Accounting for Governmental and Nonprofit Entities, 18e (Reck)
Chapter 4 Accounting for Governmental Operating Activities–Illustrative Transactions
1) The government-wide statement of net position is prepared using the same measurement focus
and basis of accounting as the General Fund balance sheet.
2) The Governmental Activities column of the government-wide statement of net position reports
both current and noncurrent assets and liabilities.
3) Vehicles used by the police department should be reported in the governmental fund financial
statements.
4) Recording the annual budget is optional in the General Fund.
5) Budgetary entries are not recorded at the government-wide level.
6) The Governmental Activities column of the statement of net position includes financial
information for all funds of a government.
7) Encumbrances Outstanding is shown on the balance sheet as a restriction on fund balance.
8) Governments that are temporarily short of cash but that have levied taxes expected to be
collectible during the fiscal year are generally able to borrow on short-term notes known as “tax
anticipation notes payable.”
9) If the actual liability for goods received in the current year differs from the estimated liability
recorded when the goods were ordered in the prior year, the Encumbrances account should be
credited in the amount of the estimated liability.
10) Under the modified accrual basis of accounting applicable to governmental fund types,
property tax revenue is accrued and recorded at net realizable value.
11) Current financial resources include cash and items such as marketable securities and
receivables expected to be converted into cash in the current period or soon enough thereafter to
pay current period obligations.
12) Under GASB standards, Revenues must be credited for the total amount of the property tax
levy.
13) A contribution was received by the city for the purchase of playground equipment. The
contribution would not be recognized as revenue by the permanent fund until the playground
equipment has been purchased.
14) Property tax revenue is an example of a nonexchange revenue—one in which the government
receives value without directly giving equal value in exchange.
15) Under current GASB standards the revenue from property taxes should be recorded in the
amounts collected during the current period.
16) Estimated uncollectible tax amounts are recorded in the General Fund general journal as a
reduction in revenues and in the governmental activities journal as a bad debt expense.
17) A tourist tax that is restricted for use on maintenance projects in the historic downtown district
should always be recorded as general revenues in the governmental activities journal.
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18) Property taxes due 75 days after the current fiscal year end would be recognized as revenues in
the current fiscal year’s General Fund general journal.
19) Whenever a significant revenue source is restricted for a specific operating purpose, a special
revenue fund should be established.
20) A payment made by the General Fund to a debt service fund would not be recorded in the
governmental activities journal.
21) Fines and forfeits are reported as charges for services on the government-wide statement of
activities.
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22) A payment made by a city-owned utility to the General Fund of the city in lieu of taxes is an
example of a transaction that is recorded in the governmental activities journal.
23) All amounts due to or from other funds should be eliminated in both the government-wide and
fund financial statements.
24) At the end of the fiscal year, the purchases method of recording inventory adjusts the
Expenditures account to reflect the amount of inventory actually used during the period.
25) Permanent funds use the modified accrual basis of accounting.
26) An interfund transfer occurs when one fund of government pays another fund of the same
government for services provided.
27) Grant funds received before time requirements are met, but after all other eligibility
requirements have been met, should be reported as an asset and a deferred inflow of resources by
the recipient.
28) Year-end interfund receivable or payable balances will appear in the line item internal
balances within their respective columns on the government-wide statement of net position.
29) Some governments choose to sell the collection rights to unpaid property taxes in tax lien
public auctions and therefore will not have property tax balances reported within the financial
statements.
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30) Encumbrance accounts need not be closed at year-end if the government is required or intends
to honor the encumbrances outstanding at year-end.
31) Which of the following financial statement(s) reports both current and noncurrent assets and
liabilities?
Government-wide Statement
of Net Position
General Fund Balance
Sheet
A)
No
Yes
B)
No
No
C)
Yes
No
D)
Yes
Yes
A) Choice A
B) Choice B
C) Choice C
D) Choice D
32) Which of the following should not be reported on the balance sheet of the General Fund?
A) Equipment.
B) Vouchers payable.
C) Tax anticipation notes payable.
D) Due from federal government.
33) When equipment is ordered by a department of the government, the purchase order should be
recorded in the General Fund as a debit to:
A) Appropriations.
B) Equipment.
C) Encumbrances.
D) Expenditures.
34) The receipt of equipment that had previously been ordered should be recorded in the General
Fund as a debit to
A) Appropriations.
B) Equipment.
C) Encumbrances.
D) Expenditures.