M1 - Governmental Accounting Overview

Question 1

Separate fund financial statements should be presented for governmental and proprietary funds to report additional and detailed information about the primary government. (true or false)

Answer 1

True

Question 2

Which of the following characteristics of service efforts and accomplishments is the most difficult to report for a governmental entity?

• Relevance
• Timeliness
• Comparability
• Consistency

Answer 2

Relevance

Relevance means the information must bear a logical relationship with the needs for its purpose. It must also be reliable. The achievement of this reporting objective is more difficult to establish than it is to demonstrate consistency (adherence to the consistent application of GAAP from year to year) or comparability (the use of GAAP in a manner comparable to other governments). The timeliness objective requires that reports be issued early enough to facilitate timely decisions. The timeliness of reporting is relatively easy to demonstrate.

Question 3

Fund accounting is used by governmental units with resources that must be:

Answer 3

segregated for the purpose of carrying on specific activities or attaining certain objectives.

A fund is a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein. Fund resources are segregated for the purpose of carrying out specific activities (e.g., water and sewer operations) or attain certain objectives (e.g., providing drinking water and wastewater management services to customers)

Question 4

Which of the following is the paramount objective of financial reporting by state and local governments?

• Reliability
• Comparability
• Consistency
• Accountability

Answer 4

Accountability

Governmental (and not-for-profit) organization is designed to demonstrate the accountability of each organization for the stewardship of the resources in their care. Governments do not measure net income or increase in wealth as businesses do, but are focused on providing efficient and effective delivery of services with public resources. Both operational and fiscal accountability are important to the financial reporting.

Question 5

Fund accounting enables service and mission-driven organizations to easily monitor compliance with spending purpose (legal restrictions), spending limits (budget and financial control), and other fiscal accountability objectives. (true or false)

Answer 5

True

Question 6

A balanced budget demonstrates interperiod equity. Interperiod equity is a significant part of accountability on behalf of a governmental entity. It helps users assess whether current year revenues are sufficient to pay for the services provided that year and whether future taxpayers will be required to assume burdens for services previously provided. (true or false)

Answer 6

true

Question 7

The primary authoritative body for determining the measurement focus and basis of accounting standards for governmental fund operating statements is the governmental accounting standards board. (GASB) (true or false)

Answer 7

True

Question 8

External financial reports are used by three primary groups including:

Answer 8

• Citizens (advocate groups within the state)
• Legislative/Oversight Groups
• Investors/Creditors