Public Administration Accounting Exam Materials
Course Introduction
Public Administration Accounting explores the principles, practices, and applications of accounting within the public sector, including government agencies and non-profit organizations. The course addresses the distinct financial reporting, budgeting, and accountability requirements faced by public administrators compared to private sector accountants. Students will learn about fund accounting, governmental financial statements, compliance with relevant laws and standards, internal controls, and the use of accounting information for decision-making, planning, and performance evaluation in public organizations. The aim is to equip students with the skills needed to ensure transparency, proper management of public funds, and efficient allocation of resources in the public sector.
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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Q1) Which of the following activities is performed by governments but not by not-for-profit organizations?
A)Issuing federal tax-free debt
B)Receiving grants
C)Preparing budgets
D)Providing services to constituents
Answer: A
Q2) (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.
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Chapter 2: The Use of Funds in Governmental Accounting
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Q1) The broad categories of funds used in government accounting do not include which one of the following?
A)revolving
B)governmental
C)proprietary
D)fiduciary
Answer: A
Q2) A government will prepare a statement of cash flows for which of the following funds?
A)General Fund
B)Enterprise Fund
C)Debt Service Fund
D)Agency Fund
Answer: B
Q3) Governmental accounting normally does not
A)use separate funds to account for various activities
B)incorporate budgetary accounts into the accounting system
C)measure the amount of profit earned during a fiscal year
D)focus on flows of current financial resources
Answer: C
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Chapter 3: Budgetary Considerations in Governmental Accounting
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Q1) Which of the following factors is the most important consideration in estimating sales tax collections for the year?
A)the projected volume of sales subject to the sales tax
B)the projected elementary school enrollment
C)the projected number of housing starts
D)the amount expected to be budgeted on the highway maintenance program
Answer: A
Q2) The legal level of budgetary control is best described as
A)the maximum amount that can be spent without incurring an unfavorable variance
B)the classification or subclassification at which expenditures cannot exceed appropriations
C)the status of the budget officer within the hierarchy of top government officials
D)the sum of favorable budget variances minus the sum of unfavorable budget variances
Answer: B
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Page 5
Chapter 4: The Governmental Fund Accounting Cycle
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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) A county borrows cash on a short-term basis.Which of the following account could be credited in this transaction?
A)tax anticipation notes payable
B)revenues from borrowing
C)appropriations--borrowed money
D)assigned fund balance
Q3) Liabilities in the General Fund and Special Revenue Fund represent:
A)claims against the fund's cash resources
B)claims against the fund's current financial resources
C)claims against the fund's economic resources
D)claims that must be paid within one year
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Chapter 5: The Governmental Fund Accounting Cycle
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Q1) A state government receives a grant from the federal government that it disburses to local governments within the state.To meet federal grant requirements,the state government monitors the local governments to make sure that they comply with federal grant requirements.When the state government disburses the grant monies to the local governments,it should debit:
A)due to local governments
B)deferred revenues - grants
C)expenditures - federal grant
D)no entry is required
Q2) A government would refer to its property tax calendar to determine whether property taxes receivable at any given time are
A)collectible in part or in full
B)delinquent or current
C)sufficient to finance planned expenditures
D)larger or smaller than those of the prior year
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Chapter 6: The Governmental Fund Accounting Cycle
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Q1) A government may have arbitrage when:
A)it finances capital projects through federal grants
B)it borrows money at lower tax-exempt rate,but invests it at a higher rate
C)it pays a higher rate on its tax-exempt debt than the rate that it receives from its investments
D)its debt pays a lower rate of interest than federally issued debt of the same credit quality
Q2) Which of the following groups of accounts best describes the types of assets and liabilities likely to be found in Capital Projects Funds?
A)cash,investments,construction contract payable,matured bonds payable
B)cash,buildings,equipment,construction contracts payable
C)cash,investments,construction contracts payable,vouchers payable,long-term debt payable
D)cash,investments,retainage payable,vouchers payable
Q3) Retainage payable will most likely appear in which financial statement?
