chapter 2

The statistical section typically presents ________ years of information in each table or schedule. -3 -12 -5 -10

-10 Explanation: The statistical section typically presents ten years of information in each table or schedule

Which of the following is true regarding Government-wide financial statements? -Fiduciary activities are only reported if they qualify as a major fund. -A Statement of Cash Flows is not required for Government-wide statements -Prior year data must be presented. -Depreciation may only be reported as a charge in total to the general government

-A Statement of Cash Flows is not required for Government-wide statements Explanation: A Statement of Cash Flows is not required for Government-wide statements. Prior year data is optional, depreciation is allocated according to function and fiduciary activities are not included in the government-wide statements.

A budgetary comparison schedule is required for? -The General Fund -Each special revenue fund that has a legally adopted annual budget. -Enterprise Funds -A budgetary comparison schedule is required for only choices A & B.

-A budgetary comparison schedule is required for only choices A & B. Explanation: A budgetary comparison schedule is required of the General Fund and each major special revenue fund that has a legally adopted budget.

The total fund balances presented in Governmental Funds Statements are different from the total Net Position on the government-wide Statement of Net Position. Which of the following is not a reason for this difference? -The two statements have different bases of accounting -Accrued Wages Payable at year end are reported on the statement of Net Position but are not reported in the fund statements -Some liabilities are not due and payable in the current period and are not reported in fund liabilities -Capital assets used in government operations are not current financial resources and therefore are not reported in the funds

-Accrued Wages Payable at year end are reported on the statement of Net Position but are not reported in the fund statements Explanation: The total fund balances presented in Governmental Funds Statements are different from the total Net Position on the government-wide Statement of Net Position because the two statements have different bases of accounting and because most internal service funds are included in the governmental activities column on the governmentwide statements. Capital assets used in governmental operations are not financial resources and therefore not reported in the funds. Some liabilities are not due and payable in the current period and are not reported in fund balances. Accrued wages payable at year end are reported in both.

Which of the following is considered Required supplementary Information (RSI)? -Management's Discussion and Analysis. -Budgetary Comparison Schedule. -Schedule of Risk Management Activities. -All of the choices are considered RSI

-All of the choices are considered RSI Explanation: RSI includes MD&A, information about infrastructure, budgetary comparison schedule, funding schedules, schedules required for external financing pools, pension schedules and schedules of risk management activities.

GASB requires which of the following (if applicable) to be included in the Notes to Financial Statements? -Outstanding encumbrances -The definition of cash and cash equivalents used in the statement of cash flows for proprietary funds -Interfund receivables and payables -All of the choices are correct

-All of the choices are correct Explanation: Any event that is significant to understanding and interpreting the financial statements should be described in the notes. Outstanding encumbrances, the definition of cash and cash equivalents used in the statement of cash flows for proprietary funds, interfund receivables and payables would all be required.

In addition to the government-wide statements, governments are required to prepare fund financial statements for which of the following category of funds? -Proprietary funds -Governmental type funds -Fiduciary funds -All of the choices are correct

-All of the choices are correct Explanation: In addition to the government-wide statement, governments are required to prepare fund-level financial statements within the three categories of funds; governmental, proprietary and fiduciary.

Which of the following is included in Required supplementary Information (RSI)? -Management's Discussion and Analysis (MD&A). -Budgetary Comparison Schedule. -The Schedule of Funding Progress and Schedule of Employer Contributions when the government reports a pension trust fund. -All of the choices are correct

-All of the choices are correct Explanation: RSI includes MD&A, information required when using the modified approach to infrastructure, budgetary comparison schedule, pension schedules and schedules of risk management activities

Which of the following is not true regarding the Statement of Cash Flows for proprietary funds? -Four categories of cash flows are used. -Interest and dividends received are recorded as investing activities. -The direct method is required for reporting cash flows from operations. -All of the choices are true statements

-All of the choices are true Explanation: The Statement of Cash Flows for a proprietary fund is prepared using the direct method. The statement has four categories and investment income is recorded as an investing activity.

Which of the following is true regarding the governmental fund financial statements? -The governmental fund financial statements include the Balance Sheet, and the Statement of Revenues, Expenditures, and Changes in Fund Balances -The governmental fund financial statements are prepared on the current financial resources measurement focus and modified accrual basis of accounting. -The governmental fund Balance Sheet reflects the residual equity as Fund Balance -All of the choices are true

-All of the choices are true Explanation: The governmental fund financial statements include the Balance Sheet, and the Statement of Revenues, Expenditures, and Changes in Fund Balances and are prepared on the current financial resources measurement focus and modified accrual basis of accounting. The excess of assets and deferred outflows over liabilities and deferred inflows is labeled fund balance for a governmental fund.

