Deck 2: The Use of Funds in Governmental Accounting

Question 1

The three broad categories of funds used by governmental entities are:

A)Governmental,Proprietary,and Fiduciary
B)Unrestricted,Partially Restricted,and Fully Restricted
C)General,Special,and Fiduciary
D)General,Enterprise,and Agency

Answer 1

A

Question 2

Which category of funds is used to account for most of the day-to-day public services provided by a government?

A)Fiduciary-type funds
B)Enterprise-type funds
C)Proprietary-type funds
D)Governmental-type funds

Answer 2

D

Question 3

The broad categories of funds used in government accounting do not include which one of the following?

A)revolving
B)governmental
C)proprietary
D)fiduciary

Answer 3

A

Question 4

Which of the following are fiduciary-type funds?

A)Pension Trust Fund,Agency Fund,and Permanent Fund
B)Investment Trust Fund,Special Revenue Fund,and Internal Service Fund
C)Agency Fund,Internal Service Fund,and Pension Trust Fund
D)Pension Trust Fund,Investment Trust Fund,and Agency Fund

Question 5

Which of the following is an example of activities that are likely to be accounted for in a government's general fund?

A)business-type activities of government that are financed by user charges
B)sales taxes collected by a state on behalf of counties within the state
C)property taxes to be used to provide basic government services
D)donations that must be kept intact,but whose income must be used to beautify parks

Question 6

Within a fund,which of the following results from using the current financial resources measurement focus?

A)capital assets will be depreciated
B)property taxes will be recognized on the cash basis of accounting
C)a liability must be reported for unsettled claims,provided payment ultimately will be made
D)long-term assets and liabilities will not be recorded in the fund

Question 7

Which of the following funds all use the current financial resources measurement focus?

A)Debt Service Fund,Special Revenue Fund,and Capital Projects Fund
B)General Fund,Debt Service Fund,and Internal Service Fund
C)Debt Service Fund,Investment Trust Fund,and Capital Projects Fund
D)General Fund,Debt Service Fund,and Pension Trust Fund

Question 8

Which of the following activities is the most likely to be accounted for in a General Fund?

A)payment of salaries of police and firefighters
B)construction of a new school building from bond proceeds
C)accumulation of resources to pay pension benefits to employees
D)accumulation of resources required by law to be used only to beautify parks

Question 9

In governmental accounting,a fund is best defined as:

A)a sum of cash set aside to attain certain objectives
B)a fiscal entity that has both financial and capital resources
C)a fiscal entity that has cash resources only
D)a fiscal and accounting entity with a self-balancing set of accounts

Question 10

Which of the following terms best describes the types of assets accounted for in governmental-type funds?

A)any resource that can be used to provide service to the citizenry
B)financial assets and capital assets
C)current assets and movable fixed assets
D)financial assets

Question 11

At what point are revenues recognized in the General Fund?

A)when the revenues are earned
B)when cash is received
C)when the revenues are measurable and available
D)when billings are mailed to service recipients

Question 12

Which of the following set of funds use the economic resources measurement focus?

A)Enterprise Fund,Special Revenue Fund,and General Fund
B)Internal Service Fund,Pension Trust Fund,and Enterprise Fund
C)Debt Service Fund,Internal Service Fund,and Pension Trust Fund
D)Enterprise Fund,Internal Service Fund,and Capital Projects Fund

Question 13

Which basis of accounting is used by funds that have a current financial resources measurement focus?

A)full accrual basis
B)cash basis
C)modified accrual basis
D)modified cash basis

Question 14

Under modified accrual accounting,when are revenues considered to be "available?"

A)when cash has been collected
B)when cash is collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period
C)when cash is on hand or reasonably expected to be collected at any time in the future so they can pay liabilities incurred in the current period
D)when property tax bills have been mailed

Question 15

For financial reporting purposes,a government may have only one

A)Capital projects fund
B)Enterprise fund
C)General fund
D)Permanent fund

Question 16

Governmental accounting normally does not

A)use separate funds to account for various activities
B)incorporate budgetary accounts into the accounting system
C)measure the amount of profit earned during a fiscal year
D)focus on flows of current financial resources

Question 17

Which of the following types of liabilities is least likely to appear in the balance sheet of a governmental-type fund?

A)amounts owed to suppliers of goods and services
B)amounts owed to bondholders over the entire 20-year life of a debt
C)amounts owed to other funds
D)amounts owed to employees for services performed before an accounting period ends

Question 18

To what does basis of accounting refer?

