Deck 1: Governmental and Nonprofit Accounting Environment and Characteristics

Question 1

An entity is likely to be a governmental entity if a controlling majority of its governing body is appointed by governmental officials.

Answer 1

True

Question 2

Characteristics that distinguish nonprofits from business enterprises include nonprofits receiving significant contributions from resource providers without an expectation of receive an equivalent return and the lack of a profit motive.

Answer 2

True

Question 3

A purpose of a government is to provide services to its constituents.

Answer 3

True

Question 4

A purpose of a nonprofit is to provide services to its constituents.

Question 5

Unlike businesses enterprises, Governments and nonprofits acquire resources through taxes or donations. Transactions related to taxes and donations require special accounting standards.

Question 6

Governmental and nonprofit accounting standards-setters tend to take a longer-term perspective in developing accounting measurements for certain of their transactions because they rarely go out of business.

Question 7

Major external users of governmental and nonprofit entity financial reports are oversight bodies, service recipients, and owners.

Question 8

State and local governments and nonprofit entities are required to prepare fund-based reports for external financial reporting purposes.

Question 9

The federal government, state and local governments, and nonprofit entities are required to prepare financial statements on the accrual basis for external financial reporting purposes.

Question 10

All governments prepare fund financial statements for external financial reporting purposes.

Question 11

The federal government and state and local governments use the modified accrual basis of accounting.

Question 12

The FASAB establishes financial reporting standards for all governments.

Question 13

In their objectives of financial reporting, both the FASAB and GASB state that financial reporting should assist in the government's duty to be publicly accountable.

Question 14

The FASB establishes financial reporting standards for all nongovernmental entities, including nonprofit colleges and universities and health care providers.

Question 15

The financial reporting standards established by the FASAB, GASB, and FASB are considered to be generally accepted accounting principles by virtue of the authority accorded them by the General Accountability Office.

Question 16

GASB standards recognize only two categories of GAAP for state and local governments. The most authoritative source of GAAP is GASB Statements.

Question 17

The FASB Codification is the single source of authoritative GAAP for nonprofit organizations.

Question 18

Which of the following is a distinguishing characteristic of a nonprofit organization?

A) Its revenues do not exceed its expenses
B) There is an absence of ownership interests that can be sold, transferred, or redeemed
C) It does not depreciate its capital assets
D) It does not charge fees for any of its services

Question 19

Which of the following is a reason that governmental accounting is different from business accounting?

A) Governments provide services.
B) Governments are expected to have a long-life.
C) Governments have budgets.
D) Governments may have liabilities

Question 20

Most of the revenues obtained by most governments come from:

A) Taxes
B) Sales of goods or services
C) Borrowing
D) All of the above.

Question 21

Which of the following is a major source of resources for many nonprofits, but not for businesses or governments?

A) Donor contributions
B) Taxes
C) Sales of goods to consumers
D) Sale of stock

Question 22

The GASB establishes financial reporting standards for state and local governmental entities. An entity created by a government possessing one or more of the following characteristics should follow GASB standards:

A) The power to enact and levy a tax.
B) The power to directly issue debt, for which its interest is exempt from federal taxation.
C) The potential that another government could unilaterally dissolve the entity and assume their assets and liabilities.
D) Any of the above.
E) Only a and b.

Question 23

External governmental financial reporting focuses on which of the following?

A) Calculating profit or loss
B) Protecting investors from fraud
C) Demonstrating accountability
D) Reporting to management

Question 24

Which of the following entities must use fund accounting for external financial reporting purposes?

A) Businesses
B) Nonprofit organizations
C) State and local governments
D) Federal government
E) All of the above

Question 25

Which of the following entities must report at both fund-level and entity-wide level?

A) Businesses
B) Nonprofit organizations
C) State and local governments
D) Federal government
E) All of the above

Question 26

Which of the following entities must report at the entity-wide level?

A) Businesses
B) Nonprofit organizations
C) State and local governments
D) Federal government
E) All of the above

Question 27

The major external users of governmental financial reports include:

A) Taxpayers.
B) Stockholders.
C) Bond-rating agencies.
D) Both a and b.
E) Both a and c.

Question 28

Which of the following is the most authoritative source of accounting standards for nonprofits?

A) Current practices widely used by not-for-profit entities
B) FASB Codification
C) FASB Statements
D) GASB Codification