Which of the following is true regarding the government-wide financial statements? -The government-wide financial statements are not required to present prior-year data. -The government-wide financial statements include a Statement of Net Position and a Statement of Activities, but not a Statement of Cash Flows. -The government-wide financial statements include capital assets, including infrastructure, and reflect depreciation, except for infrastructure using the modified approach. -All of the choices are true.

-All of the choices are true. Explanation: Prior year balances may be presented but are not required. Government-wide statements include the Statement of Net Position and the Statement of Activities. Statement of Cash Flows is not required. Capital assets are reported net of accumulated depreciation unless the modified approach is used for reporting infrastructure.

Which of the following items would likely appear in the reconciliation between the governmental fund financial statements and the governmental activities column in the government-wide financial statements? -The inclusion of long-term liabilities in the government-wide financial statements and not in the governmental fund financial statements. -The inclusion of depreciation of capital assets in the governmental activities column of the government-wide financial statements and not in the governmental fund statements. -The additional accrual of some revenues and expenses in the government-wide financial statements that were not made in the governmental fund financial statements. -All the choices are correct

-All the choices are correct Explanation: A) B) and C) would all appear in the reconciliation between governmental fund financial statements and the governmental activities column in the government-wide financial statements.

Which of the following is true regarding GASB's definition of the financial reporting entity? -The financial reporting entity might include a primary government, component units, joint ventures, or a jointly governed organization. -Primary governments may be general-purpose governments (such as states, cities, and counties) or special-purpose governments that have separately elected governing bodies, are legally separate and are fiscally independent of other state or local governments -Blending is used to incorporate component units when those component units are, in substance, part of the primary government. -All the choices are true

-All the choices are true Explanation: GASB Section 2100 establishes that the financial reporting entity is the primary government together with its component units. The primary government can be a state government, a general-purpose local government, or a special-purpose government. Blending is used to incorporate component units when the component unit is so intertwined with the primary government that they are in substance the same entity.

Which of the following is true regarding the Budgetary Comparison Schedule? -The Budgetary Comparison Schedule compares the actual results to both the original budget and the final budget, but display of variances is optional. -The Budgetary Comparison Schedule is considered part of the basic financial statements. -The Budgetary Comparison Schedule must be prepared for the General Fund and each major special revenue fund that has a legally adopted budget. -Both A and C choices are true.

-Both A and C choices are true. Explanation: A budgetary comparison schedule includes the original budget, the final appropriated budget and the actual results computed on the same basis as the budget. The variance column is optional. The budgetary comparison schedule is required as part of RSI and is required for the General Fund and each major special fund that has a legally adopted budget.

GASB provides which method(s) for including component unit financial information with that of the primary government? -Discrete Presentation -Blending -Both Discrete Presentation and Blending -None of the choices are correct

-Both Discrete Presentation and Blending Explanation: GASB standards provide two methods for including component unit financial information with that of the primary government; blending and discrete presentation.

With respect to the preparation of fund basis financial statements, governmental funds other than the General Fund are considered to be major when which of the following conditions exist? -With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of that individual governmental fund constitutes 10% of the total for the governmental fund category. -With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of that individual governmental or enterprise fund are 5% of the total of the governmental and enterprise categories, combined. -Both are choices required for a governmental fund to be a major fund. -Either choices would fulfill the requirements

-Both are choices required for a governmental fund to be a major fund. Explanation: The general fund is always considered to be a major fund. Other governmental funds are considered to be a major fund when both of the following conditions exists; 1) Total assets, liabilities, revenues or expenditures of that individual government fund constitute 10% of the total for the governmental funds category and 2) Total assets, liabilities, revenues or expenditures of that individual government fund are 5% of the total of the governmental and enterprise categories, combined. In addition, a government may designate any fund as a major fund if reporting that fund separately would be useful.

Which of the following indicates a governmental fund is considered to be a major fund? -Total assets, liabilities, revenues or expenditures of the individual governmental fund constitutes 10 percent of the governmental funds category. -Total assets, liabilities, revenues or expenditures/expenses are 5 percent of the total of the governmental and enterprise category. Other funds may be designated major funds at the discretion of management. -Both choices are required -Either of the choices will qualify a fund to be a major fund.

-Both choices are required Explanation: Governmental funds, other than the general fund, are considered to be a major fund when both of the following conditions are met: 1) Total assets, liabilities, revenues or expenditures of that individual government fund constitute 10% of the total for the governmental funds category and 2) Total assets, liabilities, revenues or expenditures of that individual government fund are 5% of the total of the governmental and enterprise categories, combined.

In addition to a Statement of Net Position, Proprietary Fund (fund-basis) financial statements include which of the following? -Statement of Revenues, Expenses, and Changes in Fund Net Position -Statement of Cash Flows -Both of the choices are included -Neither of the choices is included.

