ACC 410Week 5 Mid-Term Exam – Strayer
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Chapters 1 Through 5
Chapter 1
The Government and Not-For-Profit
Environment
TRUE/FALSE (CHAPTER 1)
1.
The
main objective of a typical governmental entity is to earn a profit.
2.
A
government’s budget may be backed by the force of law.
3.
Governmental
entities have no need for an accounting system.
4.
Governments
and not-for-profits employ a system of accounting known as fund accounting.
5.
Governments
and not-for-profits may never engage in business-type activities.
6.
Lenders
use the financial statements of governments and not-for profits just as they
would those of businesses, that is, to help assess the borrower’s
credit-worthiness.
7.
Financial
statements, no matter how prepared, do not directly impact the economic worth
of an entity.
8.
Cash
flow statements are governments’ paramount financial documents.
9.
Most
governments budget on an accrual basis.
10.
The
Governmental Accounting Standards Board established generally accepted
accounting principles for all state and local government entities, as well as
all nongovernment entities.
MULTIPLE CHOICE (CHAPTER 1)
1. A primary characteristic that distinguishes
governmental entities from business entities is
a) the need to generate revenues
equal to or in excess of expenditures/expenses.
b) the importance of the budget in
the governing process.
c) the need to provide goods or
services.
d) the correlation between revenues
generated and demand for goods or services.
2. Which of the following characteristics is
NOT a characteristic that may distinguish a governmental or not-for-profit
entity from a business entity?
a) There is often no direct link
between revenues generated and expenditures/expenses incurred.
b) Capital assets may neither
produce revenues nor save costs.
c) Revenues may not be indicative of
demand for goods and services.
d) The mission of the entity will
determine the goods or services provided.
3. The most significant financial document
provided by a governmental entity may be
a) the balance sheet.
b) the operating statement.
c) the operating budget.
d) the cash flow statement.
4. Which of the following statements is NOT
true?
a) All governmental entities engage
in similar activities.
b) There are many different types of
governments.
c) Governments may engage in
activities similar to activities engaged in by for-profit entities.
d) Managers may have a short-term
focus and thereby sacrifice the long-term viability of the entity.
5. Which of the following activities is NOT an
activity in which a governmental entity might engage?
a) Selling electric power.
b) Operating a golf course.
c) Operating a book store.
d) All of the above are activities
that might be carried out by a government.
6. In which of the following activities is a
not-for-profit entity least likely to engage?
a) Providing educational services.
b) Providing health-care services.
c) Providing for the national
defense.
d) Retail sales of cookies.
7. To obtain a comprehensive understanding of
a government’s fiscal health, a financial analyst should obtain an
understanding of which of the following?
a) All of the resources owned by the
governmental entity.
b) All of the resources which may be
summoned by a governmental entity.
c) Demographic data about the
residents served by the governmental entity.
d) All of the above.
8. Which of the following is common to both
governments and not-for-profit entities but distinguishes these entities from
for-profit entities?
a) The budget is generally the most
significant financial document.
b) Revenues are not necessarily
indicative of demand for goods or services.
c) There is frequently no direct
link between revenues and expenses.
d) All of the above are common to
both governments and not-for-profit entities but distinguish them from
for-profit entities.
9. Which of the following is NOT a purpose of
external financial reporting by governments?
External financial reports should allow users to
a) Assess financial condition.
b) Compare actual results with the
budget.
c) Assess the ability of elected
officials to effectively manage people.
d) Evaluate efficiency and
effectiveness.
10. Which of the following is NOT a reason that
users of government and not-for-profit external financial statements need to
have information to enable them to assess the financial condition of a
government?
a) To determine the ability of the
entity to meet its obligations.
b) To determine the ability of the
entity to continue to provide services.
c) To predict future fiscal
developments.
d) To evaluate the overall
profitability of the entity.
11. Users of financial statements should be
interested in information about compliance with laws and regulations for which
of the following reasons?
a) To determine if the entity has
complied with bond covenants.
b) To determine if the entity has
complied with taxing limitations.
c) To determine if the entity has
complied with donor restrictions on the use of funds.
d) To determine all of the above.
