Government and Nonprofit Financial Reporting
Final Exam
Course Introduction
This course explores the foundational principles and practices of financial reporting for governmental and nonprofit organizations. Students will learn about the unique accounting standards, frameworks, and regulatory environments that govern public sector and nonprofit financial disclosures. The course covers essential topics such as fund accounting, financial statement preparation and analysis, compliance with Governmental Accounting Standards Board (GASB) and Financial Accounting Standards Board (FASB) guidelines, budgeting processes, and the role of financial reporting in supporting organizational transparency and accountability. Practical case studies and examples provide insights into real-world challenges and best practices for financial management within government agencies and nonprofit entities.
Recommended Textbook
Introduction to Governmental and Not for Profit Accounting 7th Edition by Patton
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Chapter 1: Governmental and Not-For-Profit
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Sample Questions
Q1) (Discussion problem on fund accounting)
Discuss the nature and purpose of "fund accounting."
Answer: Fund accounting is the practice under which an organization segregates its assets,liabilities,and net position into separate accounting entities,called "funds," based on legal restrictions,donor-imposed restrictions,or other regulations.Each fund has a set of self-balancing accounts that records the unique assets of that fund and the claims against those assets.Separate financial statements may be prepared for each fund.The purpose of fund accounting is to help ensure that resources are expended only for their authorized purposes and in compliance with applicable restrictions.
Q2) Not-for-profit organizations obtain their revenues primarily from
A)Sales to customers
B)Contributions from donors
C)Taxes on personal property
D)Taxes on real property
Answer: B
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3
Chapter 2: The Use of Funds in Governmental Accounting
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Sample Questions
Q1) (Comparative computations of expenditures and expenses based on the same underlying transactions)
A department of a local government began operations at the beginning of the current fiscal year with $250,000 cash.During the fiscal year,the department made cash disbursements for the following:
-Salaries and other personnel costs,$100,000
-Office rent and utilities,$24,000
-Retirement of debt principal,$10,000;payment of interest,$2,200
-Purchased equipment at the beginning of the fiscal year for $30,000;the equipment is expected to last 6 years and have a salvage value of $6,000
-Photocopier rental,$10,500
Based on the preceding transactions,compute total annual expenditures for this department assuming it performs governmental-type activities and is accounted for in the General Fund.
Then compute total annual expenses for this department assuming it performs activities within an Enterprise Fund.
Answer: 11ea8f88_f0bf_145d_b491_e71cae742372_TB3013_00
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Page 4
Chapter 3: Budgetary Considerations in Governmental Accounting
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Sample Questions
Q1) Which of the following classifications represents the lowest legal level of budgetary control?
A)function/program
B)department
C)object
D)activity
Answer: C
Q2) Which of the following sequences correctly portrays expenditure account coding from the highest to lowest level of summarization?
A)program,department,activity,object
B)department,object,activity,program
C)activity,department,object,program
D)object,activity,department,program
Answer: A
Q3) Which of the following is expected to occur first in the budget process?
A)determine the property tax (millage)rate
B)hold public hearings on the budget
C)prepare revenue estimates
D)prepare departmental expenditure requests
Answer: C
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Chapter 4: The Governmental Fund Accounting Cycle
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Sample Questions
Q1) If the fund balance of a Special Revenue Fund has a debit balance at the end of the fiscal year,it means that
A)revenues are less than expenditures for the year
B)actual revenues are less than estimated revenues
C)total liabilities exceed total assets
D)expenditures consistently exceeded encumbrances
Q2) The City of Seales has a December 31<sup>st</sup> fiscal year end.Salaries earned by city's General Fund employees for the period December 24<sup>th</sup> through December 31<sup>st</sup> will not be paid until January 7<sup>th</sup> of the next year.On December 31<sup>st</sup>,the City of Seales' accounting personnel would:
A)debit salaries expense and credit salaries payable.
B)debit expenditures-salaries and credit cash.
C)make no journal entry because cash has not yet been paid.
D)none of the above
Q3) What basis of accounting is used to recognize revenues in the General fund?
A)cash basis
B)modified accrual basis
C)accrual basis
D)budgetary basis
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Page 6
Chapter 5: The Governmental Fund Accounting Cycle
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Q1) Which of the following best describes the general principle for recognizing property tax revenues in the General Fund?
