Accounting for Governmental and Nonprofit Entities, 18e (Reck)
1) The government-wide statement of net position displays the net expense or revenue for each
function or program of the government.
2) Program revenues are distinguished from general revenues on the government-wide statement
of activities under GASB standards.
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.
4) All purchases of goods and services and all interfund transfers of the General Fund are recorded
as Expenditures.
5) Interfund transfers are shown as general revenues on the government-wide statement of
activities.
6) Contributions to permanent funds are shown on a separate line below the general revenues on
the government-wide statement of activities.
7) On the government-wide 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.
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.
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.
10) Other financing sources increase fund balance in the same manner as revenues.
4
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
11) Budgetary accounts used in the General Fund include Estimated Revenues, Estimated Other
Financing Sources, Appropriations, Estimated Other Financing Uses, and Encumbrances.
12) All encumbrances must be closed at year-end.
13) An encumbrance represents the estimated future liability for goods or services resulting from
placing a purchase order or signing a contract.
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.
5
Copyright © 2019 McGraw-Hill Education. All rights reserved.
No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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.
16) The legal level of budgetary control represents the administrative level at which expenditures
may not exceed appropriations without a formal budgetary amendment.
17) “Available appropriation” is calculated as the difference between appropriations and the sum
of expenditures and encumbrances.
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.
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.
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.
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.
22) Encumbrance accounting is required in the accounting for payroll of governmental funds.
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.
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.
25) At the end of the fiscal year Encumbrances is closed to Budgetary Fund Balance with a credit.
26) Public school systems tend to follow the revenue and expenditure classifications of the
National Center for Education Statistics rather than the GASB classifications.
27) The fund classification system used by public schools follows the GASB standards.
28) Public school systems prepare their financial reports in accordance with the requirements of
the National Center for Education Statistics.
29) Which of the following best describes the recommended format for the government-wide
statement of activities?
A) Program revenues minus expenses minus other revenues and expenses equals change in net
position.
B) Program revenues plus general revenues minus expenses equals change in net position.
C) Program revenues minus expenses plus general revenues equals change in net position.
D) Expenses minus program revenues plus general revenues equals change in net position.
30) Which of the following statements is not a true statement about expenses that are directly
related to a government function or program?
A) They are reported in the government-wide statement of activities at the government-wide level.
B) They include expenses that are specifically associated with a function or program.
C) They include interest on general long-term liabilities.
D) They include depreciation expense on capital assets that are clearly identified with a function or
program.
31) Which of the following is not a category of program revenue reported on the statement of
activities at the government-wide level?
A) General program revenues.
B) Charges for services.
C) Operating grants and contributions.
D) Capital grants and contributions.