Public Administration Accounting
Textbook Exam Questions
Course Introduction
Public Administration Accounting explores the principles, practices, and systems used in managing public sector finances. The course covers the unique environment of governmental and nonprofit organizations, focusing on budgeting, fund accounting, financial reporting, and compliance with legal and regulatory requirements. Students learn how public resources are allocated, monitored, and controlled, emphasizing transparency, accountability, and ethical stewardship in the use of public funds. The course also addresses contemporary issues such as performance measurement, financial management reforms, and the impact of technology on public financial administration.
Recommended Textbook
Introduction to Governmental and Not for Profit Accounting 7th Edition by Patton
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Page 2
Chapter 1: Governmental and Not-For-Profit
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Sample Questions
Q1) 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
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) A city has an Arts and Cultural Fund that is used to account for private contributions that are restricted by the donors for the financing of the city's museum operations and functions.The Arts and Cultural Fund is a:
A)General Fund
B)Special Revenue Fund
C)Permanent Fund
D)Private-Purpose Trust Fund
Answer: B
Q2) 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
Q3) Which of the following are fiduciary-type funds?
A)Pension Trust Fund,Agency Fund,and Permanent Fund
B)Investment Trust Fund,Special Revenue Fund,and Internal Service Fund
C)Agency Fund,Internal Service Fund,and Pension Trust Fund
D)Pension Trust Fund,Investment Trust Fund,and Agency Fund
Answer: D
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Chapter 3: Budgetary Considerations in Governmental Accounting
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Q1) When preparing a fund budget for the next fiscal year,which of the following are important to consider when projecting the amount of resources that will be available for spending in the next year?
A)the projected fund expenditures for next year
B)the probable fund balance at the end of the current year
C)the projected transfers out of the fund for the next year
D)the projected fund revenues to be realized for the next year
E)both b and d
Answer: E
Q2) The City of Kent's police department needs a new police car.A police car is ordered at an estimated cost of $34,000 and the appropriate budgetary control journal entry is made.When the car is received,the actual cost is $35,000.Which of the following is a part of the budgetary entry that should be made when the police car is received?
A)debit encumbrances for $34,000
B)credit encumbrances for $34,000
C)debit encumbrances for $35,000
D)credit encumbrances for $35,000
Answer: B
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Chapter 4: The Governmental Fund Accounting Cycle
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Sample Questions
Q1) A city that uses encumbrance accounting places a purchase order for three fire trucks at a cost of $100,000 each,specifying that two are to be delivered in March and one in August.The vendor delivers the first two trucks,and sends an invoice for $200,000.How should the city handle the encumbrance accounting when it prepares the $200,000 voucher to pay for the first two trucks?
A)it should make no encumbrance entry until all three trucks have been received
B)it should reduce encumbrances by $100,000
C)it should reduce encumbrances by $200,000
D)it should reduce encumbrances by $300,000
Q2) What is the general rule for recognizing revenues in governmental funds?
A)revenues should be recognized when the budget is adopted
B)revenues should be recognized when available and measurable
C)revenues should be recognized when collected in cash
D)revenues may be recognized either when collected in cash or when the budget is adopted,at the option of the government
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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.The state government disburses the cash received from the federal government to the local government,but the state government has no other administrative responsibilities regarding the grant.The state government should report the grant in:
A)an agency fund
B)a special revenue fund
C)internal service fund
D)the general fund
Q2) A city uses the purchases method of accounting for supplies in the General Fund.At year-end,the amount of supplies on hand is material and the city wants to report the inventory in its balance sheet.How should the General Fund record the inventory?
A)debit supplies inventory and credit expenditures--supplies used
B)debit supplies inventory and credit vouchers payable--supplies
C)debit supplies inventory and credit unassigned fund balance
D)debit supplies inventory and credit nonspendable fund balance
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Chapter 6: The Governmental Fund Accounting Cycle
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Q1) How should a fixed asset acquired through a capital lease agreement be recorded in a General Fund?
A)at the present value of the future lease payments,by debiting expenditures and crediting other financing sources - capital leases
B)at the total amount of the future lease payments,by debiting expenditures and crediting other financing sources - capital leases
C)at the present value of the future lease payments,by debiting expenditures and crediting capital leases payable.
D)no entry is needed until payments are actually made on the capital lease agreement.
Q2) Accrued interest on the following type of debt is reported in a governmental fund:
A)short-term tax anticipation notes payable
B)serial bonds
C)general obligation bonds
D)long-term bank notes
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Chapter 7: The Governmental Accounting Cycle
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Q1) 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
Q2) Which basis of accounting is used by Enterprise Funds?
A)full accrual
B)modified accrual
C)cash
D)modified cash
Q3) Governments control their Enterprise Fund revenues and expenses in what way?
A)by using encumbrance accounting
B)by recording flexible budget amounts in the accounts
C)by controlling and approving the rates they can charge for services
D)by ensuring there is a competitive market for its services
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Chapter 8: The Governmental Fund Accounting
Cycle--Fiduciary
Funds
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Q1) Which of the following resources should be accounted for in a Private Purpose Trust Fund?
A)a gift received from a donor who stipulates in a formal trust agreement that the principal must be kept intact and the income must be used to beautify the state's parks
B)admissions fees that are legally required,based on state laws,to pay the debt service on the state's new museum and cultural center
C)dormant bank accounts that escheat to the state,with state laws requiring that the resources be held in perpetuity for the rightful owners
D)fees received by a state from insurance companies,representing charges for overseeing insurance companies located within the state
Q2) Which of the following type of pension plans results in all the employers participating in the plan being liable for the accumulated liabilities of the plan?
A)sole-employer plan
B)multiple-employer plan
C)defined contribution plan
D)cost-sharing plan
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Chapter 9: Reporting Principles and Preparation of Fund
Financial Statements
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Q1) A municipality allows its employees to accumulate up to 45 days' vacation pay that may be "cashed in" by the employees on retirement.Many employees whose salaries are paid from General Fund appropriations avail themselves of this opportunity.Where does this liability appear on the governmental funds balance sheet when employees are not expected to retire in the near future?
A)General Fund column;Accrued vacation leave caption
B)This liability is not reported in the governmental funds balance sheet.
C)General Fund column;Noncurrent liabilities caption
D)General Fund column;Payable from restricted assets caption
Q2) A government's discussion of how it defined the reporting entity is presented in which of the following places within the Comprehensive Annual Financial Report?
A)the auditor's report
B)management's discussion and analysis (MD&A)
C)the notes to the financial statements
D)required supplementary information (RSI)
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Chapter 10: Government-Wide Financial Statements
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Q1) A county,that did not previously have a property tax levies a property tax for $900,000 in December 2012.The tax is for the budget year January 1 - December 31,2013.Because it sends out the bills on December 1,it actually