A)They should be recognized in the current period to the extent that cash is collected
B)They should be recognized for the entire amount levied for the current period,regardless of when they are collected in cash
C)They should be recognized in the current period,less appropriate allowances for uncollectible accounts,tax refunds,and discounts
D)They should be recognized in the current period to the extent collected and also if collected early in the following year
Q2) Which of the following best describes an assignment of fund balance?
A)it is a government's intent to spend resources for specific purposes
B)it is another term for a budgetary fund balance reserved for encumbrances
C)it is constrained as a result of a formal action by a government's legislative body
D)it is a legal segregation of fund balance,and must be used for the purpose assigned
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Chapter 6: The Governmental Fund Accounting Cycle
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Sample Questions
Q1) A city sells $15 million of general obligation bonds on October 1,2013.The bonds mature at the rate of $1 million a year each September 30,starting September 30,2014.The amount due September 30,2014 is paid.How much should the city report as outstanding debt in the Debt Service Fund in its year-end fund level financial statements on December 31,2014?
A)$15,000,000
B)$14,000,000
C)$13,750,000
D)$0
Q2) (Journal entries to record a capital lease transaction)
A town enters into a lease-purchase agreement with Trucks,Inc.to acquire four garbage trucks.The agreement provides that the town pay $100,000 at the end of each year for four years.Upon full payment,the trucks become town property.The agreement is based on an interest rate of 7%.(The present value of an annuity of $1 for 4 periods at 7% is 3.3872. )The lease agreement is accounted for in the General Fund.
Required:
Prepare journal entries for the General Fund to record (a)the lease agreement and the lease payment (b)at the end of the first year and (c)at the end of the second year.
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Chapter 7: The Governmental Accounting Cycle
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Sample Questions
Q1) Under which of the following circumstances must an Enterprise Fund be used?
A)when its activities are partially financed with advances from the general fund
B)when its activities are financed with debt that is secured solely by the full faith and credit of the related primary government
C)when its activities are financed with debt that is secured solely by a pledge of the net revenues from the charges made by the activity
D)when its activities are financed in such a way that all costs except capital costs are covered.
Q2) Enterprise funds report capital contributions separate from operating and nonoperating revenues and expenses.When does an inflow of resources constitute a capital contribution?
A)when the inflows must be used to purchase capital assets or consist of capital assets
B)when the inflows are grants restricted to use on capital projects
C)when the contributions are from property owners
D)when the inflow consists of donated capital assets
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Chapter 8: The Governmental Fund Accounting
Cycle--Fiduciary
Funds
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Sample Questions
Q1) A recent proposed changed in pension reporting is that:
A)a net pension liability is reported in an employer's government-wide financial statements
B)the actuarial accrued liability is reported in an employer's government-wide statement of net position
C)governments no longer have the option of reporting or not reporting the net pension liability in an employer's government-wide statement of net position
D)changes in the net pension liability are reported as an expense in an employer's government-wide statement of activities
Q2) If a government participates in a defined contribution pension plan,which of the following always will be true?
A)the government will report expenditures/expenses for pension contributions
B)the government will maintain one or more pension trust funds
C)the government will record its pension transactions based on actuarial values
D)the government will have no liability for other postemployment benefits
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10
Chapter 9: Reporting Principles and Preparation of Fund
Financial Statements
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Sample Questions
Q1) Which of the following interfund transactions does not affect fund balance?
A)reimbursements
B)transfers
C)loans
D)interfund services provided and used
Q2) Which of the following statements is true regarding the inclusion of individual non-major funds in the fund-level financial statements?
A)Individual non-major internal service funds are reported in the fund-level financial statements if a government makes a special election to report them
B)Individual non-major funds must always be reported in the fund-level financial statements.
C)Individual non-major funds must be reported in the fund-level financial statements if,in total,they are more than 50 percent of the total assets or liabilities of the fund category.
D)Individual non-major funds may be reported as "major funds" in the fund-level financial statement if governmental officials believe it is important to financial statement users.
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11
Chapter 10: Government-Wide Financial Statements
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Q1) If a government uses the "modified approach" in accounting for its infrastructure assets,which of the following items properly will not appear in its government-wide statement of activities?
A)depreciation expense for any capital assets
B)interest expense for bonds issued to finance any capital assets
C)depreciation expense for infrastructure capital assets
D)interest expense for bonds issued to finance infrastructure capital assets
Q2) A city health department charges fees for copies of birth certificates provided to its citizens.How should those fees be reported in the government-wide statement of activities?
