for the General Fund and major special revenue funds for which annual budgets have been legally adopted. Answer: FALSE Difficulty: 2 Medium
Topic: Reporting budgeted and actual results Learning Objective: 0303 Discuss budgetary reporting. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 15) Available means that a revenue or other financing source is expected to be collected during the current fiscal period or within one month of the fiscal year end. Answer: FALSE Difficulty: 1 Easy Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 16) The legal level of budgetary control represents the administrative level at which expenditures may not exceed appropriations without a formal budgetary amendment. Answer: TRUE Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such
aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 17) “Available appropriation” is calculated as the difference between appropriations and the sum of expenditures and encumbrances. Answer: TRUE Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 18) When goods for which an encumbrance has been recorded are received at an invoiced amount that varies from the amount encumbered, the encumbrance is reversed in the amount of the actual invoiced cost of the goods. Answer: FALSE Difficulty: 1 Easy
Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 19) An allotment may be described as an internal allocation of funds on a periodic basis usually agreed upon by the department heads and the chief executive. Answer: TRUE Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 20) In the GASB reporting model, extraordinary items and special items must be reported as separate line items below General Revenues in the statement of activities to distinguish these nonrecurring items from normal recurring general revenues. Answer: TRUE
Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 21) The numerical difference between (1) current assets and deferred outflows and (2) current liabilities and deferred inflows recorded in governmental funds is denoted as net position. Answer: FALSE Difficulty: 1 Easy Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 22) Encumbrance accounting is required in the accounting for payroll of governmental funds.
Answer: FALSE Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 23) When an activity accounted for by the General Fund results in issuance of purchase orders or contracts for goods or services a record must be kept, but no journal entries in the General Fund are necessary. Answer: FALSE Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting
24) Any balance in Encumbrances Outstanding that remains at the end of the fiscal year is reported as a line item under Fund Balances on the governmental funds balance sheet. Answer: FALSE Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 25) At the end of the fiscal year Encumbrances is closed to Budgetary Fund Balance with a credit. Answer: FALSE Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting
26) Public school systems tend to follow the revenue and expenditure classifications of the National Center for Education Statistics rather than the GASB classifications. Answer: TRUE Difficulty: 1 Easy Topic: Accounting for public school systems Learning Objective: 0306 Explain the classification of revenues and expenditures of a public school system. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 27) The fund classification system used by public schools follows the GASB standards. Answer: TRUE Difficulty: 1 Easy Topic: Accounting for public school systems Learning Objective: 0306 Explain the classification of revenues and expenditures of a public school system. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting
28) Public school systems prepare their financial reports in accordance with the requirements of the National Center for Education Statistics. Answer: FALSE Difficulty: 1 Easy Topic: Accounting for public school systems Learning Objective: 0306 Explain the classification of revenues and expenditures of a public school system. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 29) Which of the following best describes the recommended format for the governmentwide statement of activities? 1. A) Program revenues minus expenses minus other revenues and expenses equals change in net position. 2. B) Program revenues plus general revenues minus expenses equals change in net position. 3. C) Program revenues minus expenses plus general revenues equals change in net position. 4. D) Expenses minus program revenues plus general revenues equals change in net position. Answer: D Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities.
Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 30) Which of the following statements is not a true statement about expenses that are directly related to a government function or program? 1. A) They are reported in the governmentwide statement of activities at the governmentwide level. 2. B) They include expenses that are specifically associated with a function or program. 3. C) They include interest on general longterm liabilities. 4. D) They include depreciation expense on capital assets that are clearly identified with a function or program. Answer: C Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 31) Which of the following is not a category of program revenue reported on the statement of activities at the governmentwide level?
1. A) General program revenues. 2. B) Charges for services. 3. C) Operating grants and contributions. 4. D) Capital grants and contributions. Answer: A Difficulty: 1 Easy Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 32) Extraordinary items and special items are reported on the government wide statement of activities. 1. A) With normal recurring general revenues. 2. B) As separate line items in the Function/Programs section of the statement of activities. 3. C) As separate line items below General Revenues in the statement of activities. 4. D) As separate line items above General Revenues.
