GAAFR Textbook Flashcards by Amy Daniel

Which of the following best describes the role that accounting, financial reporting, and the financial statement audit play for state and local governments?

A. They comprise a comprehensive framework of internal control.
B. They provide the informational infrastructure of public finance.
C. They serve as a public-sector performance management system.

(Ch. 1)

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Who is PRIMARILY responsible for ACCOUNTING?

A. The governing body
B. The independent auditor
C. Management

(Ch. 1)

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Who is PRIMARILY responsible for FINANCIAL REPORTING?

A. The governing body
B. The independent auditor
C. Management

(Ch. 1)

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Which of the following best describes the relationship between accounting and financial reporting?

A. The two terms are essentially interchangeable.
B. The two terms are complementary but distinct.
C. The two terms are unrelated.

(Ch. 1)

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What determines the content and format of internal financial reports?

A. Generally accepted accounting principles
B. Management’s needs and preferences
C. Both A and B

(Ch. 1)

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What typically determines the content and format of general purpose external financial reports?

A. Generally accepted accounting principles
B. Management’s needs and preferences
C. Both A and B

(Ch. 1)

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Which of the following methods of communication would require that a given item meet the definition of a financial statement element?

A. Display
B. Disclosure
C. Both A and B

(Ch. 1)

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Which of the following methods of communication focuses on providing an operational, economic, or historical context?

A. Disclosure
B. Supporting information
C. Both A and B

(Ch. 1)

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Which of the following is an essential characteristic of accounting data?

A. Precision
B. Comparability
C. Both A and B

(Ch. 1)

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Who is ultimately responsible for a government’s financial reporting?

A. The independent auditor
B. Management
C. The governing body

(Ch. 1)

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The principle that a local government possesses only those powers that are expressly granted to it by the state, or that are otherwise indispensable to its continued existence and functioning, is known as:

A. Home Rule
B. Dillon’s Rule
C. Comity of powers
D. Federalism

(Ch. 2)

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There are two basic categories of local government. On that basis, which of the following does not belong with the others?

A. Township
B. Utility
C. Municipality
D. County

(Ch. 2)

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The key differences between accounting and financial reporting for businesses and accounting and financial reporting for state and local governments are primarily attributable to:

A. Differences in environment
B. Differences in standard-setting
C. Differences in law
D. Differences in accounting theory

(Ch. 2)

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Which of the following statements is true concerning the relationship between revenues earned and related costs?

A. It is of most interest to a business
B. It is of most interest to a government
C. It is of equal interest to both

(Ch. 2)

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Which of the following statements is true concerning the relationship between revenue generation and the provision of goods and services?

A. The relationship is more direct for a business
B. The relationship is more direct for a government
C. The relationship is essentially the same for both

(Ch. 2)

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Which of the following is a tool used by state and local governments to help assess stewardship and compliance?

A. Consolidation
B. Aggregation
C. Fund Accounting
D. Cost Accounting

(Ch. 2)

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Which of the following statements is true concerning the presentation of budgetary comparisons in connection with financial statements?

A. It is required for state and local governments
B. It is required for businesses
C. Both A and B
D. Neither A nor B

(Ch. 2)

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For all practical purposes, citizens are the public-sector equivalent of private-sector investors.

A. True
B. False

(Ch. 2)

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The extent to which special purpose governments are used can vary significantly from one state to another.

A. True
B. False

(Ch. 2)

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If some of a government’s activities function much like a business, while others do not, the government should use more than one measurement focus.

A. True
B. False

(Ch. 2)

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GAAP provide authoritative guidance for which of the following?

A. Internal financial reporting
B. Special purpose external financial reporting
C. General purpose external financial reporting
D. All of the above

(Ch. 3)

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Which of the following is not properly considered to be a primary user of state and local government financial statements?

A. Investors and creditors
B. Managers
C. Legislative and oversight bodies
D. None of the above

(Ch. 3)

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Which of the following is always issued as part of the GASB’s due process?

