Question 1

Governments have no need for an accounting system.

Accepted Answer

A) True 
 B)False  False

Question 2

Governments may be subject to the same pressures that led to accounting scandals like Enron.

Accepted Answer

A) True 
 B)False  True

Question 3

Certain fiscal practices of governments promote interperiod equity while others do not.For the situations listed below, indicate whether interperiod equity is promoted or undermined.Why?
a.Issuing 30-year serial bonds to finance the construction of capital assets with estimated 30-year lives.
b.Paying for the pensions of retired employees out of resources provided by current-period taxpayers.
c.Charging the cost of supplies as expenditures in the year in which they were used rather than when they were purchased.
d.Issuing 30-year bonds to finance a portion of the current-period operating costs of a city's school system
e.Charging payments of wages and salaries made in the first week of a new year to the previous fiscal year, the year in which the wages and salaries were earned.
ESSAY (CHAPTER 1)

Accepted Answer

a.Promotes interperiod equity.Because the bonds are required to be repaid over the life of the capital assets, the cost of those assets is allocated to the periods over which taxpayers benefit from the use of the assets.
b.Undermines interperiod equity.The employee benefits costs-pension benefits-are paid by an entirely different generation of taxpayers-long after the employees earned the benefits by providing services.
c.Promotes interperiod equity.Although not particularly material, supplies do not benefit taxpayers until they are used to provide services.Reporting these as expenditures when purchased reports the cost in a different period from when the benefit is provided.
d.Undermines interperiod equity.Using debt to finance operating costs spreads the cost of providing services provided in a single period over the entire term of the long-term debt.Interest costs on the debt amplify the problem.
e.Promotes interperiod equity.Again, while possibly immaterial, reporting the cost of providing services-in the form of wages and salaries-in the period in which services were provided promotes interperiod equity.

Question 4

Which of the following statements is true?

Accepted Answer

A) Governments may engage in activities similar to activities engaged in by for-profit entities. 
B) There are a limited number of different types of governments. 
C) All governments engage in the same activities. 
D) Managers may have a long-term focus and thereby sacrifice the short-term liquidity of the entity. 
A) Governments may engage in activities similar to activities engaged in by for-profit entities. 
B) There are a limited number of different types of governments. 
C) All governments engage in the same activities. 
D) Managers may have a long-term focus and thereby sacrifice the short-term liquidity of the entity.

Question 5

Save-the-Birds (STB), a not-for-profit entity dedicated to acquiring and preserving habitat for upland birds, prepares financial statements in accordance with generally accepted accounting principles.Currently, standards require that a not-for-profit entity report virtually all contributions as revenue in the year received.During the current year STB received a donation of several hundred acres of prime habitat for upland birds.STB will require several hundred thousand dollars in additional donations in order to make the land completely suitable for the birds.Before embarking on its fund-raising campaign STB prepares financial statements which are summarized as follows.   What difficulties, if any, will STB encounter in its new fund-raising drive? Knowing that the donation of the land accounted for $1,000,000 of the revenue reported by STB, do you think the financial statements present fairly the financial position and results of operations of this not-for-profit entity?

Accepted Answer

Save-the-Birds (STB)will be launching a

Question 6

In which of the following activities is a not-for-profit entity least likely to engage?

Accepted Answer

A) Providing educational services. 
B) Providing health-care services. 
C) Providing for terrorism defense. 
D) Retail sales of cookies. 
A) Providing educational services. 
B) Providing health-care services. 
C) Providing for terrorism defense. 
D) Retail sales of cookies.

Question 7

What is the significance-for financial reporting purposes-of the fact that neither not-for-profits nor governments have owners (stockholders)?

Accepted Answer

The obvious significance of the fact tha

Question 8

Which of the following is NOT a reason why users need government and not-for-profit external financial statements?

Accepted Answer

A) To determine the ability of the entity to meet its obligations. 
B) To determine the ability of the entity to continue to provide services. 
C) To predict future fiscal solvency. 
D) To evaluate the overall profitability of the entity. 
A) To determine the ability of the entity to meet its obligations. 
B) To determine the ability of the entity to continue to provide services. 
C) To predict future fiscal solvency. 
D) To evaluate the overall profitability of the entity.

Question 9

Which of the following entities was a principal in creating the FASAB?

Accepted Answer

A) U)S.Congress. 
B) Office of Management and Budget. 
C) Governmental Accounting Standards Board. 
D) Securities and Exchange Commission. 
A) U)S.Congress. 
B) Office of Management and Budget. 
C) Governmental Accounting Standards Board. 
D) Securities and Exchange Commission.

Question 10

Which of the following can be affected by GAAP?

