Nonprofit Accounting Exam Questions
Course Introduction
Nonprofit Accounting explores the unique accounting principles and practices relevant to nonprofit organizations, including charities, foundations, educational institutions, and government entities. The course focuses on fund accounting, financial reporting standards (such as those established by FASB and GASB), and the preparation and analysis of financial statements specific to the nonprofit sector. Students will learn about budgeting, grant and donor fund management, compliance with regulatory requirements, and the ethical responsibilities of accounting professionals in nonprofit settings. Emphasis is also placed on the use of accounting information for decision-making, performance evaluation, and communicating financial results to stakeholders.
Recommended Textbook
Essentials of Accounting for Governmental and Not for Profit 12th Edition by Copley
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Chapter 1: Introduction to Accounting and Financial
Reporting for Governmental and Not-For-Profit Organizations
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Q1) The Governmental Accounting Standards Board sets financial reporting standards for all units of government: federal,state,and local.
A)True
B)False
Answer: False
Q2) The _______ sets the accounting and financial reporting standards for both state and local governments and public not-for-profits.
A) FASAB
B) FASB
C) GASB
D) AICPA
Answer: C
Q3) According to FASB standards relating to Budgetary Accounting,the accounting system should provide the basis for appropriate budgetary control.
A)True
B)False
Answer: False
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Chapter 2: Overview of Financial Reporting for State and Local Governments
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Q1) Prior-year data are required to be presented on government-wide statements
A)True
B)False Answer: False
Q2) Which part of the financial section of the CAFR is considered "Required Supplementary Information? "
A) Auditor's Report
B) Management's Discussion and Analysis
C) Government-Wide Financial Statements
D) Fund Financial Statements
Answer: B
Q3) Governmental-type fund financial statements do not include a Statement of Cash Flows.
A)True
B)False Answer: True
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Page 4
Chapter 3: Modified Accrual Accounting: Including the Role of
Fund Balances and Budgetary Authority
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Q1) Distinguish between the Encumbrances Control account and the Budgetary Fund Balance -- Reserve for Encumbrances account
Answer: The Encumbrances Control account is a budgetary account with a debit balance. Accounts subsidiary to this control account are kept in accord with the same classification system as is used for appropriations,as discussed in Chapter 3. At year-end,any balance in this account is closed to Fund Balance-Unreserved. The Fund Balance-Reserved for Encumbrances account is a fund equity account which,at year-end,equals the amount of outstanding purchase orders.
Q2) An example of an imposed nonexchange revenue is the property tax.
A)True
B)False Answer: True
Q3) A nonexchange transaction is one where a government receives resources without giving equal value in return.
A)True
B)False Answer: True
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Page 5
Chapter 4: Accounting for the General and Special Revenue Funds
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Q1) A local government was awarded a federal grant in the amount of $950,000 to provide for a summer youth employment program for young people.The grant was a reimbursement grant,and a notification of the grant award was received on Apri1 30,2015.The local government expended the resources as follows: June 2015: $400,000; July 2015: $300,000; August 2015: $250,000.
The federal government sent the funds in the month following the expenditure.The local government would recognize revenues for the fiscal year ended June 30,2015 in which amount?
A) $ -0-.
B) $400,000.
C) $700,000.
D) $950,000.
Q2) Only the General Fund may have a positive Unassigned Fund Balance
A)True
B)False
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Chapter 5: Accounting for Other Governmental Fund Types:
Capital Projects, Debt Service, and Permanent
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Q1) When using debt service accounting,interest on long term debt is not to be accrued unless the payment is due in no more than one month and the government has resources available for payment.
A)True
B)False
Q2) If taxes and/or special assessments are levied specifically for payment of interest and principal on long-term debt,those taxes are recognized as revenues of the debt service fund.
A)True
B)False
Q3) Fund basis financial statements in which capital projects funds are reported are the Governmental Funds Balance Sheet and the Governmental Funds Statement of Revenues,Expenditures,and Changes in Fund Balances.
