B. The budgetary entry to record an encumbrance would be a debit to Encumbrances and a
credit to Encumbrances Outstanding.
C. If the actual cost of a purchase exceeds the amount of the original encumbrance, the
original encumbrance is still reversed at the original amount.
D. The recording of an encumbrance is considered to be a budgetary entry.
(Answer: A; Difficult; LO1)
5. As part of a government’s basic financial statements and required supplementary information,
a budgetary comparison statement or schedule should be presented as
A. A basic financial statement.
B. In the other information section of the CAFR.
C. A note to the financial statements.
D. Budgetary reporting is optional for governments.
6. A budgetary comparison schedule is required to include all of the following columns except
A. The original budget.
B. Actual on the GAAP basis.
C. Final revised budget.
D. Actual on the budgetary basis.
7. The purpose of encumbrance accounting is to
A. Manage a government’s cash flows.
B. Avoid expenditures exceeding appropriations.
C. Replace expense accounting in governments.
D. Prevent government waste.
8. The encumbrances method of budgetary reporting
A. Is never allowed by GAAP.
B. Never results in an outstanding encumbrance.
C. Is where outstanding encumbrances are considered to be expenditures.
D. Is always required by GAAP.
9. As part of a government’s basic financial statements and required supplementary information,
a budgetary comparison schedule is required for which funds?
A. All governmental funds.
B. All governmental funds with legally adopted annual budgets.
C. General Fund only.
D. General Fund and certain Special Revenue Funds with legally adopted annual budgets.
10. Legal authority to expend resources is adopted by a city council in the budgeting process.
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These legal authorizations are called
A. Appropriations.
B. Authorizations.
C. Encumbrances.
D. Expenditures.
11. Which of the following does not represent a common approach to budgeting expenditures?
A. Zero-base budgeting.
B. Object-of-expenditure budget.
C. Program budgeting.
D. Marginal increase budgeting.
12. A general budget is often a term used to describe a budget for all of the following except
A. A General Fund.
B. A Special Revenue Fund.
C. An Enterprise Fund.
D. A Debt Service Fund.
13. The most widely used approach to budgeting operating expenditures is
A. Zero-base.
B. Performance approach.
C. Object-of-expenditure.
D. Program and planning-programming-budgeting.
14. Which of the following statements regarding revenue subsidiary ledgers is false?
A. The number of revenue subsidiary ledgers necessary is at the discretion of management.
B. The number of revenue subsidiary ledgers used is limited by the number of broad revenue
categories (e.g., taxes, licenses and permits, intergovernmental) that a governmental
entity reports.
C. Entries to revenue subsidiary ledgers may be made at any time during a fiscal period.
D. Revenue subsidiary ledgers are never required.
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15. The “Unencumbered Balance” in an expenditure subsidiary ledger represents
A. Appropriation less expenditures.
B. Appropriation less encumbrances.
C. Appropriation less expenditures and encumbrances.
D. Estimated revenue less appropriation.
16. Common functional categories of expenditures in governmental funds include all of the
following except
A. Public Safety.
B. Health and Sanitation.
C. Highways and Streets.
D. Utilities.
17. Managers may ration expenditure authority into either monthly or quarterly expenditure
ceilings. This would be an example of
A. An allotment.
B. An allocation.
C. A ration.
D. An appropriation.
18. During the year, Nathan Township amended their General Fund budget to reflect an increase
in appropriations of $50,000 to be funded by an appropriation of existing fund balance. What
would the necessary budgetary entry be to reflect this amendment?
Debit Credit
Revenues
50,000
Budgetary Fund Balance
50,000
Appropriations
50,000
Appropriations
50,000
19. Which of the following budgetary entries would the town of Geneva make upon adoption of
its Special Revenue Fund Budget for the year? Assume the following:
Estimated Revenues $6,400,000
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Debit Credit
Budgetary Fund Balance
Estimated Revenues
320,000
$6,400,000
B. Estimated Revenues
Budgetary Fund Balance
$6,400,000
320,000
Budgetary Fund Balance
Revenues
320,000
$6,400,000
D. Appropriations
Estimated Revenues
$6,400,000
$6,400,000
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20. Which of the following budgetary entries would the township of Brussels make upon
adoption of its General Fund budget for the year? Assume the following:
Estimated Revenues $10,365,000
Appropriations 10,500,000
Estimated Other Financing Sources (OFS) 200,000
Estimated Other Financing Uses (OFU) 15,000
Debit Credit
Budgetary Fund Balance
Estimated OFS
50,000
200,000
Budgetary Fund Balance
Estimated OFS/OFU, net
50,000
185,000
Estimated OFS
Budgetary Fund Balance
200,000
50,000
Estimated OFS/OFU, net
Excess
185,000
50,000
21. A city ordered uniforms with an expected cost of $6,000 for policemen. The credit required
to record this transaction is
A. Appropriations.
B. Encumbrances.
C. Vouchers payable.
D. Encumbrances Outstanding.
22. A city ordered uniforms with an expected cost of $6,000 for policemen. This amount is
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receipt of the uniforms should include a debit to
A. Encumbrances of $6,000.
B. Encumbrances Outstanding of $5,900.
C. Encumbrances Outstanding of $6,000.
D. Appropriations of $100.
23. A city ordered uniforms with an expected cost of $6,000 for policemen. This amount is
encumbered. The uniforms are received with an invoice of $5,900. The entries to record the
receipt of the uniforms should include a credit to
A. Encumbrances of $6,000.
B. Encumbrances Outstanding of $6,000.
C. Encumbrances of $5,900.
D. Appropriations of $100.
24. The Town of Red Herring issued $60,000 of purchase orders. Assume that when all orders
were received, the actual cost was $59,000. How much would be recorded as expenditures
when the purchase orders were issued?
A. $60,000
B. $59,000
C. $1,000
D. $0
25. The presentation of a governmental fund budgetary comparison statement or schedule may
be part of the
A. Basic financial statements and include the General Fund and certain Special Revenue
Funds.
B. Basic financial statements and include the General Fund only.
C. Required supplementary information and include all governmental funds with a legally
adopted budget.
D. Required supplementary information and include the General Fund only.
(Answer A; Difficult; LO5)
26. A governmental fund budgetary comparison statement or schedule should
A. Be prepared on the same basis the budget was enacted.
B. Always be prepared on a GAAP basis.
C. Always be prepared on a cash basis.
D. Be prepared only for the General Fund.
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27. When preparing a budgetary comparison statement for a General Fund, which column is
optional?
A. Final amended budget.
B. Original budget.
C. Variance comparing the final budget to the actual amounts on a budgetary basis.
D. Actual amounts on a budgetary basis.
28. The Town of Red Herring issued $60,000 of purchase orders. Assume that when all orders
were received, the actual cost was $59,000. How much would be recorded as expenditures
when the goods are received?
A. $60,000.
B. $59,000.
C. $1,000.
D. $0.
29. Which of the following is not a common revenue source in a governmental fund budget?
A. Property taxes.
B. Other financing sources.
C. Charges for services.
D. Investment income or interest.
30. The Town of Red Herring issued $60,000 of purchase orders and recorded the encumbrance.
Assume that when all orders were received, the actual cost was $59,000. What would be the
net change in the unencumbered balance when the goods are received?
A. $60,000 increase.
B. $1,000 increase.
C. $1,000 decrease.
D. $59,000 decrease.
31. The following information pertains to the Scott County General Fund:
Appropriations $15,000,000
Estimated Revenues 14,000,000
Expenditures 14,800,000
Revenues 14,200,000
The change in Scott County’s General Fund fund balance for the year is a
A. $1,600,000 decrease.
B. $1,000,000 decrease.
C. $600,000 decrease.
D. $400,000 increase.
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32. The following information pertains to the Richardson County General Fund:
Appropriations $10,000,000
Estimated Revenues 12,000,000
Expenditures 12,800,000
Revenues 9,200,000
Long-term note issue proceeds 1,000,000
Short-term note principal retirements 250,000
Operating transfers to other funds 75,000
The change in Richardson County’s General Fund fund balance for the year is a
A. $2,600,000 decrease.
B. $2,675,000 decrease.
C. $2,925,000 decrease.
D. $3,600,000 decrease.
33. Which of the following fund balance classifications is used for budgetary accounting but not
for GAAP financial statement reporting?
A. Nonspendable Fund Balance.
B. Budgetary Fund Balance.
C. Committed Fund Balance.
D. Unassigned Fund Balance.
34. If a government uses a Budgetary Fund Balance account, the account balance
A. Will equal the difference between actual expenditures and appropriations at any point in
time.
B. Will be the planned increase or decrease in fund balance at any point in time.
C. Will equal the difference between actual revenues and budgeted revenues at any point in
time.
D. Will equal the difference between actual revenues and actual expenditures and
encumbrances for the year.
1. Under the modified accrual basis, revenues are considered susceptible to accrual if
A. Available to finance current period expenditures.
B. Objectively measurable.
C. Collected during the current period.
D. Both available to finance current period expenditures and objectively measurable.
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2. Under the modified accrual basis, revenues are considered available to finance current period
expenditures if they are legally available and
A. Earned.
B. Collected during the current period.
C. Collected in the current period or soon enough thereafter to be used to pay liabilities of
the current period.
D. Objective measureable.
3. Property taxes are an example of which category of nonexchange transactions?
A. Derived tax revenue.
B. Imposed tax revenue.
C. Government mandated nonexchange revenue.
D. Voluntary nonexchange revenue.
4. Sale taxes are an example of which category of nonexchange transactions?
A. Derived tax revenue.
B. Imposed tax revenue.
C. Government mandated nonexchange revenue.
D. Voluntary nonexchange revenue.
5. State reimbursement to schools for a portion of any special education costs incurred is an
example of which category of nonexchange transactions?
A. Derived tax revenue.
B. Imposed tax revenue.
C. Government mandated nonexchange revenue.
D. Voluntary nonexchange revenue.
20X3 General Fund financial statements?
A. As a liability on the balance sheet.
B. As a deferred inflow on the balance sheet.
C. As revenue on the statement of revenues, expenditures, and changes in fund balance.
D. As an other financing source on the statement of revenues, expenditures, and changes in
fund balance.
7. Which of the following should be included in tax revenues for the current year?
A. Taxes collected this year that have been levied for next year.
B. Prior year taxes collected during the first 60 days of this year.
C. Taxes levied this year but not collected until mid-year of the next year.
D. Taxes levied 2 years ago and collected in first 60 days of the next year.
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8. A government has a fiscal year end of June 30, 20X6. Tax bills for each fiscal year are
prepared and mailed in June prior to the beginning of the fiscal year for which they apply.
Tax revenue for the fiscal year ending June 30, 20X6, would include
A. Only taxes levied in June 20X5 which came available in either June 20X5 or between
July 1, 20X5, and June 30, 20X6, as well as any taxes associated with the June 20X5 levy
collected within 60 days following June 30, 20X6.
B. Only the levy as of June 20X6.
C. Only the levy as of June 20X5.
D. Only taxes levied in June 20X5 which came available in either June 20X5 or between
July 1, 20X5, and June 30, 20X6, as well as any taxes associated with either the June
20X5 or the June 20X6 levy collected within 60 days following June 30, 20X6.
9. Which of the following statements regarding tax revenue recognition in the General Fund is
false?
A. Tax revenues may be recorded when the tax is levied.
B. Governments may choose to recognize tax revenue as it becomes available, not when it is
initially levied.
C. Tax revenues are generally recorded at gross amounts of the levy, regardless of expected
collections.
D. Tax revenues are generally recorded net of the allowance for uncollectibles.
10. A government levies property taxes and awards discounts for timely payment. How should
the government report discounts that it expects will be taken?
A. Report as expenditures in the year the taxes are levied.
B. Report as expenditures in the year the discounts are awarded for early payments received.
C. Report as other financing uses.
D. Deduct from the amount of taxes levied to determine property tax revenues.
11. Which of the following governmental fund revenue sources are typically recorded as
revenues only as they are actually received in cash?
A. Property taxes.
B. Interest.
C. Building permit fees.
D. Reimbursement grants.
12. The City of Jonesboro allows discounts on taxes. Specifically, taxpayers get a 1% discount
on the total tax if it is paid within one month of the initial levy. What would the journal entry
be to record the levy of $700,000 if the government anticipates there will be a 2%
uncollectible rate and it is anticipated that the discounts will be $5,000?
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