-Both of the choices are included Explanation: Proprietary funds must prepare the following: Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position and Statement of Cash Flows

Which of the following is true regarding the reporting of Budget-Actual Comparisons? -A Budget-Actual Comparison Schedule is required for the General Fund and all major special revenue funds that have a legally adopted annual budget -A Budget-Actual Comparison Statement may be prepared in lieu of the Schedule -Both of the choices are true. -Neither of the choices is true.

-Both of the choices are true. Explanation: Governments have the option of reporting a budget comparison statement as part of the basic financial statements rather than the budgetary comparison schedule in the RSI. A budgetary comparison schedule is required for the General fund and each major special revenue fund that has a legally adopted budget.

Which of the following is true regarding the reporting of major funds in the governmental funds financial statements? -The General Fund is always considered a major fund. -A fund is considered major if its revenues, expenditures, assets, or liabilities exceed 10% of the total governmental fund categories and if the same element (revenues, expenditures, assets, or liabilities) exceeds 5% of the governmental and enterprise funds combined. -Both of the choices are true. -Neither of the choices is true.

-Both of the choices are true. Explanation: The general fund is always considered to be a major fund. Governmental funds, other than the general fund, are considered to be a major fund when both of the following conditions are met: 1) Total assets, liabilities, revenues or expenditures of that individual government fund constitute 10% of the total for the governmental funds category and 2) Total assets, liabilities, revenues or expenditures of that individual government fund are 5% of the total of the governmental and enterprise categories, combined.

Which of the following is true regarding the governmental fund financial statements? -The governmental fund financial statements include the Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balances -The governmental fund financial statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting -Both of the choices are true. -Neither of the choices is true

-Both of the choices are true. Explanation: The governmental fund financial statements include the Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balances which are prepared using the current financial resources measurement focus and the modified accrual basis of accounting.

Which of the following is true regarding the governmental fund statements? -The Governmental Funds Balance Sheet does not reflect capital assets or long-term debt -The Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances reports columns for major funds, non-major funds (in total), and total. -Both of the choices are true. -None of the choices are true.

-Both of the choices are true. Explanation: The governmental fund statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. For this reason, capital assets and long-term debt do not appear on the balance sheet. The Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances reports columns for each major fund, a column for the total non-major funds combined, and total column.

Which of the following is true regarding fiduciary funds? -Fiduciary funds are reported in the fiduciary fund financial statements but not in the government-wide financial statements. -Custodial funds should present both a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. -Both of the choices are true. -Neither of the choices is true.

-Both of the choices are true. Explanation: Fiduciary funds are not included in the government-wide statement; they are included with the fund basis financial statements. Custodial funds prepare both a Statement of Fiduciary Net Position and a Statement of changes in Fiduciary Net Position.

Which of the following is true regarding the Comprehensive Annual Financial Report (CAFR)? -The CAFR has three main sections: introductory, financial, and statistical. -Required supplementary Information includes a Budgetary Comparison Schedule for the General Fund and all major special revenue funds that have a legally adopted annual budget (unless a statement is prepared). -Both statements are true. -Both statements are false.

-Both statements are true Explanation: The CAFR has 3 main sections; introductory, financial and statistical. A budgetary comparison schedule is required of the General Fund and each major special revenue fund that has a legally adopted budget.

Which of the following is true regarding the proprietary fund financial statements? -The proprietary fund financial statements include the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Fund Net Position, and the Statement of Cash Flows -The proprietary fund financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. -Both statements are true -Neither statement is true

-Both statements is true Explanation: The proprietary fund statements include the Statement of Net position, Statement of Revenues, Expenses, and Changes in Fund Net Position and Statement of Cash Flows which are prepared using the economic resources measurement focus and the accrual basis of accounting.

Which of the following is not one of the major sections of the Comprehensive Annual Financial Report (CAFR)? -Budgetary -Introductory -Financial -Statistical

-Budgetary Explanation: The three major sections of a CAFR are the Introductory, Financial, and Statistical sections

Direct expenses are required to be reported by function in Government-wide statements. Which of the following would not be an appropriate category? -Health and welfare -Capital outlay -Parks and recreation -Community development

-Capital outlay Explanation: Community development, parks and recreation, and health and recreation would all be function categories. Capital outlay is not a function category.

Under GASB rules for the financial reporting entity: -Counties are component units of the State Government -Blended and discretely presented component units are to be reported in government-wide financial statements but not in fund financial statements -Component units must be reported in columns (discrete presentation) separate from the funds of a primary government. -Component units are included if the primary government is financially accountable for their operations

-Component units are included if the primary government is financially accountable for their operations Explanation: GASB standards provide two methods for including component unit financial information: blending and discrete presentation. Counties can be a primary government. The financial reporting entity is the primary government together with its component units. Component units are legally separate organizations for which the primary government is financially accountable.