A. Invitation to comment (ITC)
B. Discussion memorandum (DM)
C. Preliminary views (PV)
D. None of the above

(Ch. 3)

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Which of the following has the highest status on the GAAP hierarchy for state and local governments?

A. NCGA statement
B. GASB implementation guide
C. AICPA statement of position specific to government and cleared by the GASB
D. AICPA issues paper

(Ch. 3)

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Which of the following would be covered by the AICPA's Ethics Rule 202? A. GASB implementation guide B. GASB technical bulletin C. Widely recognized and prevalent practice D. All of the above (Ch. 3)

Which of the following would be covered by the AICPA's Ethics Rule 203? A. GASB interpretation B. AICPA audit and accounting guide, State and Local Governments C. GASB implementation guide D. None of the above (Ch. 3)

Which of the following is not necessarily definitive when determining whether a given entity should be considered a state or local government for purposes of GAAP? A. Election of officers in a general election B. Ability to unilaterally dissolve with reversion of assets to government C. Ability to enact and enforce a tax levy D. The ability to issue tax-exempt debt (Ch. 3)

The SEC has the legal authority to set GAAP for state and local governments, though it historically has delegated that power to others. A. True B. False (Ch. 3)

The FAF oversees the FASB, the GASB, and the FASAB. A. True B. False (Ch. 3)

The fundamental purpose of due process is to determine that a majority of interested parties support accounting and financial reporting guidance proposed by the GASB. A. True B. False (Ch. 3)

Which of the following is a fund category? A. Internal service funds B. Business-type activities C. Fiduciary funds D. All of the above (Ch. 4)

Which of the following most likely would be reported in a proprietary fund? A. Taxes B. Grants C. Fees and charges D. Resources held in trust (Ch. 4)

What is the maximum number of fund types that an individual government could report? A. 5 B. 7 C. 11 D. There is no maximum number (Ch. 4)

For which of the following fund types, if any, is there a specific limit on the number of individual funds that may be reported? ``` A. Special revenue funds B. Internal service funds C. Enterprise funds D. Agency funds E. None of the above ``` (Ch. 4)

Which of the following fund types must be reclassified whenever a component unit is blended into the financial statements of its primary government? A. General fund B. Enterprise funds C. Internal service funds D. None of the above (Ch. 4)

Which of the following is a precondition for reporting a special reserve fund? A. Limitation on expenditure imposed by an external party B. One or more specific revenue source(s) C. Preponderance of inflows from core source D. All of the above (Ch. 4)

When is the use of an enterprise fund required? A. Outstanding debt backed solely by fees and charges B. Legal requirement that fees and charges be set to recover costs (including capital) C. Pricing policy that fees and charges be set to recover costs (including capital) D. All of the above (Ch. 4)

Which of the following statements is true concerning the use of an internal service fund? A. The government itself must be the predominant participant B. The fund must "break even" each year C. Charges must include the cost of capital based on depreciation D. All of the above (Ch. 4)

Which of the following best describes the "Number of Funds principle"? A. Use separate funds for separate activities B. Funds in the financial statements should mirror funds in the accounting system C. Use as many funds as bank accounts D. Use only as many funds as necessary (Ch. 4)

Which of the following is not a subcategory of interfund activity? ``` A. Loans B. Exchange and exchange-like transactions C. Transfers D. Reimbursements E. None of the above ``` (Ch. 4)

Which of the following would appear in a resource flows statement? A. Loans B. Reimbursements C. Transfers D. All of the above (Ch. 4)

How would an enterprise fund report the receipt of a capital asset from a department reported in the general fund? A. Transfer B. Capital contribution C. Nonoperating revenue D. None of the above (Ch. 4)

How would an enterprise fund report the receipt of a capital asset from another enterprise fund? A. Transfer B. Capital contribution C. Nonoperating revenue D. None of the above (Ch. 4)

