Chapter 1

Front 1

states, counties, municipalities (cities, towns, villages), and townships are what kind of governmental organization?

Back 1

General Purpose government

Front 2

governments that provide wide range of services to residents (police, fire dept, sanitation, road maintainence, culture and recreation) are what kind of government

Back 2

general purpose governments

Front 3

governments that provide only a single function or limited number of functions (education, drainage, flood control, fire protection, water supply) are what kind of government?

Back 3

special purpose government

Front 4

3 characteristics that FASB says are the differences between governmental/ nonprofit orgs and BUSINESS ORGS

Back 4

1. resource providers who do not expect equal payment or economic benefit

2. operating purpose other than providing goods/services at profit

3. no ownership interests that can be sold, transferred, redeemed and no entitlement of resources when org liquidates.

Front 5

GASB distinguishes government entities from NONPROFIT AND BUSINESS by...

Back 5

in gov, the power rests with the people

Front 6

what does GASB say is the cornerstone of financial reporting in government?

Back 6

ACCOUNTIBILITY

Front 7

what does FASAB say is the foundation for financial reporting for federal government?

Back 7

Accountibility

Front 8

what are FASAB's 4 objectives of federal financial reporting?

Back 8

1. budget integrity

2. operating performance

3. stewardship

4. adequacy of systems and controls

Front 9

what are the state and local government's reporting objectives?

Back 9

1. compare actual financial results to legally adopted budget

2. assess financial condition and operating results

3. assist in determining compliance with finance-related laws, rules, regulations

4. assisting in evaluating efficiency and effectiveness

Front 10

what are nonprofit org's objectives for reporting?

Back 10

1. making resource allocation decisions

2. assess services and ability to provide services

3. assess management stewardship and performance

4. assess economic resources, obligations, net resources, and changes in them.

Front 11

this required supplementary information (RSI) is designed to communicate in narrative, easily readable form the purpose of basic financial statements and the gov's current financial position and results of financial activities compared to prior year.

Back 11

Management's discussion and analysis (MD&A)

Front 12

what are the two categories of basic financial statements (by GASB)?

Back 12

government-wide and fund statements

Front 13

This financial statement provides an aggregated overview of a government’s net position and changes in net position.

Back 13

government wide fund

Front 14

government-wide financial statements assist in assessing

Back 14

operational accountability

Front 15

this financial statement provides more detailed financial information about the government

Back 15

fund statements

Front 16

this fund focuses on short-term flow of current financial resources rather than flow of economic resources

Back 16

governmental funds

Front 17

what sections are in a CAFR? and what's in them

Back 17

intro-title, content, letter of transmittal, description of the gov

financial-auditors report, MD&A, basic financial statements, supplementary info

statistical-tables, charts, on econ data, financial trends

Front 18

x

Back 18

x

Front 19

1–2. Using GP for general purpose government or SP for special purpose govern- ment, identify the following gover n ments by type.

a. Stonington Village.

b. Lynnford Regional Library District.

c. Hillsborough County Consolidated School District.

d. Missoula, Montana.

e. Pulaski County Public Works District.

f. Hohenstein Township.

Back 19

1-2. a. GP c. SP e. SP

b. SP d. GP f. GP

Front 20

1–3. Which standard-setting bodies have responsibility for establishing accounting and reporting standards for (1) state and local governments, (2) business orga- nizations, (3) not-for-profit o r ganizations, and (4) the federal government and its agencies and depar t ments?

Back 20

the FASB has responsibility for setting accounting and financial reporting standards for business enterprises and nongovernmental not-for-profitorganizations.

The GASB has responsibility for setting standards for state andlocal governments and governmental not-for-profitorganizations.

The FASAB has responsibility for setting accounting andreporting standards for the federal government and its agencies and departments.

Front 21

1–4. The Beth House Museum is a nongovernmental not-for-profit organization. At the annual meeting, one of the new board members said, “I took a couple of accounting classes in college and we can choose to use either the FASB rules or the GASB rules.” Do you agree with the board member? Why or why not?

Back 21

No, I do not agree with this board member’s statement. Since Beth House Museum is anongovernmental not-for-profit organization, it is required to follow thestandards issued by FASB. Since its purpose is not the same as a businessorganization, FASB has developed reporting standards for organizations such asBeth House Museum that reflect its unique purpose and users. Governmental not-for-profit organizationsmust follow GASB financial reporting standards. (See illustration 1-1.)nsibiJ3

Front 22

1–5. Explain the meaning and significance of interperiod equity .

Back 22

Interperiod equity = are current period revenues enough to pay for current period services?

-important part of accountibility

-not being able to pay means taxpayer will have to pay it in the future even though they didn't get any benefits in the past.

Front 23

1–6. Explain the purpose of operational accountability and the purpose of fiscal accountability . Which category of financial statements is most useful in report- ing on each of these accountability concepts?

Back 23

1-6. operational accountability - did gov use its resources effectively and efficiently to meet operating goals?

fiscal accountability -assess short term flow of financial resources.

Government–wide financial statements are primarily focused on providing information to assess operational accountability

fund financial statements are focused on providing information to assess fiscal accountability.

