Final – Govt Acctg
Instructions: Use the answer sheet (last page) to answer with the True/False or Multiple
Choice questions. You can email this to me at: or bring to class on
the final night.
1. Accountability for capital assets used by departments accounted for by the governmental funds of a governmental unit should be established in
A) The appropriate governmental funds.
B) The governmental activities accounts at the government-wide level.
C) Departmental memorandum records.
D) The property, plant, and equipment fund.
2. Which of the following would not be considered a general capital asset?
A) A vehicle purchased from general fund revenues.
B) A vehicle purchased and maintained by an enterprise fund.
C) A computer purchased from grant revenues of a special revenue fund and used by the police department.
D) Lighting on sidewalks constructed from special assessments.
3. Which of the following funds of a governmental unit uses the modified accrual basis of accounting?
A) Private-purpose trust fund.
B) Enterprise.
C) Internal service.
D) Capital projects.
4. Equipment acquired under capital leases and used by activities accounted for in governmental funds should be recorded in the governmental activities accounts at the inception of the lease at
A) Fair value.
B) Present value of minimum lease payments.
C) Lower of fair value or present value of minimum lease payments.
D) None of the above; leased assets should not be recorded in the accounts.
5. With regard to depreciation of general capital assets
A) Depreciation expense should be charged in the appropriate governmental funds, and reported in the governmental activities accounts.
B) No depreciation can be recorded in any governmental fund, but depreciation expense must be reported in the governmental activities accounts.
C) Depreciation expense must be recorded in the governmental fund, but no depreciation expense can be recorded in the governmental activities accounts.
D) No depreciation can be recorded in any governmental fund, nor is it permissible to record depreciation expense in the governmental activities accounts.
6. A capital projects fund might be used to account for which of the following activities?
A) Building a park.
B) Maintaining roads and bridges.
C) Providing water and sewer services.
D) Servicing long-term debt.
7. The budgetary account recommended for use by a capital projects funds is
A) Estimated revenues.
B) Appropriations.
C) Encumbrances.
D) Estimated other financing uses.
8. Both general capital assets acquired or constructed from the proceeds of special assessment debt, and the long-term liability are accounted for in the governmental activities accounts.
9. Debt backed by both special assessments and the full faith and credit of a governmental unit should be reported in the CAFR in the business-type activities accounts.
10. Disclosures about long-term liabilities should be included in a CAFR to provide users with information about authorization of new debt issues, sale of previously authorized issues, and retirement and refunding of debt during the year.
11. Notes to the financial statements of a state or local government should include a schedule, or summary, of annual debt service requirements (principal and interest payments) for the year following the balance sheet date and for all subsequent years until the final maturity of debt outstanding on balance sheet date.
12. Debt service funds exist to accumulate resources to pay tax supported bond issues at maturity. Interest on such bonds is paid from General Fund appropriations, not from debt service fund appropriations.
13. Which of the following may properly be reported as a component of equity in the proprietary fund statement of net assets?
A) Retained earnings.
B) Designated equity.
C) Restricted net assets.
D) Contributed capital.
14. What type of fund is recommended for municipal solid waste landfills?
A) General Fund.
B) Internal service fund.
C) Special revenue fund.
D) Enterprise fund.
15. Internal service funds should be used only if
A) The reporting government is the predominant participant in the activity.
B) The reporting government provides services primarily to external participants.
C) Either A and B.
D) Neither A nor B.
16. Revenue bonds sold by a water utility fund, upon sale, would be recorded
A) In an enterprise fund as “Proceeds of Bonds.”
B) In an enterprise fund as a liability.
C) In an enterprise fund as a revenue.
D) In the governmental activities accounts as a liability.
17. Which of the following funds of a governmental unit uses the same basis of accounting as an enterprise fund?
A) Permanent trust.
B) Investment trust fund.
C) Special revenue.
D) Capital projects.
18. How is an enterprise fund different than an internal service fund?
A) An enterprise fund is operated for profit.
B) An internal service fund is not operated like a for-profit business.
C) An enterprise fund provides services for outside users, while an internal service fund generally does not.
D) An internal service fund provides services for outside users, while an enterprise fund does not.
19. In which of the following funds is it appropriate to record depreciation of capital assets?
A) Enterprise fund.
B) Permanent fund.
C) General fund.
D) Capital projects fund.
20. Which of the following is not true regarding proprietary funds?
A) The difference between assets and liabilities of proprietary funds is called "Fund Balance."
B) Proprietary funds record long-term debt directly in the fund accounts.
C) Proprietary funds record capital assets directly in the fund accounts.
D) Proprietary funds report a statement of cash flows.
21. The comprehensive annual financial report (CAFR) of a governmental unit should contain a statement of revenues, expenses, and changes in net assets for
A) Both proprietary and governmental funds.
B) Proprietary but not governmental funds.
C) Governmental but not proprietary funds.
D) Neither governmental nor proprietary funds.
22. The type of budgeting recommended for an internal service fund is
A) Incremental.
B) Fixed.
C) Flexible.
D) Object of expenditure.
23. If a state or local governmental unit is a party to an agency relationship, it must automatically create an agency fund in order to be in conformity with generally accepted accounting principles.
24. An agency fund accounts for assets held by a governmental unit temporarily as agent for an individual, organization, other fund, or other governmental unit.
25. An agency relationship that usually necessitates the creation of an agency fund is the collection of revenues by one governmental body for several of its funds and/or for other governmental units and their funds.
26. Tax agency funds assume liability for gross levies, not for the amounts the levying funds or units expect to collect.
27. It is common for an agency fund to have relatively large fund balances.
28. An agency fund should be used to account for all special assessment billing and collection, and related debt service of special assessment debt.
29. Effective management of cash and investments of individual funds may be enhanced by placing the cash and investments in a pool under the control of the Treasurer of the governmental unit or other official.
30. General purpose external financial statements of state and local governmental units should consist of auditor’s report, management’s discussion & analysis (MD&A), basic financial statements, notes to the financial statements, and, if there is more than one fund of a given type, combining statements for each such fund type.
31. Statistical tables included in comprehensive annual financial reports should include only financial data needed to support information given in the financial statements.
32. A component unit is dependent on the primary government when the primary government is obligated for its debt.
33. The accounting system used by a state or local government must make it possible to prepare financial statements as required by the Financial Accounting Standards Board.
34. Under GASBS 34, the financial statements that report on business-type activities at the government-wide level include the statement of net assets, statement of activities, and statement of cash flows.
35. GASBS 34 reporting requires combined financial statements as part of the general purpose external financial reports.
36. The Statement of Financial Position prepared by nongovernmental NPO presents net assets in these categories: unrestricted; temporarily restricted; invested in capital assets, net of related debt; and permanently restricted.
37. NPOs are not required to prepare a Statement of Cash Flows.
38. Expense amounts by natural classification can be determined from the Statement of Functional Expenses, as well as by program services and supporting services categories.
39. All not-for-profit organizations covered by the AICPA Audit and Accounting Guide Not-for-Profit Organizations are under the standards-setting jurisdiction of the FASB.
40. Investments should be recorded at cost, or in the case of donated investments, at fair value as of the date of the gift. On subsequent balance sheets they may reported at market value at balance sheet date or lower of market value or cost (or fair value at the date of the gift), provided the valuation method is disclosed and consistently followed.
Final Govt. Acctg.Name ______
Answer Sheet