Accepted Answer

A) Legal ability to issue bonds. 
B) Ability to balance the budget. 
C) Amount reported as employee pension plan contributions. 
D) Claims and judgments settled. 
A) Legal ability to issue bonds. 
B) Ability to balance the budget. 
C) Amount reported as employee pension plan contributions. 
D) Claims and judgments settled.

Question 11

In descending order, the hierarchy of GAAP applicable to a church-owned college may be:

Accepted Answer

A) FASB Statements and Interpretations, FASB Technical Bulletins, AICPA Industry Audit Guides, FASB Implementation Guides, other accounting literature-including GASB standards. 
B) FASB Statements and Interpretations, FASB Technical Bulletins, FASB Implementation Guides, AICPA Practice Bulletins (if cleared by FAS
B) . 
C) GASB Statements and Interpretations, AICPA Industry Audit Guides, GASB Implementation Guides, other accounting literature-including FASB standards. 
D) GASB Statements and Interpretations, GASB Technical Bulletins, AICPA Industry Audit Guides, AICPA Practice Bulletins (if cleared by GAS
B) , GASB Implementation Guides, other accounting literature-including FASB standards. 
A) FASB Statements and Interpretations, FASB Technical Bulletins, AICPA Industry Audit Guides, FASB Implementation Guides, other accounting literature-including GASB standards. 
B) FASB Statements and Interpretations, FASB Technical Bulletins, FASB Implementation Guides, AICPA Practice Bulletins (if cleared by FAS
B) . 
C) GASB Statements and Interpretations, AICPA Industry Audit Guides, GASB Implementation Guides, other accounting literature-including FASB standards. 
D) GASB Statements and Interpretations, GASB Technical Bulletins, AICPA Industry Audit Guides, AICPA Practice Bulletins (if cleared by GAS
B) , GASB Implementation Guides, other accounting literature-including FASB standards.

Question 12

The Governmental Accounting Standards Board is the primary standard-setting body for:

Accepted Answer

A) All governments. 
B) All state and local governments. 
C) All governments and all not-for-profit entities. 
D) All state and local governments and all not-for-profit entities. 
A) All governments. 
B) All state and local governments. 
C) All governments and all not-for-profit entities. 
D) All state and local governments and all not-for-profit entities.

Question 13

A primary characteristic that distinguishes not-for-profit entities from businesses is

Accepted Answer

A) The need to generate revenues equal to or in excess of expenditures/expenses. 
B) The importance of the budget in the governing process. 
C) The need to provide goods or services. 
D) The correlation between revenues generated and demand for goods or services. 
A) The need to generate revenues equal to or in excess of expenditures/expenses. 
B) The importance of the budget in the governing process. 
C) The need to provide goods or services. 
D) The correlation between revenues generated and demand for goods or services.

Question 14

The purpose of the FASAB is to establish accounting standards for

Accepted Answer

A) Not-for-profit entities. 
B) Federal government. 
C) All governments. 
D) Non-federal governments. 
A) Not-for-profit entities. 
B) Federal government. 
C) All governments. 
D) Non-federal governments.

Question 15

Which of the following is NOT generally considered a main user of government and not-for-profit entity external financial statements?

Accepted Answer

A) Investors and creditors. 
B) Taxpayers. 
C) Donors. 
D) Internal managers. 
A) Investors and creditors. 
B) Taxpayers. 
C) Donors. 
D) Internal managers.

Question 16

Which of the following is an objective of financial reporting by state and local governments as established by the GASB? Financial reporting should assist users in

Accepted Answer

A) Assessing the management skills of top management. 
B) Determining if current-period revenues were sufficient to pay for current-period services. 
C) Evaluating the cash management operations of the government for the year. 
D) Assessing whether the government provided appropriate services to its constituents in the current year. 
A) Assessing the management skills of top management. 
B) Determining if current-period revenues were sufficient to pay for current-period services. 
C) Evaluating the cash management operations of the government for the year. 
D) Assessing whether the government provided appropriate services to its constituents in the current year.

Question 17

A primary characteristic that distinguishes governments from businesses is

Accepted Answer

A) The need to generate revenues equal to or in excess of expenditures/expenses. 
B) The importance of the budget in the governing process. 
C) The need to provide goods or services. 
D) The correlation between revenues generated and demand for goods or services. 
A) The need to generate revenues equal to or in excess of expenditures/expenses. 
B) The importance of the budget in the governing process. 
C) The need to provide goods or services. 
D) The correlation between revenues generated and demand for goods or services.

Question 18

Users of government financial statements should be interested in information about compliance with laws and regulations for which of the following reasons?

