Test Bank for - Concepts and Practices, 8e Michael Granof, Saleha

Test Bank for Government and Not- for-Profit Accounting Concepts and Practices, 8e Michael Granof, Saleha Khumawala, Thad Calabrese, Daniel Smith (All Chapters) 1 / 4

Granof_8E_TestBank_ch01 Page 1 Chapter 1 The Government and Not-For-Profit Environment

TRUE/FALSE (CHAPTER 1)

• The objective of a typical government or not-for-profit entity includes goals

that are difficult to quantify

• A government’s budget may be backed by the force of law.

• Governments have no need for an accounting system.

• A government’s constituants rely on general purpose financial statements for

a considerable amount of information about their government.

• Governments and not-for-profit entities may never engage in business-type

activities.

• Lenders use the financial statements of governments and not-for-profit

entities 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 affect the

economic worth of an entity.

• The Federal Accounting Standards Advisory Board’s standards do not apply

to the federal Department of the Treasury.

• Sarbanes-Oxley was passed in 2002 to enhance the independence of the

GASB.

• The Governmental Accounting Standards Board establishes generally

accepted accounting principles for all state and local governments and all not-for-profit entities.

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Granof_8E_TestBank_ch01 Page 2

ANSWERS TO TRUE/FALSE QUESTIONS (CHAPTER 1)

• T
• T
• F
• T
• F
• T
• T
• F
• T
• F
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Granof_8E_TestBank_ch01 Page 3

MULTIPLE CHOICE (CHAPTER 1)

• A primary characteristic that distinguishes governments from businesses is
• The need to generate revenues equal to or more than

expenditures/expenses.

• The importance of the budget in the governing process.
• The need to provide goods or services.
• The correlation between revenues generated and demand for goods or

services.

• A primary characteristic that distinguishes government from not-for-profits is
• The need to generate revenues equal to or more than

expenditures/expenses.

• The ability to levy taxes.
• The need to provide goods or services.
• The correlation between revenues generated and demand for goods or

services.

• Which of the following characteristics distinguishes a government or not-for-

profit entity from a business?

• There is always a direct link between revenues generated and

expenditures/expenses incurred.

• Capital assets are used to produce revenues and save costs.
• Revenues are always indicative of demand for goods and services.
• The mission of the entity may include goals other than maximizing

profit.

• The most significant financial document provided by a government is the
• Balance sheet.
• Operating statement.
• Operating budget.
• Cash flow statement.

• Which of the following statements is true?
• Governments may engage in activities like activities engaged in by for-

profit entities.

• There are a small number of different types of governments.
• All governments engage in the same activities.
• Managers may have a long-term focus and thereby sacrifice the short-

term liquidity of the entity.

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