Accounting for Governmental and Nonprofit Entities, 18e (Reck)
1) In accordance with GASB standards, both a general purpose government and a special purpose
government can be considered primary governments if certain criteria are met.
2) State and local governments should prepare only those financial reports required by
law—generally year-end financial statements.
3) A financial reporting entity is defined as a primary government, as well as all other
organizations that have an operational relationship with the primary government.
4) Both a general purpose and a special purpose government could be considered examples of
primary governments under GAAP.
5) The three sections of the comprehensive annual financial reports of state and local governments
are (1) an introductory section, (2) a financial section, and (3) a supplemental section.
6) A government is financially accountable for another entity if it appoints the voting majority of
the entity’s governing board.
7) Statistical tables included in comprehensive annual financial reports should provide social and
economic data, in addition to financial data, to assist financial statement users in better
understanding the activities and condition of the government.
8) The accounting system used by a state or local government must make it possible to prepare
financial statements as required by the Financial Accounting Standards Board.
9) Under GASB standards, the financial statements that report on business-type activities at the
government-wide level include the statement of net position, statement of activities, and statement
of cash flows.
10) Fiduciary activities are not reported in the government-wide financial statements under GASB
standards.
11) Special purpose accounting frameworks are considered generally accepted accounting
principles (GAAP) for state and local governments.
12) In reconciling between the governmental fund and government-wide statements, capital assets
acquired by a governmental fund are deducted from fund balance—governmental funds to arrive
at net position of governmental activities.
13) A discretely presented component unit is presented as a major fund on the governmental fund
financial statements.
14) Popular reports provide condensed financial information that can be used by governments to
communicate financial results to citizens.
15) One of the required reconciliations in converting governmental fund financial statements to
governmental activities statements at the government-wide level is an adjustment for internal
service funds’ assets, liabilities, operating income (loss), and transfers.
16) Under GASB standards, only proprietary funds prepare a statement of cash flows.
17) Similar in purpose to the International Accounting Standard Board (IASB) is the International
Public Sector Accounting Standards Board.
18) The General Fund data for a blended component unit should be reported as a special revenue
fund of the primary government.
19) Similar to for-profit entities, the GASB requires governments to prepare quarterly interim
financial reports.
20) The GASB defines a component unit as any organization for which the primary government is
financially accountable.
21) The two methods for presenting component units in the financial statements are aggregated
and disaggregated.
22) To be reported as a major component unit, a component unit must meet the same 10 percent
and 5 percent size requirements as major funds.
23) A not-for-profit organization could be reported as a component unit of a primary government.
24) The GASB requires that interim financial reports be prepared on a semiannual basis at a
minimum.
25) An example of information found in the statistical section of the comprehensive annual
financial report (CAFR) is demographic information such as unemployment rates, and personal
income of citizens.
26) According to the Bureau of Census, which of the following would be considered a special
district?
A) Colyer Township.
B) Milborne Independent School District.
C) Hieher City.
D) Johnston Building Authority.
27) Which of the following factors would not indicate that a potential component unit (PCU)
imposes a financial burden or provides a financial benefit to the primary government?
A) The primary government is entitled to its share of any dividends distributed by the PCU.
B) The primary government is obligated to provide financial support to the PCU.
C) The primary government is obligated for the PCU’s debt.
D) The primary government is entitled to the PCU’s resources.
28) Which of the following circumstances would indicate that a potential component unit (PCU)
should be included as part of the government financial reporting entity?
A) The primary government is entitled to the resources of the PCU.
B) Officials of the primary government appoint a majority of the members of the governing board
of the PCU.
C) The primary government significantly influences the programs and activities of the PCU.
D) Officials of the primary government appoint a majority of the members of the PCU’s governing
board and the primary government is able to impose its will on the PCU.
29) Which of the following is not a category found in the statistical section of the comprehensive
annual financial report (CAFR)?
A) Expenditure trend information.
B) Revenue capacity information.
C) Demographic and economic information.
D) Debt capacity information.