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A) Activity.
B) Character.
C) Function.
D) Object.
50) 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, not the
statement of position.
51) When is the Encumbrances control account of a city decreased?
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.
52) Under the modified accrual basis of accounting, expenditures generally are not
recognized until:
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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.
53) 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.
54) 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.
55) A liability is recorded in governmental funds when:
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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.
56) Which of the following terms refers to an actual cost rather than an estimate?
A) Budget.
B) Encumbrance.
C) Expenditure.
D) Appropriation.
57) 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.
58) When computers are ordered by the mayor’s office, the purchase order should be recorded
in the General Fund as a debit to which of the following accounts?
A) Encumbrances.
B) Equipment.
C) Expenditures.
D) Appropriations.
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59) 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 decreased or increased, depending on the department’s specific budgetary
control procedures.
60) 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.
61) 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) how should the budgetary comparison schedule be prepared?
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.
62) The Expenditures control account of a government is credited when:
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A) Supplies are ordered.
B) Supplies previously encumbered are received.
C) The budget is recorded.
D) Temporary accounts are closed at the end of the year.
63) 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.
64) 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.
65) 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 net adjustment to Budgetary Fund Balance.
D) Expenditures will be debited for $500,000.
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66) The government-wide statement of net position displays the net expense or revenue for
each function or program of the government.
⊚ true
⊚ false
67) Program revenues are distinguished from general revenues on the government-wide
statement of activities under GASB standards.
⊚ true
⊚ false
68) Three categories of program revenues are reported in the statement of activities: charges
for services, operating grants and contributions, and capital grants and contributions.
⊚ true
⊚ false
69) All purchases of goods and services and all interfund transfers of the General Fund are
recorded as Expenditures.
⊚ true
⊚ false
70) Interfund transfers are shown as general revenues on the government-wide statement of
activities.
⊚ true
⊚ false
71) Contributions to permanent funds are shown on a separate line below the general
revenues on the government-wide statement of activities.
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⊚ true
⊚ false
72) On the government-wide statement of activities, depreciation expense for assets that
essentially benefit all functions, such as the city hall, may be reported as a separate line item or
on the same line as the General Government or similar function.
⊚ true
⊚ false
73) Other financing sources and uses are disclosed in a separate section below expenditures
on the statement of revenues, expenditures, and changes in fund balances.
⊚ true
⊚ false
74) Expenses represent the costs to purchase goods or services, whereas expenditures
represent the costs of goods or services consumed or expired during the period.
⊚ true
⊚ false
75) Other financing sources increase fund balance in the same manner as revenues.
⊚ true
⊚ false
76) Budgetary accounts used in the General Fund include Estimated Revenues, Estimated
Other Financing Sources, Appropriations, Estimated Other Financing Uses, and Encumbrances.
⊚ true
⊚ false
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77) All encumbrances must be closed at year-end.
⊚ true
⊚ false
78) Budgetary entries are made at the fund level and at the government-wide level.
⊚ true
⊚ false
79) Budgetary accounts are temporary accounts that are closed at the end of the fiscal year.
⊚ true
⊚ false
80) Budgetary accounts tend to have the same normal balances as related operating statement
accounts.
⊚ true
⊚ false
81) GASB standards require that a variance column be provided in the budgetary comparison
schedule.
⊚ true
⊚ false
82) An encumbrance represents the estimated future liability for goods or services resulting
from placing a purchase order or signing a contract.
⊚ true
⊚ false
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83) GASB standards require that at a minimum all state and local governments present a
schedule of revenues, expenditures, and changes in fund balances—budget and actual for the
General Fund and major special revenue funds for which annual budgets have been legally
adopted.
⊚ true
⊚ false
84) Available means that a revenue or other financing source is expected to be collected
during the current fiscal period or within one month of the fiscal year end.
⊚ true
⊚ false
85) Debt service can be classified by character and by object.
⊚ true
⊚ false
86) The GASB indicates that expenditures should be classified at three levels—fund,
function, and source.
⊚ true
⊚ false
87) GASB standards indicate that revenues should be classified by both fund and source.
⊚ true
⊚ false
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88) The valuation of taxable property is determined through a property assessment.
⊚ true
⊚ false
89) The legal level of budgetary control represents the administrative level at which
expenditures may not exceed appropriations without a formal budgetary amendment.
⊚ true
⊚ false
90) “Available appropriation” is calculated as the difference between appropriations and the
sum of expenditures and encumbrances.
⊚ true
⊚ false
91) When goods for which an encumbrance has been recorded are received at an invoiced
amount that varies from the amount encumbered, the encumbrance is reversed in the amount of
the actual invoiced cost of the goods.
⊚ true
⊚ false
92) An allotment may be described as an internal allocation of funds on a periodic basis
usually agreed upon by the department heads and the chief executive.
⊚ true
⊚ false
93) In the GASB reporting model, extraordinary items and special items must be reported as
separate line items below General Revenues in the statement of activities to distinguish these
nonrecurring items from normal recurring general revenues.
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⊚ true
⊚ false
94) The numerical difference between (1) current assets and deferred outflows and (2) current
liabilities and deferred inflows recorded in governmental funds is denoted as net position.
⊚ true
⊚ false
95) Encumbrance accounting is required in the accounting for payroll of governmental funds.
⊚ true
⊚ false
96) When an activity accounted for by the General Fund results in issuance of purchase
orders or contracts for goods or services a record must be kept, but no journal entries in the
General Fund are necessary.
⊚ true
⊚ false
97) Any balance in Encumbrances Outstanding that remains at the end of the fiscal year is
reported as a line item under Fund Balances on the governmental funds balance sheet.
⊚ true
⊚ false
98) At the end of the fiscal year Encumbrances is closed to Budgetary Fund Balance with a
credit.
⊚ true
⊚ false
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99) Public school systems tend to follow the revenue and expenditure classifications of the
National Center for Education Statistics rather than the GASB classifications.
⊚ true
⊚ false
100) The fund classification system used by public schools follows the GASB standards.
⊚ true
⊚ false
101) Public school systems prepare their financial reports in accordance with the requirements
of the National Center for Education Statistics.
⊚ true
⊚ false
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Answer Key
Test name: chapter 3
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