Certified Public Accountant Governmental & Not-for-Profit Accounting 1 — Questions and Answers
Question 1: Which organization establishes GAAP for state and local governments in the United States?
- FASB
- GASB (Correct answer)
- AICPA
- SEC
Correct answer: GASB
The Governmental Accounting Standards Board (GASB) establishes GAAP for state and local governments, while FASB covers the private sector.
Question 2: Under governmental accounting, what is the primary measurement focus for governmental funds?
- Economic resources
- Current financial resources (Correct answer)
- Capital maintenance
- Net income
Correct answer: Current financial resources
Governmental funds use the current financial resources measurement focus, tracking only current assets and current liabilities rather than long-term items.
Question 3: Which fund type is used to account for a government's general operations and services?
- Special Revenue Fund
- Capital Projects Fund
- General Fund (Correct answer)
- Enterprise Fund
Correct answer: General Fund
The General Fund accounts for most of a government's basic services and general operations that are not accounted for in other funds.
Question 4: What basis of accounting is used in governmental fund financial statements?
- Full accrual basis
- Cash basis
- Modified accrual basis (Correct answer)
- Tax basis
Correct answer: Modified accrual basis
Governmental fund statements use modified accrual accounting, where revenues are recognized when measurable and available, and expenditures when the liability is incurred.
Question 5: Under GASB standards, which of the following is classified as a fiduciary fund?
- Enterprise Fund
- Pension Trust Fund (Correct answer)
- Special Revenue Fund
- Internal Service Fund
Correct answer: Pension Trust Fund
Pension Trust Funds are fiduciary funds used to account for resources held in trust for members and beneficiaries of pension plans.
Question 6: In not-for-profit accounting under FASB ASC 958, which net asset classification replaced the old 'temporarily restricted' category?
- Net assets with donor restrictions (Correct answer)
- Net assets without donor restrictions
- Permanently restricted net assets
- Board-designated net assets
Correct answer: Net assets with donor restrictions
FASB ASU 2016-14 simplified NFP net asset classifications to two: 'with donor restrictions' (replacing temporarily and permanently restricted) and 'without donor restrictions.'
Question 7: Which financial statement is unique to government-wide reporting and not found in individual fund financial statements?
- Statement of Net Position (Correct answer)
- Statement of Cash Flows
- Balance Sheet
- Statement of Revenues, Expenditures, and Changes in Fund Balance
Correct answer: Statement of Net Position
The Statement of Net Position is a government-wide financial statement reporting all economic resources, whereas fund statements use fund balance rather than net position.
Certified Public Accountant Governmental & Not-for-Profit Accounting 1
Which organization establishes GAAP for state and local governments in the United States?