Question 1

The accounting cycle for most governments is two to three years and the budgeting process is less than six months.

Accepted Answer

A) True 
 B)False  False

Question 2

What are the possible differences that may occur between a state or local government's budgetary practices and GAAP?

Accepted Answer

There are four types of differences that may occur-basis of accounting, timing, perspective, and reporting entity differences.
Basis of accounting differences arise when the government prepares its budget on a cash basis or other basis not consistent with the modified accrual basis accounting required for GAAP financial statements of governmental funds.
Timing differences occur when governments appropriate resources for a particular project rather than for a particular period. In addition, governments may permit departments or functions to carry over resources not spent in one period to the next budgetary period.
Perspective differences occur when governments prepare their budgets based on the types of functions or programs they plan to provide, not based on the funds in which they report these activities (which could include several funds).
Reporting entity differences occur when legally separate activities for which the government does not prepare a budget are required by GAAP to be included in the government's financial statements.

Question 3

Some governments and most not-for-profit entities do not integrate their budgets into their accounting systems or encumber the cost of goods or services for which they are committed. Are such practices justifiable? Explain.

Accepted Answer

As a general rule, integrating budgets into accounting systems and encumbering for commitments are appropriate when the benefits of the added controls outweigh the costs (in dollars and inconvenience). Governments are more likely than not-for-profits to integrate budgets and record encumbrances because governments generally face greater penalties for overspending their budgets. This is especially so for the general fund and special revenue funds, whereas adequate controls may already be in place for capital projects funds and debt service funds. Governments with modern computer systems may be able to avoid the need for formal journal entries even for the general fund by 'loading" the budget into their computers. The computer may be programmed to issue a warning when actual expenditures and commitments exceed a specified percentage of budgeted expenditures.

Question 4

Property taxes levied on the citizens of the Hill County would most appropriately be budgeted in which of the following budgets?

Accepted Answer

A)  Operating budget. 
B)  Capital budget. 
C)  Flexible budget. 
D)  All of the above. 
A)  Operating budget. 
B)  Capital budget. 
C)  Flexible budget. 
D)  All of the above.

Question 5

Encumbrances and expenditures both reduce total fund balances of state and local governments.

Accepted Answer

A) True 
 B)False

Question 6

State and local governments' budget-to-actual comparisons present both original and final budget amounts.

Accepted Answer

A) True 
 B)False

Question 7

The City of Denton uses encumbrance accounting to control expenditures. It charges the cost of outstanding purchase commitments to expenditures in the year they are received, not in the year they are ordered. If the city had $11,000 of purchase commitments outstanding at the end of Year 1 and received those goods during Year 2 at a cost of $11,700, what would be the impact on total fund balance for Year 2?

Accepted Answer

A)  Total fund balance at the end of Year 2 would be $11,700 less than at the end of Year 1. 
B)  Total fund balance at the end of Year 2 would be $700 less than at the end of Year 1. 
C)  Total fund balance at the end of Year 2 would be $700 greater than at the end of Year 1. 
D)  Total fund balance at the end of Year 2 would be same as it was at the end of Year 1. 
A)  Total fund balance at the end of Year 2 would be $11,700 less than at the end of Year 1. 
B)  Total fund balance at the end of Year 2 would be $700 less than at the end of Year 1. 
C)  Total fund balance at the end of Year 2 would be $700 greater than at the end of Year 1. 
D)  Total fund balance at the end of Year 2 would be same as it was at the end of Year 1.

Question 8

Which of the following is the best reason for preparing budgets for government entities on the cash basis?

Accepted Answer

A)  Cash basis budgeting helps to achieve interperiod equity. 
B)  Cash basis budgeting helps to ensure that the government will receive no more in revenues than itis required to disburse. 
C)  Cash basis budgeting helps a government plan to have cash on hand to pay bills 
D)  Cash basis budgeting more accurately reflects the economic impact of fiscal activities. 
A)  Cash basis budgeting helps to achieve interperiod equity. 
B)  Cash basis budgeting helps to ensure that the government will receive no more in revenues than itis required to disburse. 
C)  Cash basis budgeting helps a government plan to have cash on hand to pay bills 
D)  Cash basis budgeting more accurately reflects the economic impact of fiscal activities.

Question 9

Many governments budget on the cash basis. Explain why a government would budget on a cash basis rather than on a GAAP-basis. Discuss the advantages and disadvantages of cash-basis budgets.