How would an enterprise fund report the donation of a capital asset to a department reported in the general fund? A. Transfer B. Capital contribution (negative) C. Loss on disposal (nonoperating expense) D. None of the above (Ch. 4)

Each individual fund typically represents a separate bank account. A. True B. False (Ch. 4)

Trust fund resources, by definition, are not available to support a government's own programs. A. True B. False (Ch. 4)

Permanent fund resources, by definition, are not available to support a government's own programs. A. True B. False (Ch. 4)

By default, resources not accounted for in some other fund should be reported in the general fund. A. True B. False (Ch. 4)

Inflows from the core source for a special revenue fund should be reported directly as a revenue of that fund, even if initially collected by some other fund. A. True B. False (Ch. 4)

If a capital projects fund is used, all capital expenditures should be reported in that fund. A. True B. False (Ch. 4)

The use of a debt service fund is mandatory whenever long-term general obligation debt is outstanding. A. True B. False (Ch. 4)

The use of an enterprise fund is inappropriate if fees and charges for an activity are not expected to recover at least 50% of cost. A. True B. False (Ch. 4)

Fiduciary funds may never report resources available to support the government's own programs. A. True B. False (Ch. 4)

When resources of the sponsor government and resources of other governments are commingled in a single external government investment pool, the sponsoring government's proportionate share of pooled assets should be excluded from the investment trust fund. A. True B. False (Ch. 4)

In some situations, an interfund borrowing may need to be reclassified as a transfer. A. True B. False (Ch. 4)

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 (Ch. 5)

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 (Ch. 5)

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 (Ch. 5)

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 (Ch. 5)

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 (Ch. 5)

Where would data from an internal service fund be reported in the 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 (Ch. 5)

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 C. Current financial resources measurement focus/modified accrual basis of accounting (Ch. 5)

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 B ``` (Ch. 5)

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 ``` (Ch. 5)

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 (Ch. 5)

Revenues and expenditure/expense 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 (Ch. 5)

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 expenditure/expense of user funds C. Both A and B D. Neither A nor B (Ch. 5)

Which of the following would not be eliminated in the process of consolidation? A. Interfund transfers B. Revenues and expenditure/expense from interfund services provided and used C. Receivables and payables from interfund services provided and used C. Both B and C (Ch. 5)

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 (Ch. 5)

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 find financial reporting B. Both must equal for purposes of consolidation C. Both A and B D. Neither A nor B (Ch. 5)

Which of the following considerations ultimately defines the scope of the financial reporting entity? A. Financial interrelatedness B. Financial oversight C. Accountability of elected officials D. Assumption of risks and benefits (Ch. 6)

Which of the following is always a primary government? ``` A. County B. Municipality C. School District D. All of the above E. Both A and B ``` (Ch. 6)

Which of the following is necessary for a special purpose government to qualify as a primary government? ``` A. Separate legal status B. Separately elected governing body C. Fiscal independence D. All of the above E. Both A and B ``` (Ch. 6)

Which of the following would potentially meet the board appointment test? A. Appointment restricted to a pre-selected list of candidates B. Appointment of simple majority (although a two-thirds majority is required to issue debt) C. Both A and B D. Neither A nor B (Ch. 6)

Which of the following is evidence of a financial benefit or burden relationship between a primary government and the appointed governing board of a potential component unit? A. The primary government is the largest single customer of the potential component unit B. The primary government is entitled to the assets of the potential component unit upon dissolution C. Tax-increment financing of the primary government is used to support the potential component unit D. All of the above (Ch. 6)

Which of the following is only relevant to the determination of component unit status after board appointment has been established? A. Ability to impose will B. Financial benefit C. Financial burden D. All of the above (Ch. 6)

Which of the following is evidence of fiscal dependence? A. Another government determines that the budget of a potential component unit complies with the state's balanced budget law B. The government is of a type which is precluded by state law from issuing long-term debt C. Another government must approve the operating budget D. All of the above (Ch. 6)

