Governmental Accounting Test Bank - Chapter 1 Essay
The Government and Not-For-Profit Environment
TRUE/FALSE (CHAPTER 1)
1. The main objective of a typical governmental or not-for-profit entity is to earn a profit.
2. A government’s budget may be backed by the force of law.
3. Governmental entities have no need for an accounting system.
4. A government’s internal managers rely on general purpose financial statements for a considerable amount of information about their government.
5. Governments and not-for-profits may never engage in business-type activities.
6. Lenders use the financial statements of governments and not-for profits just as they would those of businesses, that is, to help assess the borrower’s credit-worthiness.
7. Financial …show more content…
11. Which of the following is common to both governments and not-for-profit entities but distinguishes these entities from for-profit entities? a) The budget is a legal, financial document. b) Revenues are usually indicative of demand for goods or services. c) There is direct matching of revenues and expenses. d) There are no defined ownership interests.
12. Which of the following is NOT a purpose of external financial reporting by governments? External financial reports should allow users to a) Assess financial condition. b) Compare actual results with the budget. c) Assess the ability of elected officials to effectively manage people. d) Evaluate efficiency and effectiveness.
13. Which of the following is NOT a reason why users need governmental and not-for-profit external financial statements? a) To determine the ability of the entity to meet its obligations. b) To determine the ability of the entity to continue to provide services. c) To predict future fiscal solvency. d) To evaluate the overall profitability of the entity.