Accepted Answer

A government would budget on the cash ba

Question 10

Which branch of local (city and county) government most commonly prepares the budget?

Accepted Answer

A)  Executive branch. 
B)  Legislative branch. 
C)  Judicial branch. 
D)  None of the above. 
A)  Executive branch. 
B)  Legislative branch. 
C)  Judicial branch. 
D)  None of the above.

Question 11

Periodic allocations of funds to departments or agencies are generally called i. Appropriations.
ii. Allotments.
iii. Apportionments.

Accepted Answer

A)  III only 
B)  I and II 
C)  II and III 
D)  I, II and III 
A)  III only 
B)  I and II 
C)  II and III 
D)  I, II and III

Question 12

A county previously encumbered $15,000 for the acquisition of supplies. The supplies were received at a total cost of $14,700. To recognize this event the county should make which of the following entries?

Accepted Answer

A)  Debit Reserve for encumbrances $15,000; Credit Encumbrances $15,000. 
B)  Debit Reserve for encumbrances $14,700; Credit Encumbrances $14,700. 
C)  Debit Encumbrances $15,000; Credit Reserve for encumbrances $15,000. 
D)  Debit Encumbrances $14,700; Credit Reserve for encumbrances $14,700. 
A)  Debit Reserve for encumbrances $15,000; Credit Encumbrances $15,000. 
B)  Debit Reserve for encumbrances $14,700; Credit Encumbrances $14,700. 
C)  Debit Encumbrances $15,000; Credit Reserve for encumbrances $15,000. 
D)  Debit Encumbrances $14,700; Credit Reserve for encumbrances $14,700.

Question 13

Most budgets are prepared on a cash or modified cash basis.

Accepted Answer

A) True 
 B)False

Question 14

Carolina City places an order for a specific item of equipment and encumbers $6,000 for that item. The equipment arrives with an invoice for $5,700. Which of the following entries should the city make upon receipt of the equipment?

Accepted Answer

A)  A debit to expenditures for $5,700, a debit to accounts payable for $300, and a Credit to encumbrances for $6,000. 
B)  A debit to expenditures for $5,700, a debit to reserve for encumbrances for $6,000, a Credit to accounts payable for $5,700, and a Credit to encumbrances for $6,000. 
C)  A debit to expenditures for $5,700, a debit to reserve for encumbrances for $300, and a Credit to accounts payable for $6,000. 
D)  A debit to expenditures for $300, a debit to reserve for encumbrances for $5,700, and a Credit to encumbrances for $6,000. 
A)  A debit to expenditures for $5,700, a debit to accounts payable for $300, and a Credit to encumbrances for $6,000. 
B)  A debit to expenditures for $5,700, a debit to reserve for encumbrances for $6,000, a Credit to accounts payable for $5,700, and a Credit to encumbrances for $6,000. 
C)  A debit to expenditures for $5,700, a debit to reserve for encumbrances for $300, and a Credit to accounts payable for $6,000. 
D)  A debit to expenditures for $300, a debit to reserve for encumbrances for $5,700, and a Credit to encumbrances for $6,000.

Question 15

Reserve for encumbrances accounts is a balance sheet account.

Accepted Answer

A) True 
 B)False

Question 16

Why do many governments not consider it necessary to prepare appropriation budgets for, and incorporate budgetary entries into the accounts of, their capital projects funds?

Accepted Answer

Appropriation budgets and related budget

Question 17

GAAP require state and local governments to include in their annual financial reports a budget-to-actual comparison showing actual results and original and final appropriated budgets. What are the advantages of requiring both the original and final appropriated budget amounts?

Accepted Answer

The original budget can, and frequently

Question 18

A city formally adopted a budget at the beginning of the current year. Budgeted revenues were $500 and budgeted expenditures were $490. During the year actual revenues were $520 and actual expenditures were $480. Fund balance at the end of the current year in comparison to fund balance at the end of the preceding year will be

Accepted Answer

A)  $10 greater. 
B)  $30 greater. 
C)  $40 greater. 
D)  $50 greater. 
A)  $10 greater. 
B)  $30 greater. 
C)  $40 greater. 
D)  $50 greater.

Question 19

For which of the following funds would flexible budgeting be most valuable?

