Student name:__________
1) For each of the following descriptive phrases, indicate the type of fund from the list of
funds provided.
A.Governmental funds
B.Proprietary funds
C.Fiduciary funds
_____ 1. Includes permanent funds held in trust to be used for public purposes
_____ 2. Sometimes referred to as self-supporting or business-like funds
_____ 3. Any fund held by a government in a custodial or trustee relationship for an external
party
_____ 4. Used when the government collects taxes or amounts to be invested for external parties
_____ 5. Enterprise and internal service funds
2) For each of the following scenarios, indicate how they would be classified for fund
balance reporting purposes using the fund balance classification list provided.
A.Nonspendable
B.Restricted
C.Committed
D.Assigned
E.Unassigned
_____ 1. Bond proceeds of $15,000,000 that must be used for construction of a fire substation
remain unspent at the end of the fiscal year.
_____ 2. Prepaid rent of $6,000 remains at the end of the fiscal year.
_____ 3. The city council adopted a plan to set aside 2% of revenues over the next three years to
help build cash reserves. At the end of the fiscal year 2% of the revenues were set aside.
_____ 4. The state transportation department provided $1,000,000 in state funds to be used for
street widening. At the end of the fiscal year $750,000 remained unspent.
_____ 5. The county received a $3,000,000 endowment during the year.
3) List the basic financial statements required by GASB standards and briefly explain their
purposes.
4) “The primary purpose of an accounting system for a state or a local government is to
make it possible for financial statements to demonstrate compliance with finance-related legal
and contractual provisions.” Explain why you believe this statement to be correct or incorrect.
5) Explain the difference between measurement focus and basis of accounting. Also, explain
the difference between the economic resources measurement focus and the current financial
resources measurement focus as well as the difference between the accrual and modified accrual
bases of accounting. Which funds and government-wide activities use each focus and each basis?
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6) List the seven fund financial statements that are required as part of the basic financial
statements by GASB standards. What measurement focus and basis of accounting should be used
in preparing each of these statements?
7) Explain the nature of the three major activity categories of a state or local government:
governmental activities, business-type activities, and fiduciary activities. Provide examples of
each.
8) Expenditures and expenses are classified as which of the following elements under
GASB concepts statements?
A) Deferred outflows of resources.
B) Outflows of resources.
C) Change in net position.
D) Deferred inflows of resources.
9) Which of the following is not an element defined by GASB Concepts Statement No. 4?
A) Asset.
B) Net position.
C) Deferred inflows of resources.
D) Revenues.
10) Which of the following is a primary objective of financial reporting by state and local
governments?
A) To provide information that can be used for capital allocation decisions made by
external investors.
B) To report on the legal requirements imposed on the government by its elected
officials.
C) To provide information that can be used to assess a government’s accountability.
D) To fulfill the government’s statutory duty to report on cash received and cash
disbursed.
11) According to the GASB definition, which of the following represents an inflow of
resources?
A) Expenditures.
B) Revenues.
C) Assets.
D) Deferred inflows.
12) According to the GASB, information that is essential and useful to placing information in
the correct context should be reported as which of the following?
A) Required supplementary information.
B) Supplementary information.
C) Notes to the financial statements.
D) A line item on the financial statements.
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13) Which of the following is not one of the methods recommended by the GASB Concepts
Statement 3 for communicating information to external users of government financial reports?
A) Providing a popular report.
B) Recognition in the financial statements.
C) Presentation as required supplementary information.
D) Disclosure in the notes to the financial statements.
14) Which of the following activities is considered a core government activity?
A) Finance and budget.
B) Central purchasing.
C) Culture and recreation.
D) Employee pension fund.
15) Which of the following is true regarding financial reporting for internal service funds?
A) Internal service funds are reported in the governmental fund financial statements.
B) Internal service funds are aggregated and reported as a major fund in the proprietary
fund financial statements.
C) Internal service funds are generally reported in the Business-type Activities column
of the government-wide financial statements.
D) Internal service funds are generally reported in the Governmental Activities column
of the government-wide financial statements.
16) Which of the following is not a characteristic of a fund as defined by GASB standards?
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A) An accounting entity.
B) A fiscal entity.
C) A reporting entity.
D) A self-balancing set of accounts.
17) In accounting for state and local governments the modified accrual basis is required for
A) Proprietary and fiduciary funds.
B) Governmental funds.
C) Governmental and fiduciary funds.
D) Governmental and internal service funds.
18) Under the modified accrual basis of accounting, revenues should be recognized when
A) Earned.
B) Collected in cash.
C) Authorized by the budget ordinance.
D) Measurable and available.
19) Which of the following funds is a governmental fund-type?
A) Private-purpose trust fund.
B) Internal service fund.
C) Permanent fund.
D) Enterprise fund.
20) Financial resources set aside to pay principal and interest on general long-term debt may
be accounted for in which of the following fund types?
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A) Private-purpose trust fund.
B) Debt service fund.
C) Principal and interest trust fund.
D) Internal service fund.
21) Which of the following is a proprietary fund?
A) Special revenue fund.
B) Investment trust fund.
C) Debt service fund.
D) Internal service fund.
22) Which of the following is not a fund financial statement?
A) Statement of activities.