A)True
B)False
Q4) How should the acquisition of general fixed assets acquired by capital leases be accounted for?
Q5) What is the difference between Permanent Funds and Private Purpose Trust Funds?
Q6) What is the difference between a current refunding and advance refunding?
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Chapter 6: Proprietary Funds
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Q1) Which of the following is not true regarding enterprise funds?
A) Similar to commercial businesses, enterprise funds equity accounts include both contributed capital and retained earnings.
B) A Statement of Revenues, Expenses, and Changes in Fund Net Position would be the primary operating statement for enterprise funds.
C) Enterprise funds' Cash Flow Statements could have up to four categories.
D) None of the above; all are true.
Q2) Activities that produce goods or services to be provided to other departments or other governmental units on a cost-reimbursement basis are accounted for by enterprise funds.
A)True
B)False
Q3) The two types of proprietary funds include:
A) Enterprise funds and capital projects funds.
B) Enterprise funds and internal service funds.
C) Internal service funds and capital project funds.
D) Agency funds and enterprise funds.
Q4) Why might it be desirable for an enterprise fund to operate at a profit?
Q5) Under GASB Statement 34,enterprise funds must be used under which circumstances?
Page 8
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Chapter 7: Fiduciary Funds, Inter-fund Transactions
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Q1) The City of DeKalb contributes to three pension plans: (1)a statewide pension plan for nonuniformed personnel,(2)a locally administered plan for police officers,and (3)a locally administered plan for firefighters. The City is trustee for the plans for police officers and firefighters. Which of the following is true?
A) The City would maintain trust funds for the police and fire plans but not the statewide plan.
B) When making contributions from General Fund resources to the police and fire plans, the General Fund would debit Other Financing Sources-Transfers Out and the Pension Trust Fund would credit Transfers In.
C) Both of the above.
D) Neither of the above.
Q2) How are Fiduciary Funds presented in the Government-wide Financial Statements?
A) Combined with Internal Service Funds.
B) Combined with Business activities.
C) Combined with governmental activities.
D) None of the Above.
Q3) Contrast the accounting for internal and external portions of investment pools.
Q4) Contrast a defined benefit and defined contribution retirement plan.
Q5) What are the four types of fiduciary funds and the function of each?
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Chapter 8: Government-Wide Statements: Capital Assets;
Long-Term Debt
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Q1) In addition to the fund basis statement,GASB Statement 34 requires government-wide statements that are prepared using the accrual basis and the current financial resources measurement focus.
A)True
B)False
Q2) The Village of Canandaigua determined that,as of July 1,2014,infrastructure assets estimated at $375 million were in place,with an estimated useful life of 25 years. During the year ended June 30,2015,expenditures were $9 million for the routine maintenance of infrastructure,$3 million to extend the life of existing infrastructure,and $15 million for infrastructure additions and improvements.
Required:
a)If the modified approach is used,what would be the amount charged to expense during the fiscal year ended June 30,2015. What amount would be capitalized?
b)What amount would have been charged to expense if the modified approach were not used?
What amount would be capitalized?
Q3) What conditions must be satisfied in order to use the modified approach for recording infrastructure?
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Chapter 9: Accounting for Special-Purpose Entities
Including Public Colleges and Universities
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Q1) Public higher education institutions typically report as special-purpose entities engaged in governmental and business-type activities or in governmental-type activities only.
A)True
B)False
Q2) According to GASB Statement 33,with respect to public colleges and universities,pledges receivable are recognized as assets and revenues when eligibility requirements are met.
A)True
B)False
Q3) A public college had tuition and fees of $21,000,000. Scholarships,for which no services were required,amounted to $2,500,000. Graduate assistantships,for which services were required,amounted to $1,600,000. The amount to be reported by the public college as net tuition and fees would be:
A) $21,000,000.
B) $19,400,000.
C) $18,500,000.
D) $16,900,000.
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Chapter 10: Accounting for Private Not-For-Profit Organizations
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Q1) Which of the following is not a distinguishing characteristic of a private not-for-profit organization according to FASB Statement No.116?
