Chapter 5 Flashcards
What term is used to describe the unique combination of fund and government-wide financial reporting?
A. Pyramid reporting
B. Full-scope reporting
C. Governmental accountability model
D. Governmental financial reporting model
The fund financial statements present the government as a collection of separate funds, whereas the government-wide financial statements present the government as a single, integrated financial reporting unit. Accountants describe this unique combination of fund financial statements and government-wide financial statements as the governmental financial reporting model. [Correct response = D]
Which set of financial statements is especially well suited to the assessment of fiscal accountability?
A. Fund financial statements
B. Government-wide financial statements
C. Both are equally well suited to the assessment of fiscal accountability.
Because of the wealth of detail they provide, fund financial statements are especially well suited to achieving the objective of fiscal accountability. [Correct response = A]
Which set of financial statements is especially well suited to the assessment of operational accountability?
A. Fund financial statements
B. Government-wide financial statements
C. Both are equally well suited to the assessment of operational accountability.
The level of detail in fund financial statements can impede rather than facilitate the assessment of operational accountability. For that reason, the GASB concluded that government-wide financial statements are necessary to complement the fund financial statements. [Correct response = B]
Which of the following columns would be reported in government-wide financial statements?
A. Governmental activities
B. Proprietary activities
C. Fiduciary activities
D. All of the above
Government-wide financial statements report separate columns for governmental activities and business-type activities. Fiduciary activities are not reported in government-wide financial statements. [Correct response = A]
Which of the following normally would be incorporated into the same activity column in government-wide financial statements?
A. Governmental funds and internal service funds
B. Enterprise funds and internal service funds
C. Neither A nor B
How data from an internal service fund are incorporated into the government-wide financial statements depends on which types of funds are the predominant users of its goods and services. Typically, the predominant users are departments of the general fund and other governmental fund types. Consequently, the data from internal service funds normally are incorporated with the data from governmental funds in the governmental activities column. [Correct response = A]
Where would data from an internal service fund be reported in government-wide financial statements if its primary users were fiduciary funds?
A. Governmental activities
B. Business-type activities
C. Fiduciary activities
D. A or B
Since no fiduciary activities column is reported in the government-wide financial statements, the data from the internal service funds must be incorporated into the governmental activities column by default. [Correct response = A
What measurement focus and basis of accounting are used for government-wide financial statements?
A. Economic resources measurement focus/accrual basis of accounting
B. Economic resources measurement focus/modified accrual basis of accounting
C. Current financial resources measurement focus/accrual basis of accounting
D. Current financial resources measurement focus/modified accrual basis of accounting
A driving force behind government-wide financial reporting was the desire to facilitate the assessment of operational accountability, which, because of its inherently long-term perspective, is best accommodated by the economic resources measurement focus and the accrual basis of accounting. Consequently, GAAP prescribe the use of that measurement focus and basis of accounting for the government-wide financial statements. [Correct response = A]
For which of the following must data be converted from one measurement focus and basis of accounting to another prior to incorporation into the government-wide financial statements?
A. Governmental funds
B. Proprietary funds
C. Fiduciary funds
D. All of the above
E. Both A and C
Since governmental funds employ the current financial resources measurement focus and the modified accrual basis of accounting, their data must first be converted to the economic resources measurement focus and the accrual basis of accounting before they can be incorporated into governmental activities for purposes of government-wide reporting. [Correct response = A]
A receivable/payable between a governmental fund and an enterprise fund would be included in which of the columns in the government-wide statement of net position?
A. Governmental activities
B. Business-type activities
C. Primary government – total
D. All of the above
E. Both A and B
Interfund balances between funds reported in different activity columns will be visible in those columns (interactivity balances), but not in the primary government’s total column (because they will cancel each other out when the two activity columns are combined). [Correct response = E]
A receivable/payable between two governmental funds would be included in which of the columns in the government-wide statement of net position?
A. Governmental activities
B. Primary government – total
C. Both A and B
D. Neither A nor B
Interfund balances between funds included in the same activity column would not appear anywhere in the government-wide financial statements (because they would cancel each other out within the activity column). [Correct response = D]
Revenues and expenditures/expenses from interfund services provided and used between two governmental funds would be included in which of the columns in the government-wide statement of activities?
A. Governmental activities
B. Primary government – total
C. Both A and B
D. Neither A nor B
Revenues and expenditures/expenses from interfund services provided and used are an exception to the general rule that requires consolidation. [Correct response = C]
Which of the following statements is true about a look-back adjustment involving an internal service fund that reported revenues in excess of related expenses?
A. The adjustment would reduce revenues of the internal service fund.
B. The adjustment would reduce expenditures/expenses of user funds.
C. Both A and B
D. Neither A nor B
An excess of operating revenues over operating expenses in an internal service fund would be eliminated in the process of consolidation by decreasing customer expenditures/expenses by that same amount (look-back adjustment). [Correct response = C
Which of the following would not be eliminated in the process of consolidation?
A. Interfund transfers
B. Revenues and expenditures/expenses from interfund services provided and used between functions
C. Receivables and payables from interfund services provided and used between functions
D. Both B and C
Revenues and expenditures/expenses from interfund services provided and used between functions are not eliminated in the process of consolidation used to prepare the government-wide financial statements. Conversely, related interfund receivables and payables would be eliminated. [Correct response = B]
Which of the following statements is true concerning the basic amount that must be reported for expense in each of the various governmental functions?
A. The amount must include indirect costs.
B. The amount may include indirect costs.
C. The amount may not include indirect costs
GAAP require that the basic amounts reported as expenses for each function include all direct costs and only direct costs. [Correct response = C]
Which of the following statements is true concerning internal revenues and related expenses of an internal service fund?
A. Both must equal for purposes of fund financial reporting.
B. Both must equal for purposes of consolidation.
C. Both A and B
D. Neither A nor B
Internal service funds are intended to function on a cost-reimbursement basis. As a practical matter, a given internal service fund may show a difference between revenues and expenses in any given period. This difference poses no real problem in the fund financial statements, so long as a material surplus or deficit is not allowed to build up over time. For purposes of consolidation, however, an internal service fund must “break even” each year to ensure a proper allocation of costs. That is, there can be no operating surplus or deficit as the result of purely internal activity. [Correct response = B]
