1.

Which of the following characteristics distinguishes a governmental or not-forprofit entity from a business entity? a) There is always a direct link between revenues generated and expenditures/expenses incurred. b) Capital assets are used to produce revenues and save costs. c) Revenues are always indicative of demand for goods and services. d) The mission of the entity will determine the goods or services provided.

2. a) b) c) d)

The most significant financial document provided by a governmental entity is the

The balance sheet. The operating statement. The operating budget. The cash flow statement.

3. To obtain a comprehensive understanding of a governments fiscal health, a financial analyst should obtain an understanding of which of the following? a) All of the resources owned by the governmental entity. b) All of the resources which may be summoned by a governmental entity. c) Demographic data about the residents served by the governmental entity. d) All of the above. 4. Which of the following is NOT a purpose of external financial reporting by governments? External financial reports should allow users to a) Assess financial condition. b) Compare actual results with the budget. c) Assess the ability of elected officials to effectively manage people. d) Evaluate efficiency and effectiveness. 5. Which of the following is an objective of financial reporting by governmental entities as established by GASB? a) Financial reporting should assist users in assessing the management skills of top management. b) Financial reporting should assist users in determining if currentperiod revenues were sufficient to pay for current-period services.

c) Financial reporting should assist users in evaluating the cash management operations of the governmental entity for the year. d) Financial reporting should assist users in assessing whether the government provided appropriate services to its constituents in the current year. 6. The Governmental Accounting Standards Board is the primary standard-setting body for: a) b) c) d) 7. A fund is a) b) c) d) All governments. All state and local governments. All governments and all not-for-profit entities. All state and local governments and all not-for-profit entities.

A separate legal entity. A separate fiscal and accounting entity. A separate self-balancing set of accounts for inventory purposes. None of the above.

8. Which of the following funds is a fiduciary fund? a) Permanent fund. b) Agency fund. c) Capital project fund. d) Debt service fund. 9. A city receives a donation from a citizen who specifies that the principal must be invested and the earnings must be used to support operations of a city-owned recreational facility. The principal of this gift should be accounted for in which of the following funds? a) Trust fund. b) Special revenue fund. c) Permanent fund. d) Internal service fund. 10. Which of the following funds is a proprietary fund? a) b) c) d) Internal service fund. Special revenue fund. Capital project fund. Permanent fund.

11. The City of San Jose built a new city hall and financed construction by issuing bonds due in installments over the next 30 years. The bond principal and interest

will be paid by a special tax levied on property in the City. The revenue received from this special tax should be accounted for in which of the following funds? a) b) c) d) General fund. Internal service fund. Capital project fund. Debt service fund.

12. Riverside Golf Course is a City-owned golf course that collects greens fees in amounts sufficient to cover its expenses. Riverside Golf Course should be accounted for in which of the following funds? a) b) c) d) Internal service fund. Enterprise fund. General fund. Special revenue fund.

13. Which of the following statements is NOT required in the financial reports of a notfor-profit entity? a) b) c) d) Statement of Position. Statement of Restricted Funds. Statement of Activities. Statement of Cash Flows.

14. Which of the following is NOT a function of a budget in the governmental environment? a) b) c) d) Planning. Organizing. Controlling. Evaluating.

15. Which of the following bases of accounting has been established by GASB for use in the preparation of the general fund budget? a) b) c) d) Cash basis. Modified accrual basis. Accrual basis. None of the above.

16. A governmental entity has formally integrated the budget into its accounting records and uses encumbrance accounting. During the year the government ordered but had not yet received a new police car. What effect will this event

have on the unencumbered balance in the account ExpendituresCapital Outlay, Police Department? a) The balance in the account will not be affected until the police car is received. b) The balance in the account will be increased. c) The balance in the account will be decreased. d) Purchase orders never affect any budgetary account balances. 17. To close Encumbrances at the end of the year which of the following entries should be made? a) b) c) d) Debit Encumbrances; Credit Fund Balance. Debit Reserve for Encumbrances; Credit Encumbrances. Debit Fund Balance; Credit Encumbrances. No closing entry needed.

18. Which of the following is the best reason for preparing budgets for governmental entities on the cash basis? a) Cash basis budgeting helps to achieve interperiod equity. b) Cash basis budgeting helps to ensure that the government will receive no more in revenues than it is required to disburse. c) Cash basis budgeting helps a government plan to have cash on hand to pay bills d) Cash basis budgeting more accurately reflects the economic impact of fiscal activities. 19. A county general fund budget includes budgeted revenues of $600 and budgeted expenditures of $595. Actual revenues for the year were $610. To close the Estimated Revenues account at the end of the year a) b) c) d) Debit Estimated Revenues $10 Credit Estimated Revenue $10 Debit Estimated Revenues $600 Credit Estimated Revenues $600

20. Which of the following is the primary reason why governments formally integrate their legally adopted budget into their accounting systems? a) It is required by GASB. b) It enables the government to better control its expenditures. c) It keeps the government from overspending its budget. d) It helps a government by letting it know when it is in danger of overspending its budget.