A) Operating purposes other than to provide goods or services at a profit.
B) Absence of ownership interests like those of business enterprises.
C) Commonly financed through voluntary contributions.
D) Operate for the direct benefit of members.
Q2) Which of the following organizations does not follow the AICPA's Not-for-Profit Guide?
A) Political parties.
B) Voluntary health and welfare organizations.
C) City libraries.
D) Private foundations.
Q3) When might it be appropriate for a not-for-profit organization to report a surplus (increase in net assets)?
Q4) FASB statement 116 requires contributions to be recorded as revenue when
A) The contribution is promised.
B) The contributed asset is actually received.
C) The contribution is likely to be received.
D) The contribution is probable and measurable.
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Chapter 11: College and University Accounting Private Institutions
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Q1) Private,Not-for-Profit Colleges and Universities must have Statement of Financial Position,Statement of Activities,Statement of Cash Flows,and Notes to the Financial Statements included in their financial report.
A)True B)False
Q2) What is the basis of accounting for a private college or university and what are the principal sources of reporting standards?
Q3) A donor made a gift of cash to a private college or university in 2015 with an expressed purpose restriction. All of the funds were expended in 2015. The private college or university must:
A) Record the gift as a temporarily restricted revenue, reclassify the funds to unrestricted, and then report the expense as unrestricted.
B) Record the gift and expense as unrestricted.
C) Record the gift and expense as temporarily restricted.
D) Use either of the methods described in (a) or (b).
Q4) A Pooled life income fund is a type of split-interest agreement.
A)True B)False
Page 13
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Chapter 12: Accounting for Hospitals and Other Health Care
Providers
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Q1) With respect to health care organizations,expenses must be reported using their natural classifications.
A)True
B)False
Q2) Which of the following is not correct with respect to reporting of patient service revenue for health care organizations?
A) Patient service revenue must be reported net of estimated adjustments for contractual adjustments.
B) Patient service revenue does not include amounts representing charity care.
C) Changes to estimates of contractual adjustments related to prior periods must be reported as a prior period adjustment if material.
D) Unrestricted bequests and investment income for current unrestricted purposes may be reported as either operating or nonoperating revenue, depending on the policy of the entity.
Q3) Government-owned health care organizations do not report depreciation expense. A)True B)False
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Page 14
Chapter 13: Auditing, Tax-Exempt Organizations, and Evaluating Performance
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Q1) Which of the following is not a difference between private sector auditing and governmental auditing?
A) The public availability of audit reports.
B) Testing of compliance with laws and regulations.
C) Governmental audits require auditor knowledge of government accounting and auditing.
D) None of the above; these are all differences between private sector auditing and governmental auditing.
Q2) What are major programs with respect to the Single Audit Act of 1984 and amendment of 1996?
Distinguish between Type A and Type B programs.
Q3) Which of the following is true regarding Service Efforts and Accomplishments Reporting?
A) SEA reporting utilizes both financial and non-financial performance measures.
B) GASB standards require the reporting of service efforts and accomplishments for public school systems.
C) Service efforts and accomplishments reporting is commonly covered by the auditor's opinion.
D) All of the above.
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Chapter 14: Financial Reporting by the Federal Government
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Q1) Which of the following is (are)accurate regarding a federal agency's Statement of Changes in Net Position?
A) The statement starts with the beginning of year balances in the net position accounts and reconciles these to the ending balances appearing on the agency's Balance Sheet.
B) The statement does not report Appropriations Received since this is a budgetary account and does not affect net position.
C) Both (a) and (b) above
D) Neither (a) nor (b) above
Q2) Which of the following steps in the budgetary authority process occurs when the Office of Management and Budget establishes the quarterly amount available to a federal agency for spending?
A) Apportionment
B) Appropriation
C) Allotment
D) Obligation
Q3) Describe the purpose of the following:
a)Federal government budgetary accounts
b)Federal government proprietary accounts
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