B) Balance sheet.
C) Statement of revenues, expenses, and changes in net position.
D) Statement of changes in net position.
23) Which of the following is a fiduciary fund?
A) Investment trust fund.
B) Special revenue fund.
C) Debt service fund.
D) Enterprise fund.
24) Which of the following funds would be most appropriate when accounting for an activity
that provides goods or services to the public for a fee that is intended to make the activity self-
supporting?
A) Investment trust fund.
B) Enterprise fund.
C) Internal service fund.
D) Special revenue fund.
25) Which of the following funds should be used if resources provided by a federal grant
must be set aside and used for counseling youthful offenders?
A) Private-purpose trust fund.
B) Enterprise fund.
C) Internal service fund.
D) Special revenue fund.
26) Which of the following funds would be used to account for an activity that provides
centralized purchasing and sales of goods or services to other departments or agencies of the
government on a cost-reimbursement basis?
A) Enterprise fund.
B) Fiduciary fund.
C) Internal service fund.
D) Permanent fund.
27) Which of the following funds would record depreciation of capital assets?
A) Special revenue fund.
B) Permanent fund.
C) Internal service fund.
D) Custodial fund.
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28) Capital assets used by departments accounted for by the General Fund of a governmental
unit should be accounted for in which of the following?
A) The General Fund.
B) The governmental activities journal.
C) The business-type activities journal.
D) The general capital assets fund.
29) Capital assets used by an enterprise fund should be accounted for in the
A) Enterprise fund and depreciation on the capital assets should be recorded.
B) Business-type activities journal but no depreciation on the capital assets should be
recorded.
C) Governmental activities journal and depreciation on the capital assets should be
recorded.
D) Enterprise fund but no depreciation on the capital assets should be recorded.
30) Which of the following funds are proprietary funds?
A) Enterprise funds, investment trust funds, pension trust funds, and the General Fund.
B) Enterprise funds and internal service funds.
C) Internal service funds, special revenue funds, and enterprise funds.
D) Proprietary funds are not used in governmental accounting.
31) Which of the following funds are governmental funds?
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A) General Fund, special revenue funds, capital projects funds, debt service funds, and
private-purpose trust funds.
B) General Fund, special revenue funds, private-purpose trust funds.
C) General Fund, special revenue funds, debt service funds, capital projects funds, and
permanent funds.
D) General Fund, special revenue funds, capital projects funds, debt service funds, and
internal service funds.
32) In what fund would the activities of a water utility department, which offers its services
to the general public on a user charge basis be recorded?
A) An enterprise fund.
B) A special revenue fund.
C) The General Fund.
D) An internal service fund.
33) The measurement focus and basis of accounting that are most unlike those used by
business entities are those used by
A) Governmental funds.
B) Fiduciary funds.
C) Proprietary funds.
D) Contribution funds.
34) Which of the following governmental funds must be reported as a major fund?
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A) The General Fund.
B) Any fund with total assets, liabilities, revenues, or expenditures that are 10% or more
of the General Fund and 5% or more of total General Fund and Business-type Activities.
C) The government may opt to include or exclude any fund it choses as a major fund.
D) Only the General Fund and special revenue funds that meet the 10% and 5% size
criteria.
35) Which of the following bases of accounting should be used in preparing fund financial
statements?
Governmental funds
Proprietary funds
Fiduciary funds
A)
Modified accrual
Accrual
Modified accrual
B)
Modified accrual
Modified accrual
Modified accrual
C)
Modified accrual
Accrual
Accrual
D)
Accrual
Accrual
Accrual
A) Choice A
B) Choice B
C) Choice C
D) Choice D
36) A major governmental fund is one that has one or more elements (e.g., assets, liabilities,
revenues, or expenditures) that is at least:
A) Five percent of the corresponding element(s) of total governmental funds and 10
percent of the corresponding element(s) of total governmental and enterprise funds combined.
B) Ten percent of the corresponding element(s) of total governmental funds and 10
percent of the corresponding element(s) of total governmental and enterprise funds combined.
C) Five percent of the corresponding element(s) of total governmental funds and five
percent of the corresponding element(s) of total governmental and enterprise funds combined.
D) Ten percent of the corresponding element(s) of total governmental funds and 5
percent of the corresponding element(s) of total governmental and enterprise funds combined.
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37) A city received resources that the state indicates can only be used for public works
projects, such as road construction. Assuming the resources have not been expended by year end,
how would the resources the city received be shown in the city’s fund balances?
A) Designated Fund Balance.
B) Committed Fund Balance.
C) Restricted Fund Balance.
D) Assigned Fund Balance.
38) Which of the following would be reported as a nonspendable fund balance?
A) Inventory.
B) Restricted assets.
C) Assets whose use is limited.
D) Capital assets.
39) Under GASB standards which of the following funds can report a positive amount for
unassigned fund balance?
A) Capital projects fund.
B) Special revenue fund.
C) General Fund.
D) All of the options.
40) Use the following information to determine whether the Development Special Revenue
and the Debt Service Funds should be reported as major funds based on asset amounts provided.
Development Special Revenue Fund Assets
$740,000
Debt Service Fund Assets
$150,000
Total Governmental Fund Assets
$7,500,000