CGFM Practice Exam Questions And

Certified Government Financial Manager (CGFM) Practice Exam Questions And Correct Answers (Verified Answers) Plus Rationales 2026 Q&A | Instant Download Pdf

• Which of the following is a primary purpose of governmental

accounting?

• To maximize profits
• To facilitate budgetary control
• To prepare income tax returns
• To minimize cash balances
• To facilitate budgetary control

Rationale: Governmental accounting focuses on accountability,

particularly ensuring that resources are used as authorized by budgets.

• Which fund type is used to account for resources that are legally

restricted to expenditure for specific purposes? 1 / 4

• General Fund
• Special Revenue Fund
• Enterprise Fund
• Capital Projects Fund
• Special Revenue Fund

Rationale: Special Revenue Funds account for specific revenue sources that

are legally restricted for specific purposes.

• The GASB (Governmental Accounting Standards Board) is primarily

responsible for:

• Regulating federal income tax
• Setting accounting and financial reporting standards for state and local

governments

• Auditing federal agencies
• Managing municipal bond issues
• Setting accounting and financial reporting standards for state and local

governments

Rationale: GASB establishes standards for accounting and financial

reporting to improve transparency and accountability in state and local governments.

• In governmental accounting, which basis of accounting recognizes

revenues when they are both measurable and available?

• Accrual Basis
• Modified Accrual Basis 2 / 4

• Cash Basis
• Tax Basis
• Modified Accrual Basis

Rationale: The modified accrual basis is used in governmental funds; it

recognizes revenues when measurable and available for spending.

• Which fund is used to account for activities financed through user

charges, similar to private business operations?

• General Fund
• Enterprise Fund
• Internal Service Fund
• Special Revenue Fund
• Enterprise Fund

Rationale: Enterprise Funds are used for activities where the intent is that

the costs are financed primarily through user fees.

• Which financial statement presents the financial position of

governmental funds at a specific point in time?

• Statement of Revenues, Expenditures, and Changes in Fund Balances
• Statement of Net Position
• Balance Sheet
• Statement of Cash Flows
• Balance Sheet

Rationale: Governmental fund financial statements use the Balance Sheet

to report assets, liabilities, and fund balances at a specific date. 3 / 4

• Which of the following best describes internal controls in a government

context?

• Methods to increase revenue
• Policies and procedures to ensure objectives are met and assets are

protected

• Ways to reduce taxes
• Rules to eliminate all financial risks
• Policies and procedures to ensure objectives are met and assets are

protected

Rationale: Internal controls safeguard assets, ensure reliable reporting,

and ensure compliance with laws and regulations.

8. The budgetary process in government serves primarily to:

• Maximize revenue
• Authorize spending and provide a financial plan
• Reduce accounting errors
• Create tax incentives
• Authorize spending and provide a financial plan

Rationale: Budgets serve as legal authorization for expenditures and as a

management tool for financial planning.

• Which type of audit focuses on compliance with laws, regulations, and

contracts?

• Financial Audit
• Performance Audit
• / 4