A)government-wide statement of net assets
B)capital projects fund balance sheet
C)debt service fund balance sheet
D)special revenue fund balance sheet
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Page 8
Chapter 7: The Governmental Accounting Cycle
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Q1) An Internal Service Fund (ISF)sends bills for motor vehicle services to various departments that receive appropriations from the General Fund.When it sends the bills out,which account should the ISF credit?
A)due from general fund
B)other financing sources - motor vehicle services
C)revenues - motor vehicle services
D)expenditures - motor vehicle costs
Q2) When an Internal Service Fund sends a bill to the General Fund,which account should the Internal Service Fund debit?
A)expenditures - vehicle usage
B)transfer out to the general fund
C)revenues - vehicle charges
D)due from general fund
Q3) A proprietary fund statement of net position report assets and liabilities in what format?
A)relative order of liquidity
B)classified (current/noncurrent)
C)by asset/liability type
D)separating capital assets and related debt for other assets and liabilities
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Chapter 8: The Governmental Fund Accounting
Cycle--Fiduciary
Funds
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Q1) Two sets of ratios are shown in the schedule of funding progress prepared for Pension Trust Funds: (A)the funded ratio;and (B)the unfunded actuarial accrued liability as a percentage of covered payroll.The financial status of the pension fund is said to be improving when:
A)both A and B increase over time
B)both A and B decrease over time
C)A increases and B decreases over time
D)A decreases and B increases over time
Q2) Which financial statements are prepared for an Agency Fund?
A)only a statement of fiduciary net position
B)only a statement of changes in fiduciary net position
C)a statement of fiduciary net position and a statement of changes in fiduciary net position
D)a statement of fiduciary net position,a statement of changes in fiduciary net position,and a cash flow statement
Q3) Which of the following is not a fiduciary fund?
A)pension trust fund
B)permanent fund
C)private-purpose trust fund
D)agency fund
Page 10
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Chapter 9: Reporting Principles and Preparation of Fund
Financial Statements
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Q1) What is the purpose of preparing proprietary fund balance sheets in classified format?
A)to distinguish between current and noncurrent assets and liabilities
B)to distinguish between assets and liabilities
C)to distinguish between restricted and unrestricted net position
D)to segregate net position into three components: invested in capital assets,net of related debt;restricted;and unrestricted
Q2) Which of the following is one of the two basic criteria that makes a primary government financially accountable for a legally separate entity?
A)The primary government's chief executive appoints three of the entity's trustees.
B)The primary government appoints a voting majority of the entity's governing body.
C)A department of the primary government can make grants to the entity.
D)A department of the primary government is authorized to obtain and review the entity's financial statements.
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Chapter 10: Government-Wide Financial Statements
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Q1) Which of the following elements properly will not be displayed as a specific item in a government-wide statement of activities prepared by a city or county government?
A)program revenues
B)interfund reimbursements
C)interest expense on long-term debt
D)the beginning net position balance(s)
Q2) A small village (which keeps its records on a calendar-year basis)issued $1 million of bonds on April 1,2012.The first payment of principal was due April 1,2013,but interest at 6 percent per annum on the outstanding debt was due on October 1,2012 and April 1,2013.How much interest expenditure (expense)should the village recognize in its governmental fund and government-wide financial statements for the calendar year 2012? \(\begin{array}{lll}&\text { Fund } & \text { Government-wide } \\
&\text { Statements } & \text { Statement }\\
\text { a. } & \$ 30,000 & \$ 30,000 \\
\text { b. } & \$ 30,000 & \$ 45,000 \\
\text { c. } & \$ 30,000 & \$ 60,000 \\
\text { d. } & \$ 45,000 & \$ 45,000 \end{array}\)
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Page 12
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) If a federal agency were to take a trial balance of the budgetary accounts at any point in time,what would the right side of the trial balance show?
