ACC 410 WEEK 2 QUIZ 1
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ACC 410 WEEK 2 QUIZ 1
CHAPTER 1
The Government and Not-For-Profit Environment
TRUE/FALSE (CHAPTER 1)
- The main objective
of a typical governmental entity is to earn a profit.
- A government’s
budget may be backed by the force of law.
- Governmental
entities have no need for an accounting system.
- Governments and
not-for-profits employ a system of accounting known as fund accounting.
- Governments and
not-for-profits may never engage in business-type activities.
- Lenders use the
financial statements of governments and not-for profits just as they would
those of businesses, that is, to help assess the borrower’s
credit-worthiness.
- Financial
statements, no matter how prepared, do not directly impact the economic
worth of an entity.
- Cash flow statements
are governments’ paramount financial documents.
- Most governments
budget on an accrual basis.
- The Governmental
Accounting Standards Board established generally accepted accounting
principles for all state and local government entities, as well as all
nongovernment entities.
MULTIPLE CHOICE (CHAPTER 1)
1. A primary characteristic that distinguishes
governmental entities from business entities is
a) the need to generate revenues equal
to or in excess of expenditures/expenses.
b) the importance of the budget in the
governing process.
c) the need to provide goods or
services.
d) the correlation between revenues generated
and demand for goods or services.
2. Which of the following characteristics is NOT a
characteristic that may distinguish a governmental or not-for-profit entity
from a business entity?
a) There is often no direct link between
revenues generated and expenditures/expenses incurred.
b) Capital assets may neither produce revenues
nor save costs.
c) Revenues may not be indicative of
demand for goods and services.
d) The mission of the entity will determine
the goods or services provided.
3. The most significant financial document provided
by a governmental entity may be
a) the balance sheet.
b) the operating statement.
c) the operating budget.
d) the cash flow statement.
4. Which of the following statements is NOT true?
a) All governmental entities engage in
similar activities.
b) There are many different types of
governments.
c) Governments may engage in activities
similar to activities engaged in by for-profit entities.
d) Managers may have a short-term focus and
thereby sacrifice the long-term viability of the entity.
5. Which of the following activities is NOT an
activity in which a governmental entity might engage?
a) Selling electric power.
b) Operating a golf course.
c) Operating a book store.
d) All of the above are activities that might
be carried out by a government.
6. In which of the following activities is a
not-for-profit entity least likely to engage?
a) Providing educational services.
b) Providing health-care services.
c) Providing for the national defense.
d) Retail sales of cookies.
7. To obtain a comprehensive understanding of
a government’s fiscal health, a financial analyst should obtain an
understanding of which of the following?
a) All of the resources owned by the
governmental entity.
b) All of the resources which may be summoned
by a governmental entity.
c) Demographic data about the residents
served by the governmental entity.
d) All of the above.
8. Which of the following is common to both
governments and not-for-profit entities but distinguishes these entities from
for-profit entities?
a) The budget is generally the most
significant financial document.
b) Revenues are not necessarily indicative of
demand for goods or services.
c) There is frequently no direct link
between revenues and expenses.
d) All of the above are common to both governments
and not-for-profit entities but distinguish them from for-profit entities.
9. Which of the following is NOT a purpose of
external financial reporting by governments? External financial reports
should allow users to
a) Assess financial condition.
b) Compare actual results with the budget.
c) Assess the ability of elected
officials to effectively manage people.
d) Evaluate efficiency and effectiveness.
10. Which of the following is NOT a reason that users of
government and not-for-profit external financial statements need to have
information to enable them to assess the financial condition of a government?
a) To determine the ability of the
entity to meet its obligations.
b) To determine the ability of the entity to
continue to provide services.
c) To predict future fiscal
developments.
d) To evaluate the overall profitability of
the entity.
11. Users of financial statements should be interested in
information about compliance with laws and regulations for which of the following
reasons?
a) To determine if the entity has
complied with bond covenants.
b) To determine if the entity has complied
with taxing limitations.
c) To determine if the entity has
complied with donor restrictions on the use of funds.
d) To determine all of the above.