Which of the following is true regarding component units? -Component units may be reported discretely in the government-wide statements or may be blended as a fund in the fund financial statements (and thus also included in the government-wide financial statements). -Component units could include towns, school districts, counties, and municipalities. -Both choices are true. -Neither of the choices is true.

-Component units may be reported discretely in the government-wide statements or may be blended as a fund in the fund financial statements (and thus also included in the government-wide financial statements). Explanation: Component units are either blended and included in the financial statements of the primary government or presented in separate column on the government-wide statements using discrete presentation. Towns, school districts, counties, and municipalities would be primary governments.

Funds other than the General Fund must be considered a major fund when: -Total assets, liabilities, revenues, or expenditures/expenses of that fund constitute 10 percent of either the governmental or enterprise category -Total assets, liabilities, revenues, or expenditures/expenses of that fund are 5 percent of the total of the governmental and enterprise category. -Conditions of either of the choices exist -Conditions of both of the choices exist.

-Conditions of both of the choices exist. Explanation: Governmental funds, other than the general fund, are considered to be a major fund when both of the following conditions are met: 1) Total assets, liabilities, revenues or expenditures of that individual government fund constitute 10% of the total for the governmental funds category and 2) Total assets, liabilities, revenues or expenditures of that individual government fund are 5% of the total of the governmental and enterprise categories, combined.

Governmental fund statements are prepared using: -Economic resources measurement focus and accrual basis of accounting. -Current financial resources measurement focus and accrual basis of accounting. -Current financial resources measurement focus and modified accrual basis of accounting -Economic resources measurement focus and modified accrual basis of accounting.

-Current financial resources measurement focus and modified accrual basis of accounting Explanation: Governmental fund statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting.

Which of the following is true regarding the government-wide Statement of Net Position? -Discretely presented component units are included in a separate column (or columns). Net Position is displayed in three categories: net investment in capital assets, reserved, and unreserved. -Both statements are true. -Both statements are false.

-Discretely presented component units are included in a separate column (or columns). Explanation: In addition to the governmental activities and business-type activities, information is presented in a separate column for the government's discretely presented component units. The difference between assets and liabilities is called net position and is reported in three categories; Net investment in capital assets, Restricted net position and Unrestricted net position.

GASB provides guidance for determining when a primary government should include a legally separate organization in its financial report. What would be required for the primary government to include the related entity in its financial reports? -The primary government controls a voting majority of the other organization's governing board or otherwise may impose its will on the organization -The other organization is fiscally dependent upon the primary government. -The related organization must represent a financial benefit or burden to the primary government. -Either A or B plus C choice would be sufficient to require inclusion.

-Either A or B plus C choice would be sufficient to require inclusion. Explanation: GASB provides guidance for determining when a primary government should include a legally separate organization in its financial report. First the relationship with the entity must have one of the following characteristics: (1) the primary government controls a voting majority of the other organization's governing board or otherwise may impose its will on the organization; or (2) the other organization is fiscally dependent upon the primary government. An entity is fiscally dependent on a primary government if that government approves or modifies its budget, sets charges for its services, or if the government's approval is required to issue debt. In addition, the related organization must represent a financial benefit or burden to the primary government

Which of the following is true regarding the fiduciary fund financial statements? -Custodial funds are reported only on the Statement of Changes in Fiduciary Net Position -Fiduciary fund financial statements are prepared using the current financial resources measurement focus and modified accrual basis of accounting. -Fiduciary fund financial statements include the Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position -Fiduciary fund financial statements reflect equity as reserved and unreserved.

-Fiduciary fund financial statements include the Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position Explanation: Fiduciary fund statements use accrual accounting and the economic resources measurement focus. Fiduciary funds prepare the Statement of Net Position and the Statement of Changes in Fiduciary Net Position.

Which of the following is true regarding fiduciary fund statements? -Fiduciary fund statements include the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position. -Fiduciary fund statements are prepared using the current financial resources measurement focus and modified accrual basis of accounting -Both statements are true. -Neither statement is true.

-Fiduciary fund statements include the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position. Explanation: Fiduciary fund statements include the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position and are prepared using the economic resource measurement focus and accrual accounting.

Which of the following Sections of the CAFR is audited? -Financial and statistical sections -Management Discussion and Analysis section -Statistical section -Financial section

-Financial section Explanation: The financial section is audited. MD&A and the statistical section are not audited.

Which of the following is true regarding the proprietary funds statements? -Major enterprise and internal service funds are reported in separate columns; a column is presented for all non-major enterprise and internal service funds (combined), and a total column is presented. -Financial statements include a Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position, and Statement of Cash Flows -Both statements are true. -Neither statement is true.

