Bloom’s: Apply
59) When the budget for the General Fund is recorded, the required journal entry will include:
A) A credit to Estimated Revenues.
B) A debit to Encumbrances.
C) A debit to Appropriations.
D) Either a debit or credit to Budgetary Fund Balance, as appropriate.
60) Which of the following accounts is not closed at the end of the reporting period?
A) Deferred inflows of resources.
B) Revenues.
C) Expenditures.
D) Other financing sources.
61) The expenditure classification “Current Expenditures” is an example of which of the following
types of classifications?
A) Activity.
B) Character.
C) Function.
D) Object.
22
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Difficulty: 2 Medium
Topic: Terminology and classification for budgetary and operating statement accounts
Learning Objective: 03-04 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?
A) All budgetary disclosures should be presented in the notes to the financial statements.
B) There is one specific format for presenting the budgetary comparison statement.
C) Budgetary comparisons may be presented as a statement or as required supplementary
information (RSI).
D) The budgetary reconciliation must focus on the operating statement, but not the statement of
position.
63) The Encumbrances control account of a city is decreased when
Goods are ordered
Goods are received
A)
Yes
No
B)
No
No
C)
No
Yes
D)
Yes
Yes
A) Choice A.
B) Choice B.
C) Choice C.
D) Choice D.
23
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64) Under the modified accrual basis of accounting, expenditures generally are not recognized
until:
A) They are paid in cash.
B) An obligation is incurred that will be paid from currently available financial resources.
C) Goods or services are ordered.
D) They are approved by the legislative body.
65) Which of the following fund types uses the current financial resources measurement focus and
modified accrual basis of accounting?
A) Enterprise fund.
B) Special revenue fund.
C) Investment trust fund.
D) Pension trust fund.
66) Which of the following will increase the fund balance of a government at the end of the fiscal
year?
A) The sum of revenues and other financing sources is more than the sum of expenditures and
other financing uses.
B) Expenditures are more than the difference between revenues and the excess of other financing
sources over other financing uses.
C) Revenues are less than the sum of expenditures, other financing sources, and other financing
uses.
D) The sum of fund balance, revenues, and other financing sources is more than the sum of
expenditures and other financing uses.
24
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Learning Objective: 03-05 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:
A) Goods or services are ordered.
B) Goods or services are received and the invoice is vouchered.
C) Invoices are paid.
D) The appropriation is reduced.
68) Which of the following terms refers to an actual cost rather than an estimate?
A) Budget.
B) Encumbrance.
C) Expenditure.
D) Appropriation.
69) For what funds do budgetary comparisons need to be presented in connection with the basic
financial statements?
A) General Fund.
B) General Fund and all major funds.
C) All governmental funds with legally adopted annual budgets.
D) General Fund and major special revenue funds for which a budget is legally adopted.
25
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Topic: Reporting budgeted and actual results
Learning Objective: 03-03 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:
A) Encumbrances.
B) Equipment.
C) Expenditures.
D) Appropriations.
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:
A) Decreased.
B) Increased.
C) Unaffected.
D) Either a or b, depending on the department’s specific budgetary control procedures.
72) The Appropriations account of a governmental fund is credited when:
A) The budgetary accounts are closed.
B) The budget is recorded.
C) Supplies are purchased.
D) Expenditures are recorded.
73) If a state law requires that local governments prepare General Fund and special revenue fund
budgets on a basis that differs from the basis of accounting required by generally accepted
accounting principles (GAAP):
A) The actual amounts in the budgetary comparison schedule should be reported using the
government’s budgetary basis.
B) The actual amounts in the budgetary comparison schedule should be reported on the GAAP
basis.
C) Both the budgeted and actual amounts in the budgetary comparison schedule should be reported
on the GAAP basis; a separate budget-basis comparison schedule should be prepared for the
appropriate state oversight body.
D) Only a budgetary comparison schedule prepared for the appropriate state oversight body is
required.
74) The Expenditures control account of a government is credited when:
A) Supplies are ordered.
B) Supplies previously encumbered are received.
C) The budget is recorded.
D) Temporary accounts are closed out at the end of the year.
27
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Difficulty: 2 Medium
Topic: Structure and characteristics of the General Fund and other governmental funds
Learning Objective: 03-02 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
75) The Encumbrances account is properly termed a
A) Long-term liability.
B) Reservation of unassigned fund balance.
C) Budgetary account.
D) Current liability if paid within a year; otherwise, long-term debt.
76) The county determined it needed to prepare a budget amendment to reflect a decrease in
charges for services of $100,000 and an increase in public safety expenditures of $150,000. What
will be the effect of these two adjustments on the Budgetary Fund Balance account?
A) Budgetary Fund Balance will be debited $250,000.
B) Budgetary Fund Balance will be credited $250,000.
C) Budgetary Fund Balance will be debited $50,000.
D) Budgetary Fund Balance will be credited $50,000.
77) The city amended its budget to increase expected grant revenues by $500,000 and increase
expected culture and recreation expenditures by $500,000. Which of the following statements
concerning the budget amendment journal entry is correct?
A) Estimated Revenues will be credited for $500,000.
B) Appropriations will be debited for $500,000.
C) There will be no adjustment to Budgetary Fund Balance.
28
D) Expenditures will be debited for $500,000.
78) For each of the following expenditure items, indicate its correct classification scheme
suggested by GASB standards.
A. Function
B. Program
C. Organization unit
D. Activity
E. Character
F. Object
________ 1. Streetlight repair
________ 2. City clerk
________ 3. Salaries and wages
________ 4. Transportation
________ 5. Current operating expenditures
79) For each revenue source listed indicate its correct classification recommended by GASB
standards.
A. Taxes
B. Licenses and permits
C. Intergovernmental revenue
D. Charges for services
E. Fines and forfeits