Answer: C Difficulty: 2 Medium Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 33) Which of the following items would not appear in a statement of revenues, expenditures, and changes in fund balances prepared for a governmental fund? 1. A) Depreciation expense. 2. B) Interfund transfers in. 3. C) Revenues from property taxes. 4. D) Expenditures for employee salaries. Answer: A Difficulty: 1 Easy Topic: Structure and characteristics of the General Fund and other governmental funds; Governmental Fund Revenues and Expenditures Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application
AICPA: FN Reporting 34) Which of the following would always be classified as a general revenue? 1. A) Grant proceeds. 2. B) Special assessment charges for snow removal. 3. C) Library fines. 4. D) Fuel taxes earmarked for maintenance of roads and bridges. Answer: D Difficulty: 2 Medium Topic: Reporting of expenses and revenues at the governmentwide level Learning Objective: 0301 Describe how operating revenues and expenses related to governmental activities are reported in the governmentwide statement of activities. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting 35) The cost to purchase a good or service is the definition of an 1. A) Expenditure. 2. B) Expense. 3. C) Other financing use. 4. D) Interfund transfer out. Answer: A Difficulty: 1 Easy
Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 36) Which of the following would not appear on a governmental fund balance sheet? 1. A) Accounts receivable. 2. B) Inventory. 3. C) Vouchers payable. 4. D) Bonds payable. Answer: D Difficulty: 2 Medium Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 37) When the budget for the General Fund is recorded, the required journal entry will include:
1. A) A credit to Estimated Revenues. 2. B) A debit to Encumbrances. 3. C) A credit to Appropriations. 4. D) A credit to Fund Balance. Answer: C Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting 38) When the budget of a government is recorded and Appropriations exceeds Estimated Revenues, the Budgetary Fund Balance account is: 1. A) Credited at the beginning of the year and debited at the end of the year. 2. B) Credited at the beginning of the year and no entry is made at the end of the year. 3. C) Debited at the beginning of the year and no entry is made at the end of the year. 4. D) Debited at the beginning of the year and credited at the end of the year.
Answer: D Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 39) Which of the following accounts is a budgetary account of a governmental fund? 1. A) Encumbrances. 2. B) Appropriations. 3. C) Expenditures. 4. D) Other Financing Sources. Answer: B Difficulty: 1 Easy Topic: Reporting budgeted and actual results Learning Objective: 0303 Discuss budgetary reporting. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting
40) The Estimated Revenues control account of a government is credited when:
Budgetary accountsare closed
Reven
A)
Yes
No
B)
No
No
C)
No
Yes
D)
Yes
Yes
1. A) Choice A. 2. B) Choice B. 3. C) Choice C. 4. D) Choice D. Answer: A Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting
41) Under the modified accrual basis of accounting used by the General Fund, financial resources are considered available if the revenue or other financing source is expected to be collected 1. A) Within 60 days after yearend. 2. B) Within 90 days after yearend. 3. C) During the current fiscal period. 4. D) During the current fiscal period or soon enough after yearend to pay current period obligations. Answer: D Difficulty: 2 Medium Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 42) Which of the following accounts of a government is credited when a purchase order is approved? 1. A) Encumbrances. 2. B) Encumbrances Outstanding. 3. C) Vouchers Payable. 4. D) Appropriations. Answer: B
Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting 43) The Expenditures control account of a government is debited when: 1. A) The supplies budget is recorded. 2. B) Supplies are ordered. 3. C) Supplies previously encumbered are received. 4. D) The invoice for supplies is paid. Answer: C Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply
AACSB: Knowledge Application AICPA: FN Reporting 44) Which of the following is true regarding other financing sources and other financing uses? 1. A) Both must be reported separately from revenues and expenditures in the statement of revenues, expenditures, and changes in fund balances. 2. B) These terms are used to distinguish program revenues or expenses from general revenues or expenses. 3. C) These terms are used for minor revenue or expenditure items that are peripheral to the government’s mission. 4. D) Other financing sources are equivalent to gains and other financing uses are equivalent to losses. Answer: A Difficulty: 2 Medium Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 45) Under which basis of accounting for a government should revenues be recognized in the period when they are measurable and available?
Accrual basis
Modified accrual basis
A)
Yes
No
B)
No
No
C)
No
Yes
D)
Yes
Yes
1. A) Choice A. 2. B) Choice B. 3. C) Choice C. 4. D) Choice D. Answer: C Difficulty: 1 Easy Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 46) The expenditure classification “Public Safety” is an example of which of the following types of classifications? 1. A) Activity. 2. B) Function. 3. C) Character.
