Accounting Online Program Governmental and Nonprofit Accounting 1 — Questions and Answers
Question 1: Which standard-setting body establishes GAAP for state and local governments in the United States?
- FASB
- GASB (Correct answer)
- IASB
- AICPA
Correct answer: GASB
The Governmental Accounting Standards Board (GASB) establishes generally accepted accounting principles for state and local governments.
Question 2: Which fund type is the primary operating fund used to account for most general government activities?
- Capital Projects Fund
- Debt Service Fund
- General Fund (Correct answer)
- Special Revenue Fund
Correct answer: General Fund
The General Fund is the chief operating fund of a government, accounting for all financial resources not required to be accounted for in another fund.
Question 3: What basis of accounting is used for governmental funds under GASB standards?
- Full accrual basis
- Cash basis
- Modified accrual basis (Correct answer)
- Tax basis
Correct answer: Modified accrual basis
Governmental funds use the modified accrual basis, recognizing revenues when measurable and available, and expenditures when the liability is incurred.
Question 4: Under modified accrual accounting, revenues are recognized when they are:
- Earned and realizable
- Measurable and available (Correct answer)
- Received in cash
- Approved in the budget
Correct answer: Measurable and available
Modified accrual recognizes revenues when they are both measurable and available, meaning collectible within 60 days after year-end.
Question 5: What does ACFR stand for in the context of government financial reporting?
- Accredited Certified Financial Record
- Annual Comprehensive Financial Report (Correct answer)
- Adjusted Combined Fiscal Report
- Authorized Current Finance Record
Correct answer: Annual Comprehensive Financial Report
The Annual Comprehensive Financial Report (ACFR), formerly called CAFR, is the complete set of audited financial statements issued by state and local governments.
Question 6: Which financial statement is required for voluntary health and welfare nonprofit organizations and shows expenses by both function and natural classification?
- Statement of Financial Position
- Statement of Activities
- Statement of Functional Expenses (Correct answer)
- Statement of Cash Flows
Correct answer: Statement of Functional Expenses
The Statement of Functional Expenses is unique to nonprofits and presents expenses categorized by both their function (program vs. support) and their nature (salaries, rent, etc.).
Question 7: Under ASC 958, nonprofit organizations classify net assets into how many categories?
- Two (Correct answer)
- Three
- Four
- Five
Correct answer: Two
Under ASC 958, net assets are classified into two categories: net assets with donor restrictions and net assets without donor restrictions, replacing the previous three-class system.
Accounting Online Program Governmental and Nonprofit Accounting 1
Which standard-setting body establishes GAAP for state and local governments in the United States?