A)as a separate item of revenue in the revenue section
B)as a direct reduction of the expenses of the health department
C)as an element of program revenues,which reduce gross expenses of the health department
D)as a special item
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Chapter 11: Federal Government Accounting and Reporting
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Q1) What is the rule regarding depreciation of federal capital assets classified as general property plant and equipment (General PP&E)?
A)All General PP&E is capitalized and depreciated.
B)General PP&E is capitalized and depreciated only for federal business-type activities.
C)All General PP&E is expensed at the time of acquisition.
D)Federal agencies have the option of depreciating or not depreciating General PP&E.
Q2) When do federal agencies make an entry to record "Fund Balance with the Treasury"?
A)when the Treasury tells the agency the Federal government has sufficient cash to pay bills
B)each time the department of which the agency is a part allots funds to the agency
C)when the Office of Management and Budget apportions funds to the department of which the agency is a part
D)when the Congress makes and the President approves an appropriation
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Chapter 12: Accounting for Not-For-Profit Organizations
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Q1) Which of the following best describes standards for reporting expenses by function (such as instruction and research)or by natural classification (such as salaries and supplies)in the statement of activities prepared by colleges and universities?
A)all expenses must be reported by function on the face of the statement.
B)all expenses must be reported by natural classification on the face of the statement.
C)they may report by either method on the face of the statements;if they report by natural classification on the face,they must report functional expenses in the notes.
D)colleges and universities may report by either method on the face of the statement.
Q2) Which of the following financial statements is not required to be prepared by not-for-profit organizations?
A)statement of financial position
B)statement of donations and contributions received
C)statement of cash flows
D)statement of activities
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Chapter 13: Accounting for Health Care Organizations
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Q1) When a hospital uses funds for internal record-keeping purposes,Plant Replacement and Expansion Funds are used to report:
A)resources contributed by outsiders that can only be used to replace or expand the hospital's existing physical plant
B)resources contributed by outsiders and those designated by the hospital's governing board that can only be used to replace or expand the hospital's existing physical plant
C)capital asset expenditures
D)resources restricted by any legal agreement,such as a bond agreement or a trust arrangement
Q2) In the statement of operations of a not-for-profit hospital,which of the following increases in net assets is not likely to appear as part of Excess of revenues over expenses?
A)net patient service revenue
B)premium revenue under capitation agreements
C)investment income
D)net assets released from restrictions used for purchase of equipment
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15
Chapter 14: Analysis of Financial Statements and Financial Condition
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Sample Questions
Q1) You are calculating the quick ratio for the General Fund.The General Fund balance sheet contains the following captions: (1)cash; (2)cash equivalents; (3)taxes receivable; (4)inventory; (5)prepaid items;and (6)due from other funds.Which of these accounts will enter into the calculation?
A)(1)and (2)
B)(1), (2),and (3)
C)(1), (2), (3),and (6)
D)all six
Q2) What can a financial analyst learn from a hospital's number of days' revenue in receivables?
A)the hospital's accounts receivable collection efficiency
B)the average length of stay of patients in the hospital
C)the average daily occupancy rate of the hospital's beds
D)the proportion of hospital beds occupied by patients covered by self-pay patients
Q3) What is Olde Towne's debt service coverage?
A)0.8 times
B)1.6 times
C)2.0 times
D)2.7 times
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Chapter 15: Fundamentals of Accounting
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Sample Questions
Q1) Prepare journal entries to record the following transactions regarding a fire insurance policy purchased by Chang Electronics.Chang's business operates on a calendar-year basis.
a.April 1,2013 - Chang arranges to buy fire insurance.He receives a bill for $10,000 for an insurance policy that covers the period April 1,2013 through March 31,2014.
b.April 10 - Chang pays the insurance bill.
c.December 31- Chang prepares financial statements for the year ended.December 31,2013.He prepares an adjusting entry regarding insurance.
Q2) Herman Appliance buys and sells refrigerators.Herman starts the year with an inventory of $20,000.During the year,Herman buys refrigerators totaling $182,000.At year-end,Herman takes inventory and finds that he has $28,000 of refrigerators on hand.During the year,Herman's sales revenue was $256,000.What was Herman's gross profit on the sales for the year?
A)$54,000
B)$66,000
C)$74,000
D)$82,000
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