Accepted Answer

A) To determine if the government has complied with bond covenants. 
B) To determine if the government has complied with taxing limitations. 
C) To determine if the government has complied with donor restrictions on the use of funds. 
D) To determine all of the above. 
A) To determine if the government has complied with bond covenants. 
B) To determine if the government has complied with taxing limitations. 
C) To determine if the government has complied with donor restrictions on the use of funds. 
D) To determine all of the above.

Question 19

The basis of accounting selected by or imposed on a government can influence which of the following?

Accepted Answer

A) A decision to contract-out a specific service rather than provide that service itself. 
B) The amount of salary increases proposed by union negotiators. 
C) The amount that is available to spend on a donor-specified project or service. 
D) All of the above. 
A) A decision to contract-out a specific service rather than provide that service itself. 
B) The amount of salary increases proposed by union negotiators. 
C) The amount that is available to spend on a donor-specified project or service. 
D) All of the above.

Question 20

Which of the following characteristics is unique to governments?

Accepted Answer

A) The ability to have activities financed with tax-exempt debt. 
B) The power to impose fees. 
C) The ability to issue tax-exempt debt. 
D) The ability to have activities financed by Federal grants. 
A) The ability to have activities financed with tax-exempt debt. 
B) The power to impose fees. 
C) The ability to issue tax-exempt debt. 
D) The ability to have activities financed by Federal grants.

Governments have no need for an accounting system.

Governments may be subject to the same pressures that led to accounting scandals like Enron.

Which of the following statements is true?

In which of the following activities is a not-for-profit entity least likely to engage?

What is the significance-for financial reporting purposes-of the fact that neither not-for-profits nor governments have owners (stockholders)?

Which of the following is NOT a reason why users need government and not-for-profit external financial statements?

Which of the following entities was a principal in creating the FASAB?

Which of the following can be affected by GAAP?

In descending order, the hierarchy of GAAP applicable to a church-owned college may be:

The Governmental Accounting Standards Board is the primary standard-setting body for:

A primary characteristic that distinguishes not-for-profit entities from businesses is

The purpose of the FASAB is to establish accounting standards for

Which of the following is NOT generally considered a main user of government and not-for-profit entity external financial statements?

Which of the following is an objective of financial reporting by state and local governments as established by the GASB? Financial reporting should assist users in

A primary characteristic that distinguishes governments from businesses is

Users of government financial statements should be interested in information about compliance with laws and regulations for which of the following reasons?

The basis of accounting selected by or imposed on a government can influence which of the following?

Which of the following characteristics is unique to governments?

Fund Accounting

Issues of Budgeting and Control

Recognizing Revenues in Governmental Funds

Recognizing Expenditures in Governmental Funds

Accounting for Capital Projects and Debt Service

Capital Assets and Investments in Marketable Securities

Long-Term Obligations

Business-Type Activities

Pensions and Other Fiduciary Activities

Issues of Reporting, Disclosure, and Financial Analysis

Not-For-Profit Organizations

Colleges and Universities

Health Care Providers

Managing for Results

Auditing Governments and Notforprofit Organizations

Federal Government Accounting

Filters

Exam 1: The Government and Not-For-Profit Environment

Governments have no need for an accounting system.

Governments may be subject to the same pressures that led to accounting scandals like Enron.

Which of the following statements is true?

In which of the following activities is a not-for-profit entity least likely to engage?

What is the significance-for financial reporting purposes-of the fact that neither not-for-profits nor governments have owners (stockholders)?

Which of the following is NOT a reason why users need government and not-for-profit external financial statements?

Which of the following entities was a principal in creating the FASAB?

Which of the following can be affected by GAAP?

In descending order, the hierarchy of GAAP applicable to a church-owned college may be:

The Governmental Accounting Standards Board is the primary standard-setting body for:

A primary characteristic that distinguishes not-for-profit entities from businesses is

The purpose of the FASAB is to establish accounting standards for

Which of the following is NOT generally considered a main user of government and not-for-profit entity external financial statements?

Which of the following is an objective of financial reporting by state and local governments as established by the GASB? Financial reporting should assist users in

A primary characteristic that distinguishes governments from businesses is

Users of government financial statements should be interested in information about compliance with laws and regulations for which of the following reasons?

The basis of accounting selected by or imposed on a government can influence which of the following?

Which of the following characteristics is unique to governments?

Fund Accounting

Issues of Budgeting and Control

Recognizing Revenues in Governmental Funds

Recognizing Expenditures in Governmental Funds

Accounting for Capital Projects and Debt Service

Capital Assets and Investments in Marketable Securities

Long-Term Obligations

Business-Type Activities

Pensions and Other Fiduciary Activities

Issues of Reporting, Disclosure, and Financial Analysis

Not-For-Profit Organizations

Colleges and Universities

Health Care Providers

Managing for Results

Auditing Governments and Notforprofit Organizations

Federal Government Accounting

Filters