12. Which of the following is NOT generally considered a
main user of government and not-for-profit entity external financial
statements?
a) Investors and creditors.
b) Taxpayers.
c) Donors.
d) Management.
13. Which of the following is NOT a probable use a donor
would make of the external financial statements of a not-for-profit entity?
a) To determine the creditworthiness of
the entity for investment purposes.
b) To determine the proportion of entity resources
directed to programs as opposed to fund-raising.
c) To determine the salaries paid to the
top officials of the entity.
d) To determine the allocation of resources
within the entity.
14. A regulatory agency would use the external financial
statements of a local government for which of the following purposes?
a) To assure that the entity is spending
and receiving resources in accordance with laws, regulations or policies.
b) To help assess management’s performance.
c) To exercise general oversight
responsibility.
d) To do all of the above.
15. Which of the following objectives is considered to be
the cornerstone of financial reporting by a governmental entity?
a) Accountability.
b) Budgetary compliance.
c) Interperiod equity.
d) Service efforts and accomplishments.
16. Which of the following is NOT an objective of
financial reporting by governmental entities as established by GASB?
a) Financial reporting should assist
users in determining if current period revenues were sufficient to pay for
current-period services.
b) Financial reporting should assist users in
assessing the management skills of top management.
c) Financial reporting should assist
users in evaluating the operating results of the governmental entity for the
year.
d) Financial reporting should assist users in
assessing the level of services that can be provided by the governmental entity
and its ability to meet its obligations as they come due.
17. Which of the following is NOT an objective of
financial reporting for not-for-profit entities as established by FASB?
Financial reporting should provide information that is useful to present and
potential resource providers and other users in:
a) Making rational decisions about the
allocation of resources to those organizations.
b) Assessing the services provided and the
entity’s ability to continue to provide those services.
c) Assessing the types of services
provided and the need for those services.
d) Assessing how managers have discharged
their stewardship responsibilities.
18. As used by GASB, interperiod equity refers to which of
the following? Financial reporting should:
a) Demonstrate compliance with
finance-related contractual requirements.
b) Provide information to determine whether
current-year revenues were sufficient to pay for current-year services.
c) Demonstrate whether resources were
obtained and used in accordance with the entity’s legally adopted budget.
d) Provide information to assist users in assessing
the government’s economy, efficiency, and effectiveness.
19. Given a specific set of data, the basis of accounting
selected by or imposed on a governmental entity will least affect which of the
following?
a) Determining whether or not the governmental
entity has a balanced budget.
b) Determining whether or not the governmental
entity has the ability to issue debt.
c) Determining whether or not certain
events occurred.
d) Determining the annual payments to a
government-sponsored pension plan.
20. The Governmental Accounting Standards Board is the
primary standard-setting body for:
a) All governments.
b) All state and local governmental entities.
c) All governments and all
not-for-profit entities.
d) All state and local governments and all
not-for-profit entities.
21. Under certain circumstances a governmental entity
might use standards established by which of the following standard-setting
bodies?
a) GASB.
b) FASB.
c) AICPA.
d) All of the above.
22. The primary standard-setting body for accounting and
financial reporting by a state-supported college or university is:
a) GASB.
b) FASB.
c) AICPA.
d) All of the above.
23. In descending order, the hierarchy of GAAP applicable
to a church-owned college may be:
a) FASB Statements, AICPA Industry Audit
Guides, FASB Implementation Guides, GASB Standards.
b) FASB Statements, FASB Technical Bulletins,
FASB Implementation Guides, AICPA Practice Bulletins (if cleared by FASB).
c) GASB Statements, AICPA Industry Audit
Guides, GASB Implementation Guides, FASB Standards.
d) GASB Statements, GASB Technical Bulletins,
GASB Implementation Guides, AICPA Practice Bulletins (if cleared by GASB).
- Governments and
not-for-profits employ a system of accounting known as
a) budget accounting.
b) financial accounting.
c) fund accounting
d) tax accounting.
- Which of the
following rule-making authorities would establish accounting standards for
all nongovernment not-for-profits?
a) AICPA.
b) FASB.
c) GASB.
d) APB.
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