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FUND ACCOUNTING
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TEST BANKFOR
INTRODUCTION TO FUND
ACCOUNTING 4TH EDITION
NORVELLE
, Chapterh1
ThehGovernmenthandhNot-For-ProfithEnvironment
TRUE/FALSEh(CHAPTERh1)
1. FhThehmainhobjectivehofhahtypicalhgovernmentalhorhnot-for-profithentityhishtohearnhahprofit.
2. TAhgovernment’shbudgethmayhbehbackedhbyhthehforcehofhlaw.
3. FGovernmentalhentitieshhavehnohneedhforhanhaccountinghsystem.
4. TAhgovernment’shinternalhmanagershrelyhonhgeneralhpurposehfinancialhstatementshf
orhahconsiderablehamounthofhinformationhabouththeirhgovernment.
5. FGovernmentshandhnot-for-profitshmayhneverhengagehinhbusiness-typehactivities.
6. TLendershusehthehfinancialhstatementshofhgovernmentshandhnot-
forhprofitshjusthashtheyhwouldhthosehofhbusinesses,hthathis,htohhelphassesshthehborrower’shc
redit-worthiness.
7. TFinancialhstatements,hnohmatterhhowhprepared,hdohnothdirectlyhaffecththeheconomichwort
hhofhanhentity.
8. FThehFinancialhAccountinghStandardshAdvisoryhBoard’shstandardshdohnothapplyhtoh
thehfederalhDepartmenthofhTreasury.
9. TGovernmentshmayhbehsubjecthtohthehsamehpressureshthathledhtohaccountinghscandalsh
likehEnron.
10. FThehGovernmentalhAccountinghStandardshBoardhestablisheshgenerallyhacceptedhaccounti
nghprincipleshforhallhstatehandhlocalhgovernmenthentities,hashwellhashallhnot-for-
profithentities.
MULTIPLEhCHOICEh(CHAPTERh1)
1. Ahprimaryhcharacteristichthathdistinguisheshgovernmentalhentitieshfromhbusinesshentitieshis
a) Thehneedhtohgeneratehrevenueshequalhtohorhinhexcesshofhexpenditures/expenses.
b) Thehimportancehofhthehbudgethinhthehgoverninghprocess.
c) Thehneedhtohprovidehgoodshorhservices.
d) Thehcorrelationhbetweenhrevenueshgeneratedhandhdemandhforhgoodshorhservices.
2. Ahprimaryhcharacteristichthathdistinguisheshnot-for-profithentitieshfromhbusinesshentitieshis
a) Thehneedhtohgeneratehrevenueshequalhtohorhinhexcesshofhexpenditures/expenses.
b) Thehimportancehofhthehbudgethinhthehgoverninghprocess.
c) Thehneedhtohprovidehgoodshorhservices.
d) Thehcorrelationhbetweenhrevenueshgeneratedhandhdemandhforhgoodshorhservices.
GranofhTesthBankhChapterh1 Pageh1
,3. Whichhofhthehfollowinghcharacteristicshdistinguisheshahgovernmentalhorhnot-for-
profithentityhfromhahbusinesshentity?
a) Therehishalwayshahdirecthlinkhbetweenhrevenueshgeneratedha
ndhexpenditures/expenseshincurred.
b) Capitalhassetsharehusedhtohproducehrevenueshandhsavehcosts.
c) Revenuesharehalwayshindicativehofhdemandhforhgoodshandhservices.
d) Thehmissionhofhthehentityhwillhdeterminehthehgoodshorhserviceshprovided.
4. Thehmosthsignificanthfinancialhdocumenthprovidedhbyhahgovernmentalhentityhishthe
a) Thehbalancehsheet.
b) Thehoperatinghstatement.
c) Thehoperatinghbudget.
d) Thehcashhflowhstatement.
5. Whichhofhthehfollowinghstatementshishtrue?
a) Governmentshmayhengagehinhactivitieshsimilarhtohactivitieshengagedhinhbyhforpr
ofithentities.
b) Thereharehahlimitedhnumberhofhdifferenthtypeshofhgovernments.
c) Allhgovernmentalhentitieshengagehinhthehsamehactivities.
d) Managershmayhhavehahlong-termhfocushandhtherebyhsacrificehthehshort-
termhliquidityhofhthehentity.
6. WhichhofhthehfollowinghactivitieshishNOThanhactivityhinhwhichhahgovernmentalhentityhm
ighthengage?
a) Sellinghelectrichpower.
b) Operatinghahgolfhcourse.
c) Operatinghahbookstore.
d) Allhofhthehaboveharehactivitieshthathmighthbehcarriedhouthbyhahgovernment.