-Financial statements include a Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position, and Statement of Cash Flows Explanation: Internal services funds do not follow the procedures described for major funds. Governments with more than one internal service fund combine the funds into one column for the Statement of Net Position. Detailed financial statements for each internal service fund are included in the other supplementary information. Proprietary fund financial statements include a Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position, and Statement of Cash Flows.

Governmental-type funds label the excess of assets over liabilities on the balance sheet as: -Fund Balance -Assets Net of Liabilities. -Net Position. -Net Fund Balance and Liabilities

-Fund Balance Explanation: The excess of assets and deferred outflows over liabilities and deferred inflows is labeled fund balance, an account title used only in governmental funds

Which of the following funds requires a Budgetary Comparison Schedule? -General Fund -Enterprise Funds -Investment Trust Funds -Internal Service Funds

-General Fund Explanation: A budgetary comparison schedule is required for the General Fund and each major special revenue fund that has a legally adopted budget.

Which Statement is presented using the accrual basis of accounting? -Governmental Fund Balance Sheet -Government-Wide Statement of Activities -Statement of Revenues, Expenditure and changes in Fund Balances -Both A and B choices are true

-Government-Wide Statement of Activities Explanation: The government-wide statements use the accrual basis of accounting. Fund basis statements use the modified accrual basis of accounting.

Which of the following is true regarding financial reporting of governmental funds? -The Fund Balance of governmental funds reports fund balance as reserved and unreserved. -Governmental funds include the General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds. -Both of the choices are true. -Neither of the choices is true

-Governmental funds include the General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds. Explanation: Fund balance is displayed within the categories of nonspendable, restricted, committed, assigned and unassigned. Governmental funds include the General Fund, special revenue funds, capital projects funds, debt service funds, and permanent funds.

What are the three major sections of the Comprehensive Annual Financial Report? -Introductory Section, Financial Section, Management Discussion and Analysis -Introductory Section, Financial Section, Budgetary Comparison -Introductory Section, Financial Section, Reporting Infrastructure -Introductory Section, Financial Section, Statistical Section

-Introductory Section, Financial Section, Statistical Section Explanation: The CAFR has three major sections: introductory, financial and statistical.

Which of the following is true regarding Management's Discussion and Analysis (MD&A)? -MD&A is not considered part of Required supplementary Information (RSI) -MD&A takes the place of footnotes. -MD&A should present an analysis of significant variations between the original and final budget. -All of the choices are true.

-MD&A should present an analysis of significant variations between the original and final budget. Explanation: MD&A is part of RSI. MD&A does not take the place of footnotes. GASB requires eight specific items that must be included one of which is an analysis of significant variations between original and final budget amounts and between final budget amounts and actual results for the General Fund.

Which part of the financial section of the CAFR is considered "Required supplementary Information?" -Fund Financial Statements -Government-Wide Financial Statements -Auditor's Report -Management's Discussion and Analysis

-Management's Discussion and Analysis Explanation: RSI appears in two parts of the financial section; MD&A precedes the financial statements and other RSI schedules follow the notes to the financial statements. The auditor's report and financial statements are not RSI.

Which of the following is true regarding the financial reporting entity of a state or local government? -Many component units are discretely presented, rather than blended. -Only a primary government is reported in the government-wide statements -A school district could never be a primary government -Both B and C choices are true.

-Many component units are discretely presented, rather than blended. Explanation: Component units are more commonly reported using discrete presentation rather than blended. Government-wide statements report governmental and business activities which comprise the primary government. Similar information is presented in a separate column for the government's discretely presented component units. A school district can be a primary government.

With respect to the preparation of fund basis financial statements, governmental funds other than the General fund are considered to be major when which of the following conditions exist? -With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of the individual governmental fund under consideration constitutes 25% of the total for the governmental fund category. -With respect to fund basis financial statements, governmental funds are considered to be a major fund when total assets, liabilities, revenues, or expenditures of individual governmental or enterprise fund under consideration are 15% of the total of the governmental funds and enterprise categories, combined. -Both of the choices are required for a governmental fund to be a major fund. -Neither of the choices are correct.

-Neither of the choices are correct. Explanation: The general fund is always considered to be a major fund. Other governmental funds are considered to be a major fund when both of the following conditions exists; 1) Total assets, liabilities, revenues or expenditures of that individual government fund constitute 10% of the total for the governmental funds category and 2) Total assets, liabilities, revenues or expenditures of that individual government fund are 5% of the total of the governmental and enterprise categories, combined. In addition, a government may designate any fund as a major fund if reporting that fund separately would be useful.

Which of the following is true regarding the governmental fund statements? -The governmental fund statements include a Statement of Cash Flows prepared on the direct method. -The governmental fund statements are prepared using the economic financial resources measurement focus and modified accrual accounting. -Neither of the choices is true. -Both of the choices is true.