4. D) Object. Answer: B Difficulty: 1 Easy Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 47) When supplies ordered for use in an activity accounted for in the General Fund are received at an actual price that is more than the estimated price on the purchase order, the Encumbrance account is: 1. A) Debited for the estimated price on the purchase order. 2. B) Credited for the estimated price on the purchase order. 3. C) Debited for the actual price for the supplies received. 4. D) Credited for the actual price for the supplies received. Answer: B Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for
revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 48) A statement of revenues, expenditures, and changes in fund balances— budget and actual is: 1. A) Required by GAAP for the General Fund, special revenue funds, and all other governmental fund types for which an annual budget has been adopted. 2. B) Required by GAAP for internal management reports only; not permitted for external financial reporting. 3. C) Required by GAAP for all governmental fund types. 4. D) Optional under GAAP, as long as a budgetary comparison schedule is presented. Answer: D Difficulty: 3 Hard Topic: Reporting budgeted and actual results Learning Objective: 0303 Discuss budgetary reporting. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 49) The account “Interfund Transfers In” would be classified in a General Fund statement of revenues, expenditures, and changes in fund balance as a(an):
1. A) Revenue. 2. B) Other financing use. 3. C) Other financing source. 4. D) Current liability. Answer: C Difficulty: 1 Easy Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 50) The expenditure classification “City Attorney” is an example of which of the following types of classification? 1. A) Function. 2. B) Organization unit. 3. C) Character. 4. D) Program. Answer: B Difficulty: 2 Medium
Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 51) When the budget of a government is adopted and Estimated Revenues exceed Appropriations, the excess is: 1. A) Credited to Budgetary Fund Balance. 2. B) Debited to Budgetary Fund Balance. 3. C) Debited to Encumbrances Outstanding. 4. D) Credited to Encumbrances Outstanding. Answer: A Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 52) Which of the following depict the typical order of steps in the acquisition of goods and services by an activity accounted for by the General Fund?
1. A) Appropriation, disbursement, encumbrance, expenditure. 2. B) Appropriation, encumbrance, expenditure, disbursement. 3. C) Encumbrance, appropriation, expenditure, disbursement. 4. D) Encumbrance, expenditure, appropriation, disbursement. Answer: B Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting 53) When equipment that is to be used by the General Fund is received, how should it be recorded? 1. A) Capital Asset. 2. B) Appropriation. 3. C) Encumbrances. 4. D) Expenditure. Answer: D Difficulty: 2 Medium Topic: Budgetary Accounting
Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 54) The journal entry to record budgeted revenues will include: 1. A) A debit to Estimated Revenues. 2. B) A credit to Estimated Revenues. 3. C) A debit to Revenues Receivable. 4. D) Only a memorandum entry is necessary. Answer: A Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 55) The County Commission of Seminole County adopted its General Fund budget for the year ending June 30, comprising estimated revenues of
$13,200,000 and appropriations of $12,900,000. Seminole County utilizes the budgetary accounts required by GASB standards. The journal entry to record budgeted appropriations will include: 1. A) A credit to Appropriations, $12,900,000. 2. B) A credit to Encumbrances, $12,900,000. 3. C) A debit to Estimated Expenditures, $12,900,000. 4. D) A credit to Budgetary Fund Balance, $12,900,000. Answer: A Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting 56) One characteristic that distinguishes other financing sources from revenues is that other financing sources: 1. A) Arise from debt issuances or interfund transfers in. 2. B) Increase fund balances when they are closed at yearend. 3. C) Provide financial resources for the recipient fund.
4. D) Have a normal credit balance. Answer: A Difficulty: 3 Hard Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 57) The process by which a legal valuation is placed on taxable property is called: 1. A) An appropriation. 2. B) A property tax levy. 3. C) Property assessment. 4. D) Ad valorem determination. Answer: C Difficulty: 2 Medium Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Understand
AACSB: Knowledge Application AICPA: FN Reporting 58) The County Commission of Canyon County adopted its General Fund budget for the year ending June 30, comprising estimated revenues of $13,200,000 and appropriations of $12,900,000. The budgeted excess of estimated revenues over appropriations will be recorded as: 1. A) A credit to Surplus Revenues, $300,000. 2. B) A debit to Estimated Excess Revenues, $300,000. 3. C) A credit to Budgetary Fund Balance, $300,000. 4. D) A memorandum entry only. Answer: C Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting 59) When the budget for the General Fund is recorded, the required journal entry will include: 1. A) A credit to Estimated Revenues. 2. B) A debit to Encumbrances.
3. C) A debit to Appropriations. 4. D) Either a debit or credit to Budgetary Fund Balance, as appropriate. Answer: D Difficulty: 1 Easy Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Apply AACSB: Knowledge Application AICPA: FN Reporting 60) Which of the following accounts is not closed at the end of the reporting period? 1. A) Deferred inflows of resources. 2. B) Revenues. 3. C) Expenditures. 4. D) Other financing sources. Answer: A Difficulty: 3 Hard Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for
revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 61) The expenditure classification “Current Expenditures” is an example of which of the following types of classifications? 1. A) Activity. 2. B) Character. 3. C) Function. 4. D) Object. Answer: B Difficulty: 2 Medium Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 62) Which of the following statements is true regarding the required disclosure of budgetary information? 1. A) All budgetary disclosures should be presented in the notes to the financial statements.
