Question 1

Due to an error,the general fund of Pueblo did not record an encumbrance for police equipment that had been ordered but not received on June 30,20X9,the end of its fiscal year.Pueblo's outstanding encumbrances at year-end are nonlapsing.What was the effect of this error on the balance sheet of Pueblo's general fund?

Accepted Answer

A) Assets are overstated. 
B) Liabilities are understated. 
C) Total fund balance is overstated. 
D) Unassigned fund balance is overstated.

Question 2

Which organization has the authority to establish generally accepted accounting principles for state and local government entities?

Accepted Answer

A) The National Council on Governmental Accounting 
B) The Governmental Accounting Standards Board 
C) The Financial Accounting Standards Board 
D) The Municipal Officers Finance Organization

Question 3

Which of the following statements is(are)correct about the funds used by governmental entities?
I.Funds are fiscal entities.
II.Funds are accounting entities.

Accepted Answer

A) I only 
B) II only 
C) I and II 
D) Neither I nor II

Question 4

The general fund of Park City acquired computer equipment at a cost of $50,000 on May 18,20X9.To record acquisition of this equipment,the general fund of Park City should debit:

Accepted Answer

A) expenditures. 
B) encumbrances. 
C) equipment. 
D) vouchers payable.

Question 5

The City of Ames uses the consumption method to report its inventory of supplies on its general fund balance sheet.What account is debited in the general fund when Ames acquires supplies?

Accepted Answer

A) Expenditures 
B) Inventory of Supplies 
C) Supplies Expense 
D) Fund Balance-Nonspendable

Question 6

The general fund of Caldwell had the following operating budget for the fiscal year beginning July 1,20X9:

When the general fund records its operating budget on July 1,20X9,Budgetary Fund Balance-Unassigned should be

Accepted Answer

A) credited for $600,000. 
B) debited for $900,000. 
C) debited for $600,000. 
D) credited for $900,000.

Question 7

Which of the following observations concerning interfund transfers is true?

Accepted Answer

A) They are expected to be repaid. 
B) They are classified as fund revenues or expenditures. 
C) The receiving fund recognizes these transfers as revenue. 
D) These transfers are classified under "Other Financing Sources or Uses."

Question 8

Under the modified accrual basis of accounting,revenue should be recognized when it is:

Accepted Answer

A) measurable and earned. 
B) received in cash. 
C) available and earned. 
D) measurable and available.

Question 9

Gotham City acquires $25,000 of inventory on November 1,20X7,having held no inventory previously.On December 31,20X7,the end of Gotham City's fiscal year,a physical count shows $8,000 still in stock.During 20X8,$6,500 of this inventory is used,resulting in a $1,500 remaining balance of supplies on December 31,20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X8 if Gotham City used the consumption method of accounting for inventories?

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 10

Which of the following accounts are debited when closing entries are made for the general fund (assume outstanding encumbrances lapse at year-end)?
I.Appropriations Control.
II.Estimated Revenues Control.
III.Encumbrances.
IV.Budgetary Fund Balance-Reserved for Encumbrances.
V.Estimated Other Financing Uses-Transfer Out.
VI.Revenue-Property Tax.

Accepted Answer

A) I,II,III,VI. 
B) I,II,IV. 
C) I,IV,V,VI. 
D) III,IV,V.

Question 11

At any time,the remaining appropriating authority available to the fund managers is equal to:

Accepted Answer

A) Appropriations minus Expenditures 
B) Appropriations minus (Encumbrances + Expenditures) 
C) Appropriations minus (Encumbrances - Expenditures) 
D) Appropriations minus Encumbrances

Question 12

All of the following funds have a financial resources measurement focus with the exception of which fund?

Accepted Answer

A) Debt service fund 
B) Special revenue fund 
C) Capital projects fund 
D) Private-purpose trust fund

Question 13

Which of the following funds should use the modified accrual basis of accounting?

Accepted Answer

A) Private-purpose trust and agency funds. 
B) Capital projects and special revenue funds. 
C) Internal service and enterprise funds. 
D) Debt service and private-purpose trust funds.

Question 14

The Town of Pasco has no supplies inventory in its general fund on January 1,20X8.During 20X8,Pasco incurred expenditures of $200,000 for the acquisition of supplies.On December 31,20X8,Pasco's inventory of supplies amounted to $30,000.Assume Pasco uses the purchase method of accounting for supplies in its general fund and that the village reports on the calendar year.On December 31,20X8,the general fund of Pasco should credit:

Accepted Answer

A) Expenditures for $170,000. 
B) Fund Balance-Unassigned for $170,000. 
C) Fund Balance-Nonspendable for $30,000. 
D) Expenditures for $30,000.

Question 15

The general fund of Hatteras acquired a fire truck during the fiscal year ended June 30,20X9.The purchase order for the fire truck was recorded on February 15,20X9.Hatteras' acquisition of the fire truck required which of the following sequences of accounting activities?
I.Appropriation
II.Encumbrance
III.Expenditure

Accepted Answer

A) II,I,III. 
B) I,III,II. 
C) III,II,I. 
D) I,II,III.

Exam 17: Governmental Entities: Introduction and General Fund Accounting