-Neither of the choices is true Explanation: Governmental funds do not prepare a Statement of Cash Flows. Governmental funds are prepared using the current financial resources measurement focus and the modified accrual basis of accounting.

Which of the following is true regarding fiduciary fund financial statements? -Fiduciary fund financial statements include the Statement of Fiduciary Net Position, the Statement of Changes in Fiduciary Net Position, and the Statement of Cash Flows prepared using the direct method. -Fiduciary fund financial statements are prepared on the current financial resources measurement focus and modified accrual accounting. -Both of the choices are true. -Neither of the choices is true.

-Neither of the choices is true. Explanation: Fiduciary fund statements include the Statement of Fiduciary Net position, Statement of Changes in Fiduciary Net Position. The Statement of Cash Flows is not required for fiduciary funds. Fiduciary funds use the economic resources measurement focus and accrual accounting.

Which of the following is true regarding the government-wide Statement of Activities? -General revenues include items such as charges for services and program fees. -Fiduciary activities are included. -Both of the choices are true. -Neither of the choices is true.

-Neither of the choices is true. Explanation: General revenues include tax revenues and those revenues that are not associated directly with a particular function or program. Service charges and program fees are revenues that can be directly associated with a particular function are deducted from the expenses for that function to arrive at a net expense or revenue

Which of the following is false regarding major fund reporting for governmental funds? -The General Fund is always a major fund. -Each fund that is considered major must be reported in a separate column in the governmental funds financial statements. -A government may designate any fund as major if it feels that reporting that fund in the basic financial statements would be useful. -None of the choices, all are true

-None of the choices, all are true Explanation: All of statements are true. The General Fund is always a major fund. Each fund that is considered major must be reported in a separate column in the governmental funds financial statements. A government may designate any fund as major if it feels that reporting that fund in the basic financial statements would be useful.

Which of the following is not considered Required supplementary Information (RSI)? -Notes to the financial statements. -Budgetary Comparison Schedule. -Management's Discussion and Analysis. -None of the choices; all are considered RSI.

-Notes to the financial statements. Explanation: RSI includes MD&A, information about infrastructure, budgetary comparison schedule, funding schedules, schedules required for external financing pools, pension schedules and schedules of risk management activities. Notes to the financial statements are required and not part of RSI.

Which of the following is false regarding the financial reporting entity of a state or local government? -Many component units are discretely presented, rather than blended -Only a primary government is reported in the government-wide statements. -A school district can be a primary government. -. Both B and C are false.

-Only a primary government is reported in the government-wide statements. Explanation: Component units are more commonly reported using discrete presentation rather than blended. Government-wide statements report governmental and business activities which comprise the primary government. Similar information is presented in a separate column for the government's discretely presented component units. A school district can be a primary government.

A Statement of Cash Flows is required for which type of fund? -Proprietary. -Governmental. -Fiduciary. -None of the choices are correct.

-Proprietary Explanation: The statement of cash flows is only required for proprietary funds.

Which of the following is true regarding the proprietary fund financial statements? -The Statement of Net Position reflects equity as contributed equity and retained earnings. -Proprietary fund financial statements include the Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position, and Statement of Cash Flows. -Normally, a reconciliation is required between the proprietary fund financial statements and the business-type activities column in the government-wide financial statements. -The Statement of Cash Flows may be prepared using either the direct or indirect methods.

-Proprietary fund financial statements include the Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position, and Statement of Cash Flows Explanation: Proprietary funds include the Statement of Net Position, Statement of Revenues, Expenses, and Changes in Fund Net Position, and Statement of Cash Flows.

Which of the following funds require a Statement of Cash Flows? -Proprietary funds -Governmental and Fiduciary Funds -Fiduciary Funds -Governmental funds

-Proprietary funds Explanation: The statement of cash flows is only required for proprietary funds.

An example of an expenditure classification by function for a governmental fund would be: -Salaries. -Capital outlay. -Public safety. -Debt service.

-Public safety Explanation: Expenditures reported by function such as public safety, judicial administration and general government. Debt service is reported as interest or principle. Capital outlay and salaries are not function categories.

The modified approach for infrastructure requires schedules and disclosures to be included in which part of the CAFR? -Required supplementary Information -Other Supplementary Information -Notes to the Financial Statements -Proprietary Fund Statements

-Required supplementary Information Explanation: RSI includes MD&A, information required when using the modified approach to infrastructure, budgetary comparison schedule, pension schedules and schedules of risk management activities.

