A) Long-term liability.
B) Revenue.
C) Other financing source.
D) Not reported by the governmental fund; only reported at the government-wide level.
45) Under the modified accrual basis of accounting, revenues should be recognized when
A) Realizable.
B) Earned.
C) Available.
D) Spent.
46) At the end of the 2023 fiscal year the General Fund had $500 in encumbrances that
remained opened into fiscal year 2024. In 2024 the encumbered goods were received at an
invoiced cost of $520. How much would be recorded as the 2024 expenditure?
A) $0.
B) $20.
C) $500.
D) $520.
47) The governmental funds operating statement presents all of the following except
A) Expenditures.
B) Other financing sources.
C) Revenues.
D) Encumbrances.
Version 1 20
48) The account Deferred Inflows of Resources—Unavailable Revenues is used in
governmental funds to record
A) Property taxes that are considered uncollectible.
B) Property taxes that have been collected but not yet earned.
C) Property taxes that will not be collected within 60 days of fiscal year end.
D) Uncollectible and unearned property taxes could be included in Deferred Inflows of
Resources—Unavailable Revenues.
49) Supplies recorded in the General Fund under the purchases method will initially include a
A) Debit to Inventory of Supplies.
B) Credit to Fund Balance—Restricted—Inventory of Supplies.
C) Debit to Expenditures.
D) Debit to Fund Balance—Restricted—Inventory of Supplies.
50) Supplies recorded in the General Fund under the consumption method will initially
include a
A) Debit to Inventory of Supplies.
B) Credit to Fund Balance—Restricted—Inventory of Supplies.
C) Debit to Expenditures.
D) Debit to Fund Balance—Restricted—Inventory of Supplies.
51) Revenues that are legally restricted for expenditure on specified operating purposes that
should be accounted for in special revenue funds include
Version 1 21
A) An endowment where the investment earnings are to be used for public purposes.
B) Pension trust fund revenues.
C) An accumulation of resources for payment of general long-term debt principal and
interest.
D) Gasoline taxes to finance road repairs.
52) The city’s electric utility fund sent $1,000,000 to the General Fund to help cover the
city’s operating costs. This transaction would be recorded in the governmental activities journal
as
A) An interfund transfer in.
B) An internal balance.
C) A revenue.
D) It would not be recorded since the transaction involves two funds of the same
government.
53) The General Fund sent $750,000 to a debt service fund to cover principal and interest
costs. This transaction would be recorded in the governmental activities journal as
A) An interfund transfer in.
B) An internal balance.
C) A revenue.
D) It would not be recorded since the transaction involves two governmental funds.
54) Which of the following transactions is classified as an exchange transaction?
Version 1 22
A) Fees charged for use of an athletic field at a city park.
B) State grant to conduct a smoking cessation program for middle school-aged youth.
C) Bequest left to the city by a former mayor.
D) Personal property taxes.
55) For which of the following types of nonexchange transactions are revenuesrecognized
when all the eligibility requirements are met?
A) Voluntary nonexchange transactions.
B) Imposed nonexchange transactions.
C) Derived tax revenues.
D) Property tax revenues.
56) Which of the following is not a program revenues classification used in the governmental
activities journal and reported in the government-wide statement of activities?
A) User fees.
B) Capital grants and contributions.
C) Charges for services.
D) Operating grants and contributions.
57) The town received a $5,000,000 endowment, the terms of which indicate that earnings on
the endowment are to be used by health and welfare to provide vaccines to all citizens that are
interested. Where would the $5,000,000 be recorded?
A) Special revenue fund.
B) Permanent fund.
C) Private-purpose trust fund.
D) Public-purpose trust fund.
Version 1 23
58) The earnings on the assets of a permanent fund are to be used to support the city’s library
(special revenue fund). How would the earnings be recorded?
A) Revenues by the permanent fund.
B) Revenues by the library.
C) Revenues by both the permanent fund and the library.
D) Other financing source by the permanent fund.
59) In what ways does the governmental activities column of the government-wide statement
of net position differ from the balance sheet for governmental funds?
60) Why might the property tax revenue in a given year differ between the governmental
funds statement of revenues, expenditures, and changes in fund balances and the governmental
activities column of the statement of activities?
61) Why might actual revenues and expenditures reported on the schedule of revenues,
expenditures, and changes in fund balances—budget and actual differ from those reported on the
GAAP-basis statement of revenues, expenditures, and changes in fund balances?
62) Identify the four types of nonexchange transactions and discuss the rules for recognition
of revenues and expenses/expenditures for each type of transaction.
