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CFOS EXAM QUESTIONS AND ANSWERS 2025
Local Units - ...ANSWER... ✔ ✔municipalities and
counties that are corporations created by the state's
constitution and statutes
authority - ...ANSWER... ✔ ✔quasi-municipal
corporations established without the consent of the
residents for the purpose of achieving certain objectives
or providing specified services, such as water treatment,
sewage and waste disposal
municipal corporations - ...ANSWER... ✔ ✔have the
powers to: sue and be sued, adopt a common seal,
acquire property, acquire, lease and operate public
utilities, exercise any power and render any service
which contributes to the general welfare
accounting and financial practices - ...ANSWER... ✔
✔-Accounting system must show that legal provisions
have been complied with.
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-Accounting system must be on a double entry basis, with
a general ledger
-Funds must be classified consistent with legal provisions
(Defined Later)
-A complete self-balancing group of accounts must be
established for each fund.
-An annual audit of accounts is required to be conducted
by a Registered Municipal Accountant (RMA)
-Adherence to budgets is required by Statute -accounts
should be centralized under the direction of one officer
fund - ...ANSWER... ✔ ✔sum of money or other
resources segregated for the purpose of carrying on a
specific activity or attaining certain objectives in
accordance with special regulations restrictions or
limitations and constituting an independent fiscal and
accounting entity with a self-balancing set of accounts
Current Fund - ...ANSWER... ✔ ✔fund in which all
current operations of the municipality are accounted for,
provides for budgetary compliance of such operations
accounting equation - ...ANSWER... ✔ ✔assets=
liabilities + fund balance
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assets - ...ANSWER... ✔ ✔generally have a debit
balance, a debit entry to an asset increases the balance
and a credit entry decreases the balance, include: cash,
bank accounts, investment accounts, receivables, &
deferred charges
liabilities - ...ANSWER... ✔ ✔generally have a credit
balance, a credit entry increases the balance and a
debit entry decreases the balance, include: tax
overpayments, prepaid taxes, appropriation reserves,
and payables
Reserves - ...ANSWER... ✔ ✔have a credit balance,
a credit entry to a reserve account increases the
balance, generally used to account for the offset of
receivables
Fund Balance - ...ANSWER... ✔ ✔must have a credit
balance, the excess of total assets less total liabilities,
represents unused resources available for future use
Revenue - ...ANSWER... ✔ ✔income statement
account, budget is recorded as a debit entry, when
revenue is received the account is credited, at the close
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of the year they are closed to operations, accounts
include: taxes, grants, fees, permits, licenses
Appropriations - ...ANSWER... ✔ ✔budget is
recorded as a credit, encumbrances are recorded as a
debit, closed to appropriation reserves, accounts include:
salaries & wages, other expenses, debt service,
statutory expenditures, and the reserve for uncollected
taxes
GAAP - ...ANSWER... ✔ ✔Generally Accepted
Accounting Principles is the accounting method used by
many local units outside of NJ
OCBOA - ...ANSWER... ✔ ✔Other Comprehensive
Basis of Accounting method is used by NJ municipalities
and is a modified accrual basis
Modified Accrual - ...ANSWER... ✔ ✔hybrid of cash
basis and accrual basis, revenue is recorded when
received in cash, expenditures are recorded when
committed through an encumbrance, all receivables most
have an offsetting reserve for receivables
Local Bond Law - ...ANSWER... ✔ ✔N.J.S.A. 40A:2
CFOS EXAM QUESTIONS AND ANSWERS 2025
Local Units - ...ANSWER... ✔ ✔municipalities and
counties that are corporations created by the state's
constitution and statutes
authority - ...ANSWER... ✔ ✔quasi-municipal
corporations established without the consent of the
residents for the purpose of achieving certain objectives
or providing specified services, such as water treatment,
sewage and waste disposal
municipal corporations - ...ANSWER... ✔ ✔have the
powers to: sue and be sued, adopt a common seal,
acquire property, acquire, lease and operate public
utilities, exercise any power and render any service
which contributes to the general welfare
accounting and financial practices - ...ANSWER... ✔
✔-Accounting system must show that legal provisions
have been complied with.
,2|Page
-Accounting system must be on a double entry basis, with
a general ledger
-Funds must be classified consistent with legal provisions
(Defined Later)
-A complete self-balancing group of accounts must be
established for each fund.
-An annual audit of accounts is required to be conducted
by a Registered Municipal Accountant (RMA)
-Adherence to budgets is required by Statute -accounts
should be centralized under the direction of one officer
fund - ...ANSWER... ✔ ✔sum of money or other
resources segregated for the purpose of carrying on a
specific activity or attaining certain objectives in
accordance with special regulations restrictions or
limitations and constituting an independent fiscal and
accounting entity with a self-balancing set of accounts
Current Fund - ...ANSWER... ✔ ✔fund in which all
current operations of the municipality are accounted for,
provides for budgetary compliance of such operations
accounting equation - ...ANSWER... ✔ ✔assets=
liabilities + fund balance
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assets - ...ANSWER... ✔ ✔generally have a debit
balance, a debit entry to an asset increases the balance
and a credit entry decreases the balance, include: cash,
bank accounts, investment accounts, receivables, &
deferred charges
liabilities - ...ANSWER... ✔ ✔generally have a credit
balance, a credit entry increases the balance and a
debit entry decreases the balance, include: tax
overpayments, prepaid taxes, appropriation reserves,
and payables
Reserves - ...ANSWER... ✔ ✔have a credit balance,
a credit entry to a reserve account increases the
balance, generally used to account for the offset of
receivables
Fund Balance - ...ANSWER... ✔ ✔must have a credit
balance, the excess of total assets less total liabilities,
represents unused resources available for future use
Revenue - ...ANSWER... ✔ ✔income statement
account, budget is recorded as a debit entry, when
revenue is received the account is credited, at the close
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of the year they are closed to operations, accounts
include: taxes, grants, fees, permits, licenses
Appropriations - ...ANSWER... ✔ ✔budget is
recorded as a credit, encumbrances are recorded as a
debit, closed to appropriation reserves, accounts include:
salaries & wages, other expenses, debt service,
statutory expenditures, and the reserve for uncollected
taxes
GAAP - ...ANSWER... ✔ ✔Generally Accepted
Accounting Principles is the accounting method used by
many local units outside of NJ
OCBOA - ...ANSWER... ✔ ✔Other Comprehensive
Basis of Accounting method is used by NJ municipalities
and is a modified accrual basis
Modified Accrual - ...ANSWER... ✔ ✔hybrid of cash
basis and accrual basis, revenue is recorded when
received in cash, expenditures are recorded when
committed through an encumbrance, all receivables most
have an offsetting reserve for receivables
Local Bond Law - ...ANSWER... ✔ ✔N.J.S.A. 40A:2