Which of the following is true regarding the government-wide Statement of Activities? -The government-wide Statement of Activities may reflect expenses either by function (general government, public safety, etc.) or by object or natural classification (salaries, supplies, etc.). -The government-wide Statement of Activities is prepared using the modified accrual basis of accounting for governmental activities and using the accrual basis of accounting for business-type activities -Separate rows are presented for major government functions and business-like activities -The government-wide Statement of Activities reflects most taxes as program revenues.

-Separate rows are presented for major government functions and business-like activities Explanation: In the government-wide Statement of Activities, direct expenses are required to be reported by function. All taxes levied by the government, including those restricted to a particular purpose, are reported as general revenues. Although rarely done, governments may allocate indirect expenses to functions.

In addition to a Statement of Net Position, what statements are required in the government-wide Financial Statements? -Statement of Activities. -Statement of Cash Flows. -Neither of the choices are required. -Both of the choices are required.

-Statement of Activities. Explanation: Government-wide financial statements include the Government-wide Statement of Net Position and the Government-wide Statement of Activities. The Statement of Cash Flows is not required.

With respect to Government-wide financial statements, which of the following is not required by GASB? -Statement of Cash Flow -Statement of Net Position -Statement of Activities -All of the choices are required by GASB

-Statement of Cash Flow Explanation: Government-wide financial statements include the Government-wide Statement of Net Position and the Government-wide Statement of Activities. The Statement of Cash Flows is not required.

Which of the following is true regarding the composition of the Comprehensive Annual Financial Report (CAFR)? -The CAFR is to include both blended and discretely presented component units. -The CAFR is required in order to be in conformity with Generally Accepted Accounting Principles (GAAP). -The CAFR contains four major sections: introductory, financial, supplementary, and statistical. -All of the choices are true

-The CAFR is to include both blended and discretely presented component units. Explanation: The CAFR has three major sections: introductory, financial and statistical.

Which of the following is true with respect to the General Fund? -The General Fund is always considered to be a major fund when preparing fund basis financial statements. -The General Fund is considered to be a major fund when preparing fund basis financial statements if it bears a financial benefit or burden to the primary government. -The General Fund is considered to be a major fund if the combined total of assets, liabilities, revenues, and expenses exceeds 10% of the total of all governmental funds. -The General Fund is not reported as part of the CAFR.

-The General Fund is always considered to be a major fund when preparing fund basis financial statements. Explanation: The general fund is always considered to be a major fund. Other governmental funds are considered to be a major fund when both of the following conditions exists; 1) Total assets, liabilities, revenues or expenditures of that individual government fund constitute 10% of the total for the governmental funds category and 2) Total assets, liabilities, revenues or expenditures of that individual government fund are 5% of the total of the governmental and enterprise categories, combined. In addition, a government may designate any fund as a major fund if reporting that fund separately would be useful.

Which of the following is true regarding the government-wide Statement of Activities? -The Statement of Activities includes depreciation expense. -In the government-wide Statement of Activities, "special items" are those items that are both unusual and infrequent and are not under the control of management. -Taxes levied, including those restricted to a particular purpose, are reported as program revenue -Transfers between governmental and business-type activities are eliminated and do not appear on the government-wide Statement of Activities

-The Statement of Activities includes depreciation expense. Explanation: In the government-wide statements, "special items" are items within the control of management but which are unusual in nature or infrequent in occurrence. Transfers between governmental and business-type activities are displayed in the general revenues section and offset. All taxes levied by the government, including those restricted to a particular purpose, are reported as general revenues

Which of the following is true regarding the Comprehensive Annual Financial Report? -The basic financial statements consist of the government-wide, the governmental fund, the proprietary fund, and the fiduciary fund financial statements (and the notes to the financial statements). -The government-wide financial statements include the Statement of Net Position, the Statement of Activities, and the Statement of Cash Flows. -Both of the choices are true. -Neither of the choices is true.

-The basic financial statements consist of the government-wide, the governmental fund, the proprietary fund, and the fiduciary fund financial statements (and the notes to the financial statements). Explanation: The basic financial statements consist of the government-wide, the governmental fund, the proprietary fund, and the fiduciary fund financial statements (and the notes to the financial statements). The government-wide statements include the Statement of Net Position and the Statement of Activities.

Which of the following is not correct with respect to reporting major funds? -A government may designate any fund as a major fund if reporting that fund separately would be useful -The general fund is not classified as a major fund if it does not meet the 10% and 5% tests for a major fund. -If the reporting government is preparing a complete CAFR, a schedule showing the detail of nonmajor funds is provided in the other supplementary information section. -Any funds not reported separately are aggregated and reported in a single column under the label nonmajor funds.

-The general fund is not classified as a major fund if it does not meet the 10% and 5% tests for a major fund. Explanation: The General Fund is always a major fund. Governmental funds, other than the general fund, are considered to be a major fund when both of the following conditions are met: 1) Total assets, liabilities, revenues or expenditures of that individual government fund constitute 10% of the total for the governmental funds category and 2) Total assets, liabilities, revenues or expenditures of that individual government fund are 5% of the total of the governmental and enterprise categories, combined.