12. Which of the following is NOT generally
considered a main user of government and not-for-profit entity external
financial statements?
a) Investors and creditors.
b) Taxpayers.
c) Donors.
d) Management.
13. Which of the following is NOT a probable use
a donor would make of the external financial statements of a not-for-profit
entity?
a) To determine the creditworthiness
of the entity for investment purposes.
b) To determine the proportion of
entity resources directed to programs as opposed to fund-raising.
c) To determine the salaries paid to
the top officials of the entity.
d) To determine the allocation of
resources within the entity.
14. A regulatory agency would use the external
financial statements of a local government for which of the following purposes?
a) To assure that the entity is
spending and receiving resources in accordance with laws, regulations or
policies.
b) To help assess management’s
performance.
c) To exercise general oversight
responsibility.
d) To do all of the above.
15. Which of the following objectives is
considered to be the cornerstone of financial reporting by a governmental
entity?
a) Accountability.
b) Budgetary compliance.
c) Interperiod equity.
d) Service efforts and
accomplishments.
16. Which of the following is NOT an objective of
financial reporting by governmental entities as established by GASB?
a) Financial reporting should assist
users in determining if current period revenues were sufficient to pay for
current-period services.
b) Financial reporting should assist
users in assessing the management skills of top management.
c) Financial reporting should assist
users in evaluating the operating results of the governmental entity for the
year.
d) Financial reporting should assist
users in assessing the level of services that can be provided by the
governmental entity and its ability to meet its obligations as they come due.
17. Which of the following is NOT an objective of
financial reporting for not-for-profit entities as established by FASB? Financial reporting should provide
information that is useful to present and potential resource providers and
other users in:
a) Making rational decisions about
the allocation of resources to those organizations.
b) Assessing the services provided
and the entity’s ability to continue to provide those services.
c) Assessing the types of services provided
and the need for those services.
d) Assessing how managers have
discharged their stewardship responsibilities.
18. As used by GASB, interperiod equity refers to
which of the following? Financial
reporting should:
a) Demonstrate compliance with
finance-related contractual requirements.
b) Provide information to determine
whether current-year revenues were sufficient to pay for current-year services.
c) Demonstrate whether resources
were obtained and used in accordance with the entity’s legally adopted budget.
d) Provide information to assist
users in assessing the government’s economy, efficiency, and effectiveness.
19. Given a specific set of data, the basis of
accounting selected by or imposed on a governmental entity will least affect
which of the following?
a) Determining whether or not the
governmental entity has a balanced budget.
b) Determining whether or not the
governmental entity has the ability to issue debt.
c) Determining whether or not
certain events occurred.
d) Determining the annual payments
to a government-sponsored pension plan.
20. The Governmental Accounting Standards Board
is the primary standard-setting body for:
a) All governments.
b) All state and local governmental
entities.
c) All governments and all
not-for-profit entities.
d) All state and local governments
and all not-for-profit entities.
21. Under certain circumstances a governmental
entity might use standards established by which of the following
standard-setting bodies?
a) GASB.
b) FASB.
c) AICPA.
d) All of the above.
22. The primary standard-setting body for
accounting and financial reporting by a state-supported college or university
is:
a) GASB.
b) FASB.
c) AICPA.
d) All of the above.
23. In descending order, the hierarchy of GAAP
applicable to a church-owned college may be:
a) FASB Statements, AICPA Industry
Audit Guides, FASB Implementation Guides, GASB Standards.
b) FASB Statements, FASB Technical
Bulletins, FASB Implementation Guides, AICPA Practice Bulletins (if cleared by
FASB).
c) GASB Statements, AICPA Industry
Audit Guides, GASB Implementation Guides, FASB Standards.
d) GASB Statements, GASB Technical
Bulletins, GASB Implementation Guides, AICPA Practice Bulletins (if cleared by
GASB).
24. Governments and not-for-profits
employ a system of accounting known as
a) budget accounting.
b)
financial accounting.
c) fund accounting
d)
tax accounting.
25. Which of the following
rule-making authorities would establish accounting standards for all
nongovernment not-for-profits?
a) AICPA.
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