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Governmental and Nonprofit Accounting: Theory and Practice, 11e (Freeman)

Chapter 2 State and Local Government Accounting and Financial Reporting Model—The Foundation

• If a government is obligated to legally report information in a manner that differs from GAAP
• GAAP take precedence over the legal requirements.
• Legal requirements take precedence over GAAP.
• Both GAAP requirements and legal requirements must be met.
• Information should be presented that meets as many legal requirements as possible without

violating GAAP in a material manner.

Answer: C

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Difficult

Classification: Synthesis

AACSB Category: Analytical thinking

• Which of the following is not a fund category used by state and local governments?
• Fiduciary funds.
• Plant and Equipment funds.
• Governmental funds.
• Proprietary funds.

Answer: B

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Easy

Classification: Concept

AACSB Category: Application of knowledge

Governmental and Nonprofit Accounting 11th Edition Freeman Test Bank Visit TestBankDeal.com to get complete for all chapters

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• Which of the following is an official fund category used by state and local governments?
• Current funds.
• Expendable funds.
• Governmental funds.
• General capital asset funds.

Answer: C

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Easy

Classification: Concept

AACSB Category: Application of knowledge

• Which of the following is considered a proprietary fund?
• General Fund.
• Special Revenue Fund.
• Permanent Fund.
• Internal Service Fund.

Answer: D

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Easy

Classification: Concept

AACSB Category: Application of knowledge

• The operations of a city bus line receiving all its funding from user charges would be accounted for

in

• A General Fund.
• An Enterprise Fund.
• An Internal Service Fund.

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• A Special Revenue Fund.

Answer: B

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Easy

Classification: Application

AACSB Category: Analytical thinking

• Which of the following is not considered a fiduciary fund?
• Agency Fund
• Investment Trust Fund
• Permanent Fund
• Private-purpose Trust Fund

Answer: C

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Easy

Classification: Concept

AACSB Category: Application of knowledge

• Activities of a central motor pool that provides and services vehicles for the use of municipal

employees on official business should be accounted for in

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

Answer: C

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

4 Copyright © 2018 Pearson Education, Inc.• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Easy

Classification: Application

AACSB Category: Application of knowledge

• A government can only have one
• Capital Projects Fund.
• General Fund.
• Private-Purpose Trust Fund.
• Special Revenue Fund.

Answer: B

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and on the General Capital Assets and General Long-Term Liabilities accounts.• Identifying typical budgetary accounting and reporting requirements.• Explaining the financial reporting requirements for a government’s basic financial statements and its comprehensive annual financial report.

Difficulty Level: Moderate

Classification: Concept

AACSB Category: Application of knowledge

• Which of the following is not considered a governmental fund?
• General Fund.
• Debt Service Fund.
• Permanent Fund.
• Internal Service Fund.

Answer: D

Objective: LO 2.2 Explain the fundamental features of the state and local government accounting and

financial reporting model, including:

• Distinguishing the three broad categories of funds—governmental, proprietary, and fiduciary— and the specific types of funds in each fund category.• Identifying and explaining the measurement focus and basis of accounting used for each category of funds and the financial statements required for funds of each category.• Analyzing the effects of transactions on the proprietary fund and governmental fund categories and