Version 1 13
Total Governmental Fund and Enterprise Fund Assets
$8,750,000
A) The Development Special Revenue Fund should be reported as major.
B) The Debt Service Fund should be reported as major.
C) Both the Development Special Revenue Fund and the Debt Service Fund should be
reported as major.
D) Neither the Development Special Revenue Fund nor the Debt Service Fund should
be reported as major.
41) Use the following information to determine whether the Fire House Capital Projects Fund
should be reported as a major fund based on expenditure amounts provided.
Fire House Capital Projects Fund expenditures
$2,740,000
General Fund expenditures
$27,150,000
Total of all other governmental fund expenditures
1,433,000
Total of enterprise fund expenditures
$7,500,000
A) Yes, it is more than 10 percent of the General Fund expenditures.
B) No, it is less than 10 percent of the total governmental fund expenditures.
C) Yes, it is more than 5 percent of the total governmental fund expenditures.
D) There is insufficient information to determine if the major fund criteria are met.
42) Which of the following is not one of the seven elements defined by the GASB concept
statements?
A) Deferred inflows of resources.
B) Expenses.
C) Assets.
D) Net position.
43) The GASB concept statements indicate that in certain instances a remeasured value for an
asset or liability should be reported on the financial statements. Which of the following is not
one of the methods recommended by the GASB for remeasured amounts?
Version 1 14
A) Historical cost.
B) Lower of cost or market.
C) Fair value.
D) Replacement cost.
44) The GASB recommends that budget-to-actual comparison information be provided as
which of the following?
A) A stand-alone financial statement.
B) A schedule in the notes to the financial statements.
C) As a part of the basic financial statements.
D) As a required supplementary information schedule.
45) The GASB requires budget-to-actual comparison information for which of the following?
A) The General Fund.
B) All governmental funds.
C) The General Fund and major special revenue funds with legally adopted budgets.
D) All special revenue, debt service and capital projects funds with legally adopted
budgets.
46) Following are some of the county’s governmental funds. The county has asked you to
determine if any of the funds listed should be classified as major funds based on the GASB size
criteria. Clearly indicate which fund(s) you believe should be classified as major and provide
support for your choice(s).
General
Fund
Special
Revenue
Fund
Debt
Service
Fund
Total of
all
Government
al Funds
Version 1 15
Assets
12,000,0
00
1,000,0
00
500,000
15,000,0
00
Liabilities
3,000,00
0
250,000
30,000
4,580,00
0
Revenues
10,000,0
00
600,000
1,450,0
00
13,770,0
00
Expenditures/Expen
ses
9,859,00
0
725,000
1,300,0
00
13,460,0
00
47) According to the guidance of GASB Concepts Statement 3, financial information can be
communicated by recognition in the financial statements, disclosure in the notes to the financial
statements, presentation as required supplementary information, or presentation as
supplementary information.
⊚ true
⊚ false
48) According to GASB Concepts Statement 1 a primary objective of financial reports is to
provide information useful in determining the accountability of the government.
⊚ true
⊚ false
49) Activities a local government can engage in are classified as governmental, business–
type, or fiduciary.
⊚ true
⊚ false
50) Governmental funds are identical to governmental activities, proprietary funds are
identical to business-type activities, and fiduciary funds are identical to fiduciary activities of a
government.
Version 1 16
⊚ true
⊚ false
51) Only those governmental and proprietary funds that meet the GASB size criteria for
major funds are reported in separate columns of the governmental and proprietary fund financial
statements.
⊚ true
⊚ false
52) Economic resources are cash or items expected to be converted into cash during the
current period, or soon enough thereafter to pay current period liabilities.
⊚ true
⊚ false
53) Governmental funds account for current and long-term liabilities.
⊚ true
⊚ false
54) The types of funds that may be used in governmental accounting are classified into the
three categories of governmental, proprietary, and fiduciary.
⊚ true
⊚ false
55) The governmental funds category includes the General Fund, special revenue funds, debt
service funds, capital projects funds, and internal service funds.
⊚ true
⊚ false
Version 1 17
56) Governments can, in part, demonstrate operational accountability by using an economic
resources measurement focus and the accrual basis of accounting for reporting.
⊚ true
⊚ false
57) All capital assets acquired by or used by a fund should be reported in the fund balance
sheet or statement of net position.
⊚ true
⊚ false
58) Because budgetary accounts are used by governments, government financial statements
can never be said to be in accord with generally accepted accounting principles.
⊚ true
⊚ false
59) The maximum number of financial statements prepared by any of the three fund
categories of government is three.
⊚ true
⊚ false
60) When revenues are legally restricted by external resource providers or committed by
enabling legislation for particular operating purposes, a private purpose trust fund is created.
⊚ true
⊚ false
61) A debt service fund is used to account for financial resources set aside for the purpose of
making principal and interest payments on general long-term debt.
⊚ true
⊚ false
Version 1 18
62) A deferred inflow of resources is defined as “an acquisition of net assets by the
government that is applicable to a future reporting period.”
⊚ true
⊚ false
63) Expenditures are never recorded in governmental funds.
⊚ true
⊚ false
64) Deferred outflows of resources is a type of asset that is unique to government.
⊚ true
⊚ false
65) Revenues are an example of what the GASB terms an inflow of resources.
⊚ true
⊚ false
66) An expenditure is an example of what the GASB terms an outflow of resources.
⊚ true
⊚ false
67) Deferred inflows of resources and deferred outflows of resources would be shown in
separate sections of a government’s statement of net position.
⊚ true
⊚ false
Version 1 19
68) In accordance with GASB standards, a deferred inflow of resources is reported in the
liabilities section of the financial statement.
⊚ true
⊚ false
69) The GASB concept statements indicate that an asset that is going to be converted to cash
should be reported at a remeasured amount at the financial statement date.
⊚ true
⊚ false
70) Proprietary funds primarily provide services to the general public for a fee.
⊚ true
⊚ false
71) A permanent endowment is an example of a nonspendable fund balance.
⊚ true
⊚ false
72) Assigned fund balances can be either positive or negative.
⊚ true
⊚ false
73) The General Fund is the only fund that can have a positive unassigned fund balance.
⊚ true
⊚ false
Version 1 20
74) The positive fund balance in a special revenue fund must at a minimum be reported as
assigned.
⊚ true
⊚ false
75) Nonmajor funds are not reported on the fund financial statements.
⊚ true
⊚ false
76) There are four major activity categories reported by state and local governments:
governmental, government-wide, proprietary, and fiduciary.
⊚ true
⊚ false
77) Governmental activities include the core services provided by a government, such as
public safety.
⊚ true
⊚ false
78) The statement of net position is a governmental fund financial statement.
⊚ true
⊚ false
79) The only difference between the modified accrual basis of accounting and the accrual
basis is that one records expenditures and the other records expenses.
⊚ true
⊚ false
Version 1 21
80) Nonmajor funds are all reported in the same column on the governmental fund financial
statements.
⊚ true
⊚ false
Version 1 22
Answer Key
Test name: chapter 2
Version 1 23
Version 1 24