Where in the CAFR would one find the long-term liability for revenue bonds (paid from the revenues of an enterprise fund)? -The proprietary funds Statement of Net Position only -The government-wide Statement of Net Position only. -The government-wide Statement of Net Position and the RSI Schedule of Bonds Payable. -The government-wide Statement of Net Position and the proprietary funds Statement of Net Position.

-The government-wide Statement of Net Position and the proprietary funds Statement of Net Position. Explanation: Long-term liability for revenue bonds would be found in the government wide Statement of Net Position and the proprietary funds Statement of Net Position.

Which of the following is true regarding the government-wide Statement of Net Position? -The government-wide Statement of Net Position must be prepared in a classified format; that is, both assets and liabilities must be separated between current and long-term categories. -The government-wide Statement of Net Position includes all resources entrusted to the government; including governmental, proprietary, and fiduciary -A reporting entity (primary government plus component units) total column is required. -The government-wide Statement of Net Position reflects capital assets, net of accumulated depreciation, for both governmental and business-type activities.

-The government-wide Statement of Net Position reflects capital assets, net of accumulated depreciation, for both governmental and business-type activities. Explanation: Governmental and business-type activities are totaled but component units are separately stated in the government-wide statements. Capital assets are reported net of accumulated depreciation for both governmental and business-type activities in the government-wide statements unless the modified approach is used for reporting infrastructure. The Statement of Net Position may be presented using the classified approach, but it is not required in the government-wide statements. Fiduciary activities are not included in the government-wide statements.

Which of the following is true regarding the government-wide financial statements? -The government-wide financial statements include the Statement of Net Position and the Statement of Activities. -The government-wide financial statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. -Both statements are true -Neither statement is true

-The government-wide financial statements include the Statement of Net Position and the Statement of Activities. Explanation: Government-wide financial statements include the Government-wide Statement of Net Position and the Government-wide Statement of Activities. The Statement of Cash Flows is not required.

Which of the following is true regarding the government-wide statements? -The government-wide statements include a Statement of Net Position and a Statement of Activities -The governmental activities portion of the government-wide statements is prepared using the current financial resources measurement focus and modified accrual basis of accounting. -Both statements are true. -Both statements are false.

-The government-wide statements include a Statement of Net Position and a Statement of Activities Explanation: The government-wide statements are the Government-wide statement of Net Position and the Government-wide Statement of Activities. Government-wide statements are prepared using the accrual basis of accounting and the economic resources measurement focus.

Which of the following is true regarding the proprietary fund financial statements? -The proprietary fund financial statements include the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Fund Net Position, and the Statement of Cash Flows. -The proprietary funds include enterprise, internal service, and permanent funds. -Both statements are true -Neither statement is true

-The proprietary fund financial statements include the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Fund Net Position, and the Statement of Cash Flows. Explanation: The proprietary fund financial statements include the Statement of Net Position, the Statement of Revenues, Expenses, and Changes in Fund Net Position, and the Statement of Cash Flows. Proprietary funds include enterprise and internal service funds.

Which of the following is true about the combining financial statements? -They are used whenever a nonmajor column is used in one of the fund financial statements -The total column in the combining statements is not always the same as the nonmajor funds column in the basic financial statements. -Both of the choices are true. -Neither of the choices is true.

-They are used whenever a nonmajor column is used in one of the fund financial statements Explanation: A complete CAFR presents combining statements to reflect its nonmajor funds whenever a nonmajor column is used in one of the fund statements.

A reconciliation from Enterprise funds statements to government-wide statements is not necessary because: -They both use the same measurement focus and basis of accounting (current financial resources, modified accrual). -Enterprise funds are not included in the government-wide statements -They both use the same measurement focus and basis of accounting (economic resources, accrual) -They use a different measurement focus and basis of accounting.

-They both use the same measurement focus and basis of accounting (economic resources, accrual). Explanation: Enterprise funds use the economic resources measurement focus and the accrual basis of accounting which is the same as the government-wide statements.

Which of the following statements is false? -In addition to the government-wide statements, governments are required to prepare fund financial statements for governmental, proprietary and fiduciary funds. -When preparing fund basis financial statements, any funds not reported separately are aggregated and reported in a single column under the label non-major funds. -With respect to fund basis financial statements, a government may designate any fund to be a major fund if reporting that fund separately would be useful. -When preparing fund basis financial statements, any funds not reported separately are reported by function

-When preparing fund basis financial statements, any funds not reported separately are reported by function Explanation: When preparing fund basis financial statements, any funds not reported separately are aggregated and reported in a single column under the label non-major funds