A)the cumulative results of the agency's appropriations
B)the status of the agency's budgetary resources
C)the agency's fund balance with Treasury
D)the total amount appropriated to the agency
Q3) What is the federal counterpart of the state and local government "encumbrance"?
A)obligation
B)allotment
C)outlay
D)apportionment
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Chapter 12: Accounting for Not-For-Profit Organizations
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Q1) Socialite Lisa King establishes a $4 million irrevocable charitable remainder trust providing a beneficial interest to the Clinton Metropolitan Opera.A percentage of the fair value of the trust's assets go to her husband during his lifetime.The Opera will receive the remaining assets at her husband's death.Mrs.King also specifies that the only the revenue from investing the assets may be used to support the Opera's programs.The Opera estimates that the present value of the estimated future benefits it will receive from the trust is $1.5 million.How should the Opera report this arrangement when it learns of the trust?
A)It should record nothing now.It should record the fair value of the assets only after Mr.King dies
B)It should record a $4 million receivable,$1.5 million in permanently restricted support,and $2.5 million long-term payable to Mr.King.
C)It should disclose the anticipated $1.5 million contribution in the notes to its financial statements.
D)It should record $1.5 million as contributions receivable and as permanently restricted support
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Page 14
Chapter 13: Accounting for Health Care Organizations
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Q1) A hospital had capitation agreements with several health maintenance organizations to provide services.The hospital received $12 million of capitation fees for the year.The hospital also calculated that: (a)its costs to provide these services were $11.8 million;and (b)the value of these services at established billing rates were $16 million.How should the hospital report this information on the face of its financial statements?
A)report $200,000 as a separate item of revenue,labeled net premium revenue.
B)add $16 million to Net patient service revenue,and deduct $4 million in a separate item labeled Adjustment for capitation premiums.
C)report Premium revenue of $12 million as a separate item of revenue,and report cost of serving HMO patients of $11.8 million as a separate item of expense.
D)report premium revenue of $12 million as a separate item of revenue,if significant.
Q2) Which of the following is reported as an expense by not-for-profit hospitals?
A)charity care
B)bad debts
C)contractual adjustments
D)volunteer and employee discounts
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Page 15
Chapter 14: Analysis of Financial Statements and Financial Condition
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Q1) Which of the following items should be excluded from the assets or liabilities when computing the quick ratio?
A)inventories
B)amount of long-term debt due in the following year
C)accounts payable
D)cash equivalents
Q2) What can an analyst learn from the liquidity indicators?
A)the amount of cash than an entity can obtain from liquidating its capital assets
B)the amount of cash needed to liquidate its long-term debt
C)the amount that an entity is likely to realize from selling all of its assets
D)the ability of an entity to meet its short-term obligations
Q3) If a government derives a large portion of its tax revenues from economy-sensitive taxes,the size of which of the following ratios would be of most concern to a financial analyst?
A)ratio of real property taxes receivable to real property tax revenues
B)ratio of total available fund balance to total revenues
C)ratio of program expenses to total expenses
D)portion of real property taxes collected in the year of the tax levy
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Chapter 15: Fundamentals of Accounting
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Q1) Why would the accrual basis of accounting be preferable to the cash basis?
A)it is easier to keep records on the accrual basis than on the cash basis
B)it measures performance by comparing inflows and outflows of cash
C)it ignores the effect of the consumption of assets on the cost of doing business
D)it measures performance by comparing revenues earned with expenses incurred.
Q2) Assume that an organization's operations result in a net profit for the year.When the books are closed,what is the accounting effect of the journal entry that closes out the net profit?
A)it is added to the cash balance
B)it is subtracted from the cash balance
C)it is added to the opening balance of owner's equity
D)it is subtracted from the liabilities
Q3) An owner of a business withdraws cash from his business.Which of the following accounts would need to be reduced to record this transaction?
A)accounts receivable
B)owner's equity
C)expenses
D)accounts payable
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