Practice Test Geeks(AICPA) Association of International Certified Professional Accountants Practice Test
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Governmental & Not-for-Profit Accounting Flashcards

7 cards from real AICPA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Governmental & Not-for-Profit Accounting flashcards as text

  1. How are capital assets (e.g., buildings, equipment) reported in government-wide financial statements?

    Answer: Capitalized and depreciated over their useful lives

    Under the full accrual basis used for government-wide statements, capital assets are capitalized and depreciated, matching the cost over their service lives.

  2. A special revenue fund is used to account for:

    Answer: Resources legally restricted or committed for specific purposes other than debt service or capital projects

    Special revenue funds segregate revenues that are legally restricted or committed to specific purposes, such as a dedicated gas-tax fund for road maintenance.

  3. What is an encumbrance in governmental accounting?

    Answer: A commitment of fund resources against an approved appropriation for a purchase order or contract

    An encumbrance represents a reservation of an appropriation for a future expenditure (e.g., when a purchase order is issued) to prevent over-spending the budget.

  4. Under GASB, enterprise funds are used to report activities that are financed primarily through:

    Answer: User fees and charges for services to external parties

    Enterprise funds account for activities where the cost of providing services is recovered primarily through fees charged to external users, similar to a business.

  5. The Management's Discussion and Analysis (MD&A) in a government's annual report is classified as:

    Answer: Required supplementary information (RSI)

    The MD&A is required supplementary information (RSI) that precedes the basic financial statements and provides an objective analysis of financial activities.

  6. A permanent fund is a governmental fund used to report resources that are legally restricted so that:

    Answer: Only income may be expended for the government's programs, not principal

    Permanent funds require the principal to remain intact; only earnings may be spent, and those earnings must benefit the government's programs or citizenry.

  7. Which GASB pronouncement established infrastructure asset reporting requirements and introduced the modified approach as an alternative to depreciation?

    Answer: GASB Statement No. 34

    GASB 34 required governments to report infrastructure assets for the first time and allowed the modified approach — maintaining assets at a set condition level — as an alternative to depreciation.