Version 1 24
63) When preparing the statement or schedule of revenues, expenditures, and changes in fund
balances on the budgetary basis, how are encumbrances outstanding at year-end treated if they
will be honored in the upcoming year?
64) What are deferred inflows of resources, and when are they recorded?
65) The government-wide statement of net position is prepared using the same measurement
focus and basis of accounting as the General Fund balance sheet.
⊚ true
⊚ false
66) The Governmental Activities column of the government-wide statement of net position
reports both current and noncurrent assets and liabilities.
⊚ true
⊚ false
67) Vehicles used by the culture and recreation department should be reported in the
governmental fund financial statements.
Version 1 25
⊚ true
⊚ false
68) Vehicles used by the culture and recreation department should be reported in the
Governmental Activities column of the government-wide statement of net position.
⊚ true
⊚ false
69) Recording the annual budget is optional in the General Fund.
⊚ true
⊚ false
70) Budgetary entries are not recorded at the government-wide level.
⊚ true
⊚ false
71) The Governmental Activities column of the statement of net position includes financial
information for all funds of a government.
⊚ true
⊚ false
72) Encumbrances Outstanding is shown on the balance sheet as a restriction on fund
balance.
⊚ true
⊚ false
Version 1 26
73) Governments that are temporarily short of cash but that have levied taxes expected to be
collectible during the fiscal year are generally able to obtain funding from tax anticipation notes
payable.
⊚ true
⊚ false
74) If the actual liability for goods received by the General Fund differs from the estimated
liability recorded when the goods were ordered, the Encumbrances account should be credited in
the amount of the estimated liability.
⊚ true
⊚ false
75) Under the modified accrual basis of accounting, property tax revenue is recognized in the
year it is levied.
⊚ true
⊚ false
76) 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.
⊚ true
⊚ false
77) At the government-wide level, Revenues is credited for the total amount of the property
tax levy.
⊚ true
⊚ false
Version 1 27
78) GASB standards require that the principal amount of public-purpose trusts for which the
earnings are expendable for a specified purpose, but the principal amount is not expendable, be
accounted for in a governmental fund called a permanent fund.
⊚ true
⊚ false
79) Property tax revenue is an example of a nonexchange revenue—one in which the
government receives value without directly giving equal value in exchange.
⊚ true
⊚ false
80) Property tax revenue recorded in the governmental funds may differ from the amount
recorded at the government-wide level in any given year.
⊚ true
⊚ false
81) 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.
⊚ true
⊚ false
82) 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.
⊚ true
⊚ false
83) A tourist tax that is restricted for use on maintenance projects in the historic downtown
district should be accounted for in a special revenue fund.
Version 1 28
⊚ true
⊚ false
84) Property taxes levied in the current year but due 75 days after the current fiscal year end
would be recognized as revenues in the current fiscal year’s General Fund general journal.
⊚ true
⊚ false
85) Whenever a significant revenue source is restricted for a specific operating purpose, a
special revenue fund should be established.
⊚ true
⊚ false
86) A payment made by the General Fund to a debt service fund would not be recorded in the
governmental activities journal.
⊚ true
⊚ false
87) Fines and forfeits are reported as program revenues on the government-wide statement of
activities.
⊚ true
⊚ false
88) A payment made by a city-owned utility to the General Fund of the city in lieu of taxes
requires journal entries in both the General Fund and the utility fund.
⊚ true
⊚ false
Version 1 29
89) All amounts due to or from other funds should be eliminated in both the government-
wide and fund financial statements.
⊚ true
⊚ false
90) 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.
⊚ true
⊚ false
91) Permanent funds use the modified accrual basis of accounting.
⊚ true
⊚ false
92) An interfund transfer occurs when one fund of a government pays another fund of the
same government for services provided.
⊚ true
⊚ false
93) 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.
⊚ true
⊚ false
94) 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.
Version 1 30
⊚ true
⊚ false
95) 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.
⊚ true
⊚ false
96) Encumbrance accounts need not be closed at year-end if the government is required or
intends to honor the encumbrances outstanding at year-end.
⊚ true
⊚ false
97) State and local governments typically provide quarterly or other interim financial
statements to external parties, similar to interim reports issued by publicly traded corporations.
⊚ true
⊚ false
98) Deferred inflows of resources are combined with liabilities and presented as total
liabilities on government financial statements.
⊚ true
⊚ false
99) It is not uncommon for the General Fund to transfer resources to a debt service fund to
make principal or interest payments on general long-term debt.
⊚ true
⊚ false
Version 1 31
Version 1 32
Answer Key
Test name: chapter 4
Version 1 33
Version 1 34
Version 1 35