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1. Multiple Choice: What is the primary difference between accrual and modified accrual accounting in governmental accounting? a) Timing of revenue recognition b) Measurement focus c) Nature of the fund used d) Classification of funds Answer: b) Measurement focus. Rationale: Accrual accounting recognizes revenues when they are earned and expenses when they are incurred, regardless of when cash transactions occur. Modified accrual accounting, on the other hand, focuses on the flow of economic resources and recognizes revenues when they become available and measurable and expenditures when the related fund liability is incurred. 2. True/False: In nonprofit accounting, the statement of activities is equivalent to the income statement in for-profit accounting. Answer: True. Rationale: The statement of activities in nonprofit accounting reports on the revenues, expenses, gains, and losses of the organization, which is similar to the income statement's function in forprofit accounting.
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