2. B) There is one specific format for presenting the budgetary comparison statement. 3. C) Budgetary comparisons may be presented as a statement or as required supplementary information (RSI). 4. D) The budgetary reconciliation must focus on the operating statement, but not the statement of position. Answer: C Difficulty: 2 Medium Topic: Reporting budgeted and actual results Learning Objective: 0303 Discuss budgetary reporting. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 63) The Encumbrances control account of a city is decreased when
Goods are ordered
Goods are re
A)
Yes
No
B)
No
No
C)
No
Yes
D)
Yes
Yes
1. A) Choice A. 2. B) Choice B. 3. C) Choice C.
4. D) Choice D. Answer: C Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 64) Under the modified accrual basis of accounting, expenditures generally are not recognized until: 1. A) They are paid in cash. 2. B) An obligation is incurred that will be paid from currently available financial resources. 3. C) Goods or services are ordered. 4. D) They are approved by the legislative body. Answer: B Difficulty: 2 Medium Topic: Structure and characteristics of the General Fund and other governmental funds
Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 65) Which of the following fund types uses the current financial resources measurement focus and modified accrual basis of accounting? 1. A) Enterprise fund. 2. B) Special revenue fund. 3. C) Investment trust fund. 4. D) Pension trust fund. Answer: B Difficulty: 2 Medium Topic: Structure and characteristics of the General Fund and other governmental funds Learning Objective: 0302 Distinguish, in governmental funds, between Revenues and Other Financing Sources and between Expenditures and Other Financing Uses. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 66) Which of the following will increase the fund balance of a government at the end of the fiscal year?
1. A) The sum of revenues and other financing sources is more than the sum of expenditures and other financing uses. 2. B) Expenditures are more than the difference between revenues and the excess of other financing sources over other financing uses. 3. C) Revenues are less than the sum of expenditures, other financing sources, and other financing uses. 4. D) The sum of fund balance, revenues, and other financing sources is more than the sum of expenditures and other financing uses. Answer: A Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 67) A liability is recorded in governmental funds when: 1. A) Goods or services are ordered. 2. B) Goods or services are received and the invoice is vouchered. 3. C) Invoices are paid. 4. D) The appropriation is reduced. Answer: B
Difficulty: 2 Medium Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 68) Which of the following terms refers to an actual cost rather than an estimate? 1. A) Budget. 2. B) Encumbrance. 3. C) Expenditure. 4. D) Appropriation. Answer: C Difficulty: 2 Medium Topic: Terminology and classification for budgetary and operating statement accounts Learning Objective: 0304 Explain how budgetary and operating statement accounts are classified in the governmental funds. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting
69) For what funds do budgetary comparisons need to be presented in connection with the basic financial statements? 1. A) General Fund. 2. B) General Fund and all major funds. 3. C) All governmental funds with legally adopted annual budgets. 4. D) General Fund and major special revenue funds for which a budget is legally adopted. Answer: D Difficulty: 2 Medium Topic: Reporting budgeted and actual results Learning Objective: 0303 Discuss budgetary reporting. Bloom’s: Remember AACSB: Knowledge Application AICPA: FN Reporting 70) When computers are ordered by the mayor’s office, the purchase order should be recorded in the General Fund as a debit to: 1. A) Encumbrances. 2. B) Equipment. 3. C) Expenditures. 4. D) Appropriations. Answer: A Difficulty: 2 Medium Topic: Budgetary Accounting
Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting 71) If supplies that were ordered by a department financed by the General Fund are received at an actual price that is less than the estimated price on the purchase order, the department’s available balance of appropriations for supplies will be: 1. A) Decreased. 2. B) Increased. 3. C) Unaffected. 4. D) Either a or b, depending on the department’s specific budgetary control procedures. Answer: B Difficulty: 3 Hard Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application
AICPA: FN Reporting 72) The Appropriations account of a governmental fund is credited when: 1. A) The budgetary accounts are closed. 2. B) The budget is recorded. 3. C) Supplies are purchased. 4. D) Expenditures are recorded. Answer: B Difficulty: 2 Medium Topic: Budgetary Accounting Learning Objective: 0305 Explain how budgetary accounting contributes to achieving budgetary control over revenues and expenditures, including such aspects as: recording and revising the annual budget; accounting for revenues, encumbrances, and expenditures; closing budgetary accounts; and accounting for allotments. Bloom’s: Understand AACSB: Knowledge Application AICPA: FN Reporting