Test Bank For Accounting for
Governmental and Nonprofit
Chapter 1: Introduction to Accounting and Financial Reporting for Governmental and
Nonprofit Entities
Question 1:
Which of the following is a primary purpose of financial reporting by state and local
governments?
A) To provide information for making economic, social, and political decisions
B) To ensure accountability and stewardship over resources
C) To evaluate the performance of government management
D) All of the above
Answer: D) All of the above
Question 2:
Which of the following funds is used to account for activities that are similar to those
often found in the private sector?
A) General Fund
B) Special Revenue Fund
C) Enterprise Fund
D) Debt Service Fund
Answer: C) Enterprise Fund
Question 3:
Which of the following is not a characteristic of a government as defined by the
Governmental Accounting Standards Board (GASB)?
A) The power to enact and enforce a tax levy
B) The ability to issue tax-exempt debt
C) The requirement to prepare consolidated financial statements
D) The existence of a popularly elected governing body
,Answer: C) The requirement to prepare consolidated financial statements
Chapter 2: Principles of Accounting and Financial Reporting for State and Local
Governments
Question 1:
Which of the following is not a fund category used in governmental accounting?
A) Governmental Funds
B) Proprietary Funds
C) Fiduciary Funds
D) Depreciation Funds
Answer: D) Depreciation Funds
Question 2:
Under the accrual basis of accounting, when are revenues recognized?
A) When earned, regardless of when received
B) When received in cash
C) When authorized by the government
D) When expenditures are made
Answer: A) When earned, regardless of when received
Question 3:
Which of the following types of funds uses the economic resources measurement
focus and the accrual basis of accounting?
A) General Fund
B) Capital Projects Fund
C) Enterprise Fund
D) Debt Service Fund
Answer: C) Enterprise Fund
,Chapter 3: Budgetary Accounting
Question 1:
Which of the following is not a purpose of a governmental budget?
A) To provide a plan for government operations
B) To control spending by limiting expenditures
C) To serve as a basis for external financial reporting
D) To calculate net income for the fiscal period
Answer: D) To calculate net income for the fiscal period
Question 2:
Encumbrances are recorded in governmental accounting to:
A) Reserve fund balance for the amount of outstanding purchase orders
B) Record expenditures when they are paid
C) Allocate resources to different departments
D) Recognize revenue when it is earned
Answer: A) Reserve fund balance for the amount of outstanding purchase orders
Question 3:
Which of the following statements about budgetary comparison schedules is true?
A) They are required for all funds
B) They must be included in the financial section of the CAFR
C) They compare actual revenues and expenditures to the original and final budget
amounts
D) They must be prepared using the cash basis of accounting
Answer: C) They compare actual revenues and expenditures to the original and final
budget amounts
, Chapter 4: Accounting for the General and Special Revenue Funds
Question 1:
In governmental accounting, which of the following funds would most likely be used
to account for resources that are legally restricted for a specific purpose other than
debt service or capital projects?
A) General Fund
B) Special Revenue Fund
C) Capital Projects Fund
D) Debt Service Fund
Answer: B) Special Revenue Fund
Question 2:
Which of the following is true about the General Fund in governmental accounting?
A) It accounts for all financial resources except those required to be accounted for in
another fund.
B) It is used to account for capital projects.
C) It is a type of fiduciary fund.
D) It is not included in the government-wide financial statements.
Answer: A) It accounts for all financial resources except those required to be
accounted for in another fund.
Question 3:
Which of the following entries would be made to record the adoption of the budget
in the General Fund?
A) Debit Expenditures, Credit Appropriations
B) Debit Appropriations, Credit Estimated Revenues
C) Debit Estimated Revenues, Credit Appropriations
D) Debit Encumbrances, Credit Fund Balance
Answer: C) Debit Estimated Revenues, Credit Appropriations
Governmental and Nonprofit
Chapter 1: Introduction to Accounting and Financial Reporting for Governmental and
Nonprofit Entities
Question 1:
Which of the following is a primary purpose of financial reporting by state and local
governments?
A) To provide information for making economic, social, and political decisions
B) To ensure accountability and stewardship over resources
C) To evaluate the performance of government management
D) All of the above
Answer: D) All of the above
Question 2:
Which of the following funds is used to account for activities that are similar to those
often found in the private sector?
A) General Fund
B) Special Revenue Fund
C) Enterprise Fund
D) Debt Service Fund
Answer: C) Enterprise Fund
Question 3:
Which of the following is not a characteristic of a government as defined by the
Governmental Accounting Standards Board (GASB)?
A) The power to enact and enforce a tax levy
B) The ability to issue tax-exempt debt
C) The requirement to prepare consolidated financial statements
D) The existence of a popularly elected governing body
,Answer: C) The requirement to prepare consolidated financial statements
Chapter 2: Principles of Accounting and Financial Reporting for State and Local
Governments
Question 1:
Which of the following is not a fund category used in governmental accounting?
A) Governmental Funds
B) Proprietary Funds
C) Fiduciary Funds
D) Depreciation Funds
Answer: D) Depreciation Funds
Question 2:
Under the accrual basis of accounting, when are revenues recognized?
A) When earned, regardless of when received
B) When received in cash
C) When authorized by the government
D) When expenditures are made
Answer: A) When earned, regardless of when received
Question 3:
Which of the following types of funds uses the economic resources measurement
focus and the accrual basis of accounting?
A) General Fund
B) Capital Projects Fund
C) Enterprise Fund
D) Debt Service Fund
Answer: C) Enterprise Fund
,Chapter 3: Budgetary Accounting
Question 1:
Which of the following is not a purpose of a governmental budget?
A) To provide a plan for government operations
B) To control spending by limiting expenditures
C) To serve as a basis for external financial reporting
D) To calculate net income for the fiscal period
Answer: D) To calculate net income for the fiscal period
Question 2:
Encumbrances are recorded in governmental accounting to:
A) Reserve fund balance for the amount of outstanding purchase orders
B) Record expenditures when they are paid
C) Allocate resources to different departments
D) Recognize revenue when it is earned
Answer: A) Reserve fund balance for the amount of outstanding purchase orders
Question 3:
Which of the following statements about budgetary comparison schedules is true?
A) They are required for all funds
B) They must be included in the financial section of the CAFR
C) They compare actual revenues and expenditures to the original and final budget
amounts
D) They must be prepared using the cash basis of accounting
Answer: C) They compare actual revenues and expenditures to the original and final
budget amounts
, Chapter 4: Accounting for the General and Special Revenue Funds
Question 1:
In governmental accounting, which of the following funds would most likely be used
to account for resources that are legally restricted for a specific purpose other than
debt service or capital projects?
A) General Fund
B) Special Revenue Fund
C) Capital Projects Fund
D) Debt Service Fund
Answer: B) Special Revenue Fund
Question 2:
Which of the following is true about the General Fund in governmental accounting?
A) It accounts for all financial resources except those required to be accounted for in
another fund.
B) It is used to account for capital projects.
C) It is a type of fiduciary fund.
D) It is not included in the government-wide financial statements.
Answer: A) It accounts for all financial resources except those required to be
accounted for in another fund.
Question 3:
Which of the following entries would be made to record the adoption of the budget
in the General Fund?
A) Debit Expenditures, Credit Appropriations
B) Debit Appropriations, Credit Estimated Revenues
C) Debit Estimated Revenues, Credit Appropriations
D) Debit Encumbrances, Credit Fund Balance
Answer: C) Debit Estimated Revenues, Credit Appropriations
