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Granof Test Bank Chapter 2 Page 1
Chapter 2 Fund Accounting
TRUE/FALSE (CHAPTER 2)
- Fund accounting promotes control and accountability over restricted resources.
- The basis of accounting determines when transactions and events are recognized.
- If an entity adopts a full accrual basis of accounting, its measurement focus will
automatically be on all economic resources.
- A government may report some of its funds on a full accrual basis.
- Funds divide a government into functional departments.
- General funds are established to account for resources legally restricted for specified
purposes.
- Fiduciary activities only benefit parties other than the government itself.
- The Financial Accounting Standards Board requires all nongovernmental not-for-profit
entities to use fund accounting.
- In addition to preparing fund financial statements, governments should also prepare
consolidated financial statements to provide information on the financial position and operating results of the government as a single economic entity.
- Fiduciary activities should be reported in fund statements, but should be excluded from the
government-wide statements.
- At first glance, the government-wide statement of activities bears little resemblance to the
income statement of a business.
- In accounting for costs incurred on a major construction project in a capital projects fund,
the construction outlays are reported as expenditures, not capital assets.
Government and Not-for-Profit Accounting Concepts and Practices 6th Edition Granof Test Bank Visit TestBankDeal.com to get complete for all chapters
Granof Test Bank Chapter 2 Page 2
MULTIPLE CHOICE (CHAPTER 2)
- What is the primary reason that governmental entities use fund accounting?
a) Fund accounting is required by law.
b) Fund accounting is required by GAAP.
c) Fund accounting promotes control and accountability over restricted resources.
d) Fund accounting promotes better control over operating activities.
- Basis of accounting determines which of the following?
a) When transactions and events are recognized.
b) What transactions and events will be reported.
c) Where transactions and events will be reported.
d) Why transactions and events will be reported.
- A fund is
a) A separate legal entity.
b) A separate fiscal and accounting entity.
c) A separate self-balancing set of accounts for inventory purposes.
d) None of the above.
- Which of the following funds is a fiduciary fund?
a) Permanent fund.
b) Agency fund.
c) Capital projects fund.
d) Debt service fund.
- When a governmental entity adopts a basis of accounting other than full accrual and a
measurement focus that excludes long-lived assets and liabilities in its governmental fund
types:
a) It is in violation of the law.
b) It is in violation of GAAP.
c) It has reported in accordance with GAAP for governmental fund financial statements.
d) It has the ability to better measure the results of operations.
- A city receives a donation from a citizen who specifies that the principal must be invested and
the earnings must be used to support operations of a city-owned recreational facility. The principal of this gift should be accounted for in which of the following funds?
a) Trust fund.
b) Special revenue fund.
c) Permanent fund.
d) Internal service fund.
Granof Test Bank Chapter 2 Page 3
- Which of the following is NOT a governmental fund?
a) City hall debt service fund.
b) City utilities enterprise fund.
c) Gasoline tax special revenue fund.
d) City hall capital projects fund.
- Which of the following accounts would you least expect to see in a debt service fund?
a) Principal payments.
b) Interest charges.
c) Interest earned.
d) Outstanding balance of the debt being serviced.
- Which of the following funds is a proprietary fund?
a) Internal service fund.
b) Special revenue fund.
c) Capital projects fund.
d) Permanent fund.
- Which of the following funds is a governmental fund?
a) Enterprise fund.
b) Debt service fund.
c) Internal service fund.
d) Agency fund.
- Which of the following activities conducted by a city-owned junior college should be
accounted for in an agency fund?
a) Receipt of tuition payments.
b) Receipt of revenues belonging to the student accounting club.
c) Receipt of state monies appropriated for general operations.
d) Receipt of donations in support of the university’s athletic program.
- Which of the following transactions should the City of Highland account for in a trust fund?
a) General fund contributions received by the city pension plan.
b) Greens fees received from golfers at the city-owned golf course.
c) Grants received from the Federal government to purchase buses to be used for public
transit.
d) Proceeds of bonds issued to construct a new city hall building.
- The state collects a gasoline tax that must be used to support highway construction and
maintenance. The gasoline tax revenue should be accounted for in which of the following funds?
a) General fund.
b) Special revenue fund.
c) Debt service fund.
d) Internal service fund.
Granof Test Bank Chapter 2 Page 4
- The City of San Jose built a new city hall and financed construction by issuing bonds due in
installments over the next 30 years. The bond principal and interest will be paid by a special tax levied on property in the city. The revenue received from this special tax should be accounted for in which of the following funds?
a) General fund.
b) Internal service fund.
c) Capital projects fund.
d) Debt service fund.
- Riverside Golf Course is a city-owned golf course that collects greens fees in amounts
sufficient to cover its expenses. Riverside Golf Course should be accounted for in which of the following funds?
a) Internal service fund.
b) Enterprise fund.
c) General fund.
d) Special revenue fund.
- To fulfill the printing needs of its various departments and agencies, the City has established a
Central Print Shop, which bills the various departments and agencies of the city for printing services rendered. The Central Print Shop should be accounted for in which of the following funds.
a) Internal service fund.
b) Enterprise fund.
c) General fund.
d) Special revenue fund.
- Which of the following sections is NOT required in the comprehensive annual financial report
of a city?
a) Financial section.
b) Introductory section.
c) Statistical section.
d) Historical section.
- The basic financial statements of a city do NOT include which of the following?
a) Government-wide statement of net position.
b) Government-wide statement of activities.
c) Government-wide statement of cash flows.
d) Separate balance sheets for governmental and proprietary funds.
- Which of the following funds is accounted for on the modified accrual basis of accounting?
a) General fund.
b) Internal service fund.
c) Proprietary fund.
d) Pension trust fund.
- Which of the following assets would NOT be found in the general fund balance sheet of the
City of Harrison?
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