7. Inhwhichhofhthehfollowinghactivitieshishahnot-for-profithentityhleasthlikelyhtohengage?
a) Providingheducationalhservices.
b) Providinghhealth-carehservices.
c) Providinghforhterrorismhdefense.
d) Retailhsaleshofhcookies.
8. WhichhofhthehfollowinghcanhbehaffectedhbyhGAAP?
a) Legalhabilityhtohissuehbonds.
b) Abilityhtohbalancehthehbudget.
c) Amounthreportedhashemployeehpensionhplanhcontributions.
d) Claimshandhjudgmentshsettled.
9. Whichhofhthehfollowinghcharacteristicshishuniquehtohahgovernmentalhentity?
a) Thehabilityhtohhavehactivitieshfinancedhwithhtax-exempthdebt.
b) Thehpowerhtohimposehfees.
c) Thehabilityhtohissuehtax-exempthdebt.
d) ThehabilityhtohhavehactivitieshfinancedhbyhFederalhgrants.
GranofhTesthBankhChapterh1 Pageh2
, 10. Tohobtainhahcomprehensivehunderstandinghofhahgovernment’shfiscalhhealth,hahfinancialhana
lysthshouldhobtainhanhunderstandinghofhwhichhofhthehfollowing?
a) Allhofhthehresourceshownedhbyhthehgovernmentalhentity.
b) Allhofhthehresourceshwhichhmayhbehsummonedhbyhahgovernmentalhentity.
c) Demographichdatahabouththehresidentshservedhbyhthehgovernmentalhentity.
d) Allhofhthehabove.
11. Whichhofhthehfollowinghishcommonhtohbothhgovernmentshandhnot-for-
profithentitieshbuthdistinguisheshthesehentitieshfromhfor-profithentities?
a) Thehbudgethishahlegal,hfinancialhdocument.
b) Revenuesharehusuallyhindicativehofhdemandhforhgoodshorhservices.
c) Therehishdirecthmatchinghofhrevenueshandhexpenses.
d) Thereharehnohdefinedhownershiphinterests.
12. WhichhofhthehfollowinghishNOThahpurposehofhexternalhfinancialhreportinghbyhgovernments?
Externalhfinancialhreportshshouldhallowhusershto
a) Assesshfinancialhcondition.
b) Comparehactualhresultshwithhthehbudget.
c) Assesshthehabilityhofhelectedhofficialshtoheffectivelyhmanagehpeople.
d) Evaluatehefficiencyhandheffectiveness.
13. WhichhofhthehfollowinghishNOThahreasonhwhyhusershneedhgovernmentalhandhnot-for-
profithexternalhfinancialhstatements?
a) Tohdeterminehthehabilityhofhthehentityhtohmeethitshobligations.
b) Tohdeterminehthehabilityhofhthehentityhtohcontinuehtohprovidehservices.
c) Tohpredicthfuturehfiscalhsolvency.
d) Tohevaluatehthehoverallhprofitabilityhofhthehentity.
14. Usershofhgovernmenthfinancialhstatementshshouldhbehinterestedhinhinformationhab
outhcompliancehwithhlawshandhregulationshforhwhichhofhthehfollowinghreasons?
a) Tohdeterminehifhthehentityhhashcompliedhwithhbondhcovenants.
b) Tohdeterminehifhthehentityhhashcompliedhwithhtaxinghlimitations.
c) Tohdeterminehifhthehentityhhashcompliedhwithhdonorhrestrictionshonhthehusehofhfunds.
d) Tohdeterminehallhofhthehabove.
15. WhichhofhthehfollowinghishNOThgenerallyhconsideredhahmainhuserhofhgovernmenthandh
not-hforprofithentityhexternalhfinancialhstatements?
a) Investorshandhcreditors.
b) Taxpayers.
c) Donors.
d) Internalhmanagers.
16. Whichhofhthehfollowinghishahprobablehusehahdonorhwouldhmakehofhthehexternalhfina
ncialhstatementshofhahnot-for-profithentity?
a) Tohdeterminehthehproportionhofhentityhresourceshdirectedhtohprogramshashoppo
sedhtohfund-raising.
b) Tohdeterminehthehcreditworthinesshofhthehentityhforhinvestmenthpurposes.
GranofhTesthBankhChapterh1 Pageh3
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