Which of the following criteria are relevant to determining whether a legally separate tax-exempt organization is a component unit? ``` A. Direct benefit B. Access to resources C. Significance D. All of the above E. Both A and B ``` (Ch. 6)

A primary government, as legally defined, has two special revenue funds. It also has a component unit with a general fund and three special revenue funds. How many special revenue funds would the primary government present in the financial report of the financial reporting entity? A. 2 B. 3 C. 5 D. 6 (Ch. 6)

Which of the following could qualify as a blended component unit even if its board was not substantially the same as that of the primary government? ``` A. Financing authority B. Utility C. Housing authority D. All of the above E. None of the above ``` (Ch. 6)

If the board members of a primary government serve automatically as the board of another entity, the latter still meets the board appointment test even though the members were not actually appointed. A. True B. False (Ch. 6)

A single potential component unit may meet the criteria for being a component unit of more than one primary government. A. True B. False (Ch. 6)

A single potential component unit may be reported as a component unit of more than one primary government. A. True B. False (Ch. 6)

One way to meet the requirement to present information for major discretely presented component units is to include combining statements outside the basic financial statement, elsewhere within the financial section of the CAFR. A. True B. False (Ch. 6)

Stand-alone financial statements are appropriate for entities other than primary governments. A. True B. False (Ch. 6)

Which of the following operations would be most likely to have a measurement focus different from the others? A. Fire department B. Streets department C. Water department D. Police department (Ch. 7)

Which of the following assets, if present, will always appear on a statement of position, regardless of measurement focus? A. Prepaids B. Capital assets C. Receivables D. All of the above (Ch. 7)

Which of the following liabilities, if present, will always appear on a statement of position, regardless of measurement focus? ``` A. Vendor payables B. Interest payable C. Long-term debt D. All of the above E. Both A and B ``` (Ch. 7)

Which of the following, if present, will always appear on a statement of resource flows, regardless of measurement focus? A. Capital outlay B. Debt service principal payments C. Issuance of debt D. None of the above (Ch. 7)

Which of the following would appear in a statement of resource flows prepared using the economic resources measurement focus? A. Issuance of debt B. Repayment of principal debt C. Capital outlay D. Depreciation and amortization (Ch. 7)

Which of the following would not appear in a statement of resource flows prepared using the current financial resources measurement focus? A. Issuance of debt B. Repayment of principal of debt C. Capital outlay D. Depreciation and amortization (Ch. 7)

Which of the following would not appear in a statement of resource flows prepared using the economic resources measurement focus? A. Revenues B. Expenses C. Expenditures D. None of the above (Ch. 7)

Which of the following would not appear in a statement of resource flows prepared using the current financial resources measurement focus? A. Revenues B. Expenses C. Expenditures D. None of the above (Ch. 7)

Gains and losses are described as other financing sources and other financing uses in a statement of resource flows prepared using the current financial resources measurement focus. A. True B. False (Ch. 7)

Measurement focus determines what is measured, while basis of accounting determines when recognition should occur. A. True B. False (Ch. 7)

Under the accrual basis of accoutning, revenue and expense recognition are unaffected by the timing of related cash flows. A. True B. False (Ch. 7)

Which basis of accounting is consistent with the economic resources measurement focus? ``` A. Accrual B. Modified accrual C. Cash D. All of the above E. None of the above ``` (Ch. 7)

The same item might qualify for recognition as revenue under both the accrual and modified accrual basis of accounting. A. True B. False (Ch. 7)

The same item might qualify for recognition as revenue under the accrual basis of accounting, but not under the modified accrual basis of accounting. A. True B. False (Ch. 7)

Which of the following would be recognized as an expenditure of the current period? A. Accrued interest B. Vacation leave earned but not taken C. Salaries and wages earned D. All of the above A. True B. False (Ch. 7)