Accepted Answer

A)  Special revenue fund. 
B)  Capital projects fund. 
C)  Agency fund. 
D)  Enterprise fund. 
A)  Special revenue fund. 
B)  Capital projects fund. 
C)  Agency fund. 
D)  Enterprise fund.

Question 20

Cash-basis budgets help governments demonstrate interperiod equity.

Accepted Answer

A) True 
 B)False

The accounting cycle for most governments is two to three years and the budgeting process is less than six months.

What are the possible differences that may occur between a state or local government's budgetary practices and GAAP?

Some governments and most not-for-profit entities do not integrate their budgets into their accounting systems or encumber the cost of goods or services for which they are committed. Are such practices justifiable? Explain.

Property taxes levied on the citizens of the Hill County would most appropriately be budgeted in which of the following budgets?

Encumbrances and expenditures both reduce total fund balances of state and local governments.

State and local governments' budget-to-actual comparisons present both original and final budget amounts.

Which of the following is the best reason for preparing budgets for government entities on the cash basis?

Many governments budget on the cash basis. Explain why a government would budget on a cash basis rather than on a GAAP-basis. Discuss the advantages and disadvantages of cash-basis budgets.

Which branch of local (city and county) government most commonly prepares the budget?

Periodic allocations of funds to departments or agencies are generally called i. Appropriations. ii. Allotments. iii. Apportionments.

A county previously encumbered $15,000 for the acquisition of supplies. The supplies were received at a total cost of $14,700. To recognize this event the county should make which of the following entries?

Most budgets are prepared on a cash or modified cash basis.

Carolina City places an order for a specific item of equipment and encumbers $6,000 for that item. The equipment arrives with an invoice for $5,700. Which of the following entries should the city make upon receipt of the equipment?

Reserve for encumbrances accounts is a balance sheet account.

Why do many governments not consider it necessary to prepare appropriation budgets for, and incorporate budgetary entries into the accounts of, their capital projects funds?

GAAP require state and local governments to include in their annual financial reports a budget-to-actual comparison showing actual results and original and final appropriated budgets. What are the advantages of requiring both the original and final appropriated budget amounts?

For which of the following funds would flexible budgeting be most valuable?

Cash-basis budgets help governments demonstrate interperiod equity.

The Government and Not-For-Profit Environment

Fund Accounting

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

Auditing Governments and Not-For-Profit Organizations

Federal Government Accounting

Filters

Exam 3: Issues of Budgeting and Control

The accounting cycle for most governments is two to three years and the budgeting process is less than six months.

What are the possible differences that may occur between a state or local government's budgetary practices and GAAP?

Some governments and most not-for-profit entities do not integrate their budgets into their accounting systems or encumber the cost of goods or services for which they are committed. Are such practices justifiable? Explain.

Property taxes levied on the citizens of the Hill County would most appropriately be budgeted in which of the following budgets?

Encumbrances and expenditures both reduce total fund balances of state and local governments.

State and local governments' budget-to-actual comparisons present both original and final budget amounts.

Which of the following is the best reason for preparing budgets for government entities on the cash basis?

Many governments budget on the cash basis. Explain why a government would budget on a cash basis rather than on a GAAP-basis. Discuss the advantages and disadvantages of cash-basis budgets.

Which branch of local (city and county) government most commonly prepares the budget?

Periodic allocations of funds to departments or agencies are generally called i. Appropriations. ii. Allotments. iii. Apportionments.

A county previously encumbered $15,000 for the acquisition of supplies. The supplies were received at a total cost of $14,700. To recognize this event the county should make which of the following entries?

Most budgets are prepared on a cash or modified cash basis.

Carolina City places an order for a specific item of equipment and encumbers $6,000 for that item. The equipment arrives with an invoice for $5,700. Which of the following entries should the city make upon receipt of the equipment?

Reserve for encumbrances accounts is a balance sheet account.

Why do many governments not consider it necessary to prepare appropriation budgets for, and incorporate budgetary entries into the accounts of, their capital projects funds?

GAAP require state and local governments to include in their annual financial reports a budget-to-actual comparison showing actual results and original and final appropriated budgets. What are the advantages of requiring both the original and final appropriated budget amounts?

For which of the following funds would flexible budgeting be most valuable?

Cash-basis budgets help governments demonstrate interperiod equity.

The Government and Not-For-Profit Environment

Fund Accounting

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

Auditing Governments and Not-For-Profit Organizations

Federal Government Accounting

Filters