A)whether an entity is trying to measure the excess of inflows over outflows
B)how much cash an entity received in a particular reporting period
C)the timing of recognition of assets,liabilities,revenues,and expenditures/expenses in financial statements
D)the ownership of the assets,liabilities,and equities reported in a balance sheet

Question 19

Which category of funds focuses on financial resources available for current spending?

A)Enterprise-type funds
B)Proprietary-type funds
C)Governmental-type funds
D)Fiduciary-type funds

Question 20

The General Fund levies property taxes in the amount of $1,000,000 for calendar year 2009.It expects to collect $950,000 during the year,$30,000 in the first 60 days of the next year,and $15,000 during the rest of the next year.It does not expect to collect the remaining $5,000.How much property tax revenue should it recognize for the year 2009?

A)$1,000,000
B)$980,000
C)$995,000
D)$990,000

Question 21

A governmental fund has total liabilities in excess of its total assets at the end of the fiscal year.It has no deferred resource inflows or outflows.Which of the following statements is always true?

A)fund balance is negative
B)cash is less than short-term receivables
C)payables exceed receivables
D)payables exceed cash

Question 22

In what section of the Enterprise Fund statement of revenues,expenses,and changes in fund net position is interest expense generally reported?

A)with operating expenses
B)with nonoperating expenses
C)either with extraordinary or special items,depending on the circumstances
D)with capital contributions and transfers

Question 23

A city uses a Library Fund to account for proceeds restricted for an addition to the main library and construction of neighborhood libraries.The Library Fund is a:

A)Capital Projects Fund
B)General Fund
C)Permanent Fund
D)Debt Service Fund
E)Private-Purpose Trust Fund

Question 24

What is the disposition of the earnings of a Permanent Fund?

A)The earnings remain indefinitely in a permanent fund.
B)The earnings are used only for non-governmental programs.
C)The earnings are used for programs that benefit the government or its citizens.
D)The earnings must be used for permanent projects,such as bridges.

Question 25

Which of the following is a distinguishing characteristic of proprietary funds?

A)they recognize revenues when they are measurable and available
B)they always earn sufficient revenues to cover their expenses
C)they charge fees for the services they provide
D)they are legally prohibited from selling services to other governmental agencies

Question 26

A city has an Arts and Cultural Fund that is used to account for private contributions that are restricted by the donors for the financing of the city's museum operations and functions.The Arts and Cultural Fund is a:

A)General Fund
B)Special Revenue Fund
C)Permanent Fund
D)Private-Purpose Trust Fund

Question 27

Which of the following pairs of accounts are likely to appear on the balance sheet of a government's general fund?

A)cash and buildings
B)cash and investments
C)accounts payable and long-term bonds payable
D)current portion of bonds payable and non-current portion of bonds payable

Question 28

Which of the following is a distinguishing characteristic of the resources accounted for in fiduciary funds?

A)They must be held intact in perpetuity.
B)They are generally held for very short periods of time.
C)They are used only to support programs of the governmental entity having custody of the resources.
D)They are not used to support programs of the governmental entity having custody of the resources.

Question 29

Which measurement focus and basis of accounting should be used in a Special Revenue Fund?

Question 30

A governmental entity has a General Fund and an Enterprise Fund.At the beginning of the year,neither fund has any unpaid salary liability.During the year,both funds paid salaries of $600,000.In addition,salaries for the last three days of the fiscal year ($15,000 for each fund)will be paid during the first week of the next fiscal year.How much should each fund report as salary expenditures (expenses)for the fiscal year?

Question 31

A governmental unit establishes a central motor pool to provide service to governmental departments and agencies.The pricing objective of the central motor pool is to break-even by charging all agencies a user fee.What type of fund should be established for this activity?

A)Special Revenue Fund
B)Agency Fund
C)Permanent Fund
D)Internal Service Fund

Question 32

What is the purpose of a debt service fund?

A)to accumulate resources for paying interest on all debt issued by the government
B)to account for all outstanding long-term and short-term debt issued by the government
C)to account for outstanding general long-term debt
D)to accumulate resources for paying principal and interest on general long-term debt

Question 33

Which of the following is a characteristic of an Agency Fund's financial reporting?

A)Its statement of fiduciary net position shows assets,liabilities,and fund balance
B)Its statement of fiduciary net position shows no net position
C)Its statement of fiduciary net position shows no liabilities
D)Its statement of fiduciary net position shows no assets

Question 34

A state legislature enacts a new park entrance fee that may be used only for adding to and maintaining the collection of tropical plants in that state's nationally famous Prospect Park.Which type of fund should be used to account for those resources?

