Accounting for Governmental and Nonprofit Entities, 18e (Reck)
1) Budgeting is an important part of a manager’s planning and control responsibilities in both
public and private organizations.
2) In governments, the budget has always played a role in external financial reports through the
required budget-to-actual comparison schedules or statements for those funds that have a legally
approved budget.
3) The type of budgeting that relates input of resources to output of services is zero-based
budgeting.
4) Popular budgeting approaches employed by governments include incremental budgeting,
performance budgeting, program budgeting, planning-programming-budgeting systems, and
zero-based budgeting.
5) Government budgets must be voted upon by citizens for approval in an annual general election.
6) Public hearings must be held to provide adequate opportunity for citizens‘ input to government
budgets, prior to legislative adoption of the budget.
7) Cash planning and budgeting are important in government because the timing of cash inflows
often does not necessarily coincide with the timing of cash outflows.
8) Under GASB standards, every government, regardless of its size, is instructed to prepare a cash
budget for each month of the fiscal year.
9) Budget appropriations for governmental funds ordinarily cover only one year, while capital
budgets are often multi-year.
10) When planning, budgeting, and performance measurement are related, good performance is
rewarded, and consequences exist for substandard performance.
11) Total quality management (TQM) seeks to continuously improve an organization’s ability to
meet or exceed customers’ demands, and, as such, is useful in a government setting as well as a
business setting.
12) Service efforts and accomplishments measures suffer from the same problem as line-item or
object-of-expenditures budgeting; that is, focusing only on resource inputs while ignoring outputs
and outcomes of governmental activities.
13) To determine which costs are allowable for charging to a federal assistance program,
accountants and auditors refer to the GASB cost circular.
14) Service efforts and accomplishments (SEA) reporting helps citizens, elected officials,
appointed officials, investors and creditors, and other interested parties evaluate the government’s
performance in the absence of a “bottom line” measure such as exists for for-profit entities.
15) Under service efforts and accomplishments (SEA) reporting input measures are quantity
measures that reflect the quantity of a service provided, such as the number of lane-miles of road
repaired.
16) Under service efforts and accomplishments (SEA) reporting, outcome measures gauge
accomplishments, or the results of services provided, such as the percentage of lane-miles of road
in excellent, good, or fair condition.
17) Despite its initial popularity, service efforts and accomplishments reporting has lost favor in
recent years.
18) A major disadvantage of activity-based costing (ABC) in a government setting is the very
limited number of activities for which it can be used.
19) A major advantage of activity-based costing (ABC) is that it reduces unit cost distortions
arising from overhead allocations that often occur using traditional cost accounting systems.
20) The sole purpose of preparing a government budget is to show compliance with laws and
regulations.
21) GASB Concepts Statement No. 2 requires state and local governments to include service
efforts and accomplishments measures within the comprehensive annual financial report.
22) Under certain circumstances a cost generally unallowable under a grant agreement may be
allowable.
23) Governments receiving federal grants and contract funds are expected to have an accounting
information system with adequate internal controls that can deliver reliable information to
compare the actual amount spent with budgeted amounts.
24) The United States Office of Management and Budget (OMB) publishes uniform guidance,
which provides streamlined guidelines for grant accounting and reporting.
25) Service efforts and accomplishments reporting is also referred to as citizen-centric reporting.
26) Which of the following statements is not consistent with the GASB’s “Budgeting, Budgetary
Control, and Budgetary Reporting Principle”?
A) An annual budget must be adopted using generally accepted accounting principles.
B) The accounting system should provide the basis for appropriate budgetary control.
C) Budgetary comparisons should be presented for the General Fund and each major special
revenue fund for which an annual budget has been adopted.
D) The budgetary comparisons should present both the original and the final appropriated budgets
for the reporting period.
27) The GASB “Budgeting Principle” states that an annual budget should be adopted by (for)
every:
A) Fiduciary fund type.
B) Fund of a government.
C) Governmental unit.
D) Governmental fund type except special revenue funds.
28) A common approach to budgeting line-items whereby the current year’s budget is constructed
by adding or subtracting amounts expected to be required by line items is:
A) Performance budgeting.
B) Zero-based budgeting.
C) Program budgeting.
D) Incremental budgeting.
29) Which of the following is not a typical step in the budgeting process for a state or local
government?
A) Request by management for input on the budget.
B) Review and revisions of the budget by the administrative staff of each unit.
C) Public hearings for citizen input.
D) Approval by a majority vote of the citizenry.
30) A budgeting method that derives the subsequent year’s budget from the current year’s budget is
called:
A) Planning-programming-budgeting.
B) Incremental budgeting.
C) Zero-based budgeting.
D) Performance budgeting.
31) In budgeting revenues, state and local government administrators should:
A) Be cautious not to utilize unauthorized sources or exceed authorized ceilings on revenues from
specific sources.
B) Ensure that at least the amount of revenues needed to meet spending needs are raised, even if
authorized ceilings on some revenue sources must be exceeded.
C) Utilize all authorized revenue sources at the maximum amount allowed by law.
D) Ignore “other financing sources” since these resource inflows are not available for
appropriation.
32) Cash receipts and cash disbursement budgets for a government:
A) Should be prepared for all funds for the entire fiscal year.
B) Should be prepared monthly or as needed to enhance cash management, investment
management, and short-term debt management.
C) Should be prepared for only those funds for which appropriations budgets are required by law
to be prepared on the accrual basis or the modified accrual basis.
D) Should be prepared for only those funds for which appropriations budgets are not required by
law.
33) Cash disbursement budgets:
A) Are prepared to facilitate the preparation of government-wide financial statements.
B) Are usually prepared for each month of the year, or for shorter intervals, in order to facilitate
planning short-term borrowings and investments.
C) Are prepared only for funds not required to operate under legal appropriation budgets.
D) Are prepared only for each fiscal year because disbursements for each month are approximately
equal.
34) The schedule of legally required events in the budgeting process is generally referred to as the:
A) Budget docket.
B) Legal timetable.
C) Hearing schedule.
D) Budget calendar.