Front 24

1–7. What is the primary financial reporting objective for not-for-profit organizations? How does this differ from the primary financial reporting objective for a government?

Back 24

The primary financial reporting objectivefor not-for-profit organizations is to provide decision-useful financialinformation to resource providers, such as donors, members, and creditors. Theprimary financial reporting objective for a government organization isaccountability, but other objectives include providing useful information foreconomic, social and political decisions. Thus, the reporting focus for the twotypes of organizations differs in that the not-for-profit organizationfinancial reports are to focus on providing information that is useful inmaking decisions; while the government organization is to focus primarily onproviding information that can be used to assess whether public resources wereraised and used for their intended purposes. T

Front 25

1–8. What are the three sections of a comprehensive annual financial report (CAFR)? What information is contained in each section? How do the minimum requirements for general purpose external financial reporting relate in scope to the CAFR?

Back 25

1-6. ACAFR should have an introductory section, financial section, and statisticalsection. The contents of each sectionare described briefly in the section headed Comprehensive Annual Financial Report. Minimum requirements for general externalfinancial reports are but a portion of the content of the CAFR. The minimum requirements of the generalexternal financial report include the basic financial statements(government-wide and fund), management’s discussion & analysis (MD&A), andother required supplementary information (RSI). As can be seen, the minimum requirements for the general externalfinancial report do not include an introductory section, other supplementaryfinancial information, or a statistical section.

Front 26

1. Which of the following is a special purpose government?

a. The State of Arkansas.

b. Greene County.

c. Rutgers University.

d. Seattle, Washington.

Back 26

c. Rutgers University.

Front 27

2. Which of the following is not a distinguishing difference between govern- mental organizations and for-profit organizations?

a . Lack of a profit motive.

b . Revenue may be earned through exchange transactions.

c . Absence of owners.

d. Resources are provided by individuals and entities that may not directly benefit from the use of the resources.

Back 27

b . Revenue may be earned through exchange transactions.

Front 28

3. Which of the following statements regarding primary sources of accounting and f i nancial reporting standards is false?

a. The GASB sets standards for all state and local governments.

b. The FASB sets standards for all business and not-for-profit entities.

c. The FASB and GASB are administered by the Financial Accounting Foundation.

d. The FASAB sets standards for the federal government and its agencies and departments.

Back 28

b. The FASB sets standards for all business and not-for-profit entities.

Front 29

4. James Black is reviewing his city’s financial reporting because he wants to run for the city council. He is concerned that the city is not using its resources effectively. James is primarily interested in:

a. Fiscal accountability.

b . Social accountability.

c. Political accountability.

d. Operational accountability.

Back 29

d. Operational accountability.

Front 30

5. The concept of interperiod equity refers to whether:

a. Revenues equaled or exceeded expenditures for the year.

b. Total assets (current and noncurrent) were sufficient to cover total liabil- ities (current and noncurrent).

c. Current year revenues were sufficient to pay for current year services.

d. Future taxpayers can expect to receive the same or higher level of ser- vices as current taxpayers.

Back 30

c. Current year revenues were sufficient to pay for current year services.

Front 31

6. What are the components that are included in the minimum requirements for general purpose exte r nal financial repor t ing?

a. Introductory section, financial section, and statistical section.

b. MD&A, government financial statements, fund financial statements, notes to the financial statements, and RSI.

c. Letter from the chief financial officer, government financial statements, notes to the financial statements, and RSI.

d. MD&A, government-wide financial statements, notes to the financial statements, and RSI.

Back 31

d. MD&A, government-wide financial statements, notes to the financial statements, and RSI.

Front 32

7. The basic financial statements of a state or local government include all of the following except:

a. An MD&A.

b. Government-wide financial statements.

c. Fund financial statements.

d. Notes to the financial statements.

Back 32

a. An MD&A.

Front 33

Under GASB standards, financial information useful for assessing opera- tional accountability is pr i marily reported in which financial statements?

Government-wide Fund

Financial Statements Financial Statements

a. No Yes

b. Yes No

c. Yes Yes

d. No No

Back 33

b. Yes No

Front 34

9. Which of the following is not a required section of a federal agency or department’s pe r formance and accoun t ability report (PAR)?

a. A performance section, which includes an annual performance report (APR).

b. An MD&A.

c. A basic financial statements section.

d. A statement of nonparticipation in political matters.

Back 34

d. A statement of nonparticipation in political matters.

Front 35

10. The primary reason that not-for-profit (NFP) organizations should report expenses incurred for pr o gram purposes separately from those for sup- porting services such as management and general and fund-raising is that:

a. GASB standards require it.

b. Program managers need information about the cost of activities for which they are responsible.

c. Top managers need to know how much they are spending for non- programmatic management and general support.

d. Donors, potential donors, oversight bodies, and others need to know what percentage of total expenses are being incurred for carrying out the NFP’s programs, rather than for overhead and fund-raising.

Back 35

d. Donors, potential donors, oversight bodies, and others need to know what percentage of total expenses are being incurred for carrying out the NFP’s programs, rather than for overhead and fund-raising.

Front 36

x

Back 36

x