A)Special Revenue Fund
B)General Fund
C)Internal Service Fund
D)Agency Fund

Question 35

A municipal government decides to construct and operate a public swimming pool.It will charge user fees to recover its costs,but will allow senior citizens and children under the age of three to enter at half-price.What type of fund should it use for this purpose?

A)Special Revenue Fund
B)Enterprise Fund
C)Agency Fund
D)Private Purpose Fund

Question 36

Which of the following is an appropriate objective of an Internal Service Fund?

A)accounting for the full costs of services,including depreciation of capital assets,to provide a basis for charging governmental users
B)providing services to other governmental agencies without charge
C)temporarily holding tax resources on behalf of another government
D)accounting for the full costs of providing services to the general public

Question 37

A state collects sales taxes not only for itself,but also on behalf of all cities within the state.What type of fund should the state use to account for the sales taxes held for the cities?

A)Private Purpose Trust Fund
B)Agency Fund
C)Special Revenue Fund
D)Investment Trust Fund

Question 38

Which of the following statements about capital projects funds is true?

A)The assets of a capital projects fund include both financial and capital assets
B)All fixed assets acquired by a government are paid for from a capital projects fund
C)A capital projects fund accounts for resources that are restricted or otherwise limited to spending for capital outlays
D)When capital assets are financed through the issuance of long-term debt,that long-term debt is accounted for in a capital projects fund.

Question 39

The Dillard Park Fund is used to account for a private donation by Mr.and Mrs.Bud Dillard.When making the donation,the Dillard's stipulated that only the income from this fund could be used for the operations of Dillard Park,a city owned park.The Dillard Park Fund is a:

A)General Fund
B)Special Revenue Fund
C)Permanent Fund
D)Private-Purpose Trust Fund

Question 40

A city has a General Fund and an Enterprise Fund.During the year,legal claims are filed against the resources of both funds.City attorneys believe that each claim will ultimately be settled for about $55,000,but settling claims of this kind usually is about a three-year process.How much should be reported as a liability in each fund's balance sheet at the end of the current year?

Question 42

A local government sells bonds having a face value of $1,000,000 at par.The bond proceeds will be accounted for in a Capital Projects Fund.What account will be credited to offset the debit to cash?

A)other financing sources
B)citizens' equity
C)fund balance
D)bonds payable

Question 43

A government will prepare a statement of cash flows for which of the following funds?

A)General Fund
B)Enterprise Fund
C)Debt Service Fund
D)Agency Fund

Question 44

Which measurement focus and basis of accounting should be used in an Internal Service Fund?

Question 47

Which of the following financial statements would be prepared for enterprise funds?

A)a statement of net position
B)a statement of cash flows
C)a statement of revenues,expenses,and changes in net position
D)All of the above would be prepared.
E)Only a and c would be prepared.

Question 48

(Comparative computations of expenditures and expenses based on the same underlying transactions)
A department of a local government began operations at the beginning of the current fiscal year with $250,000 cash.During the fiscal year,the department made cash disbursements for the following:
-Salaries and other personnel costs,$100,000
-Office rent and utilities,$24,000
-Retirement of debt principal,$10,000;payment of interest,$2,200
-Purchased equipment at the beginning of the fiscal year for $30,000;the equipment is expected to last 6 years and have a salvage value of $6,000
-Photocopier rental,$10,500
Based on the preceding transactions,compute total annual expenditures for this department assuming it performs governmental-type activities and is accounted for in the General Fund.
Then compute total annual expenses for this department assuming it performs activities within an Enterprise Fund.

Question 49

Which of the following is true regarding a statement of cash flows prepared by a government?

A)the statement of cash flows will be identical to one prepared by a business
B)the statement of cash flows will be prepared using the indirect method
C)the statement of cash flows will have no more than three cash flow classifications
D)the statement of cash flows will be prepared using the direct method

Question 51

Which of the following accounts is associated with the current financial resources measurement focus but not with the economic resources measurement focus?

A)assets
B)expenditures
C)revenues
D)liabilities

Question 52

The information generated from the accounting system of a governmental-type fund

A)is budget oriented
B)measures profitability
C)measures operational efficiency
D)is intended for use only by legislators

Question 53

A long-term loan from the General Fund to another fund is reported in the General Fund as:

A)due from other fund
B)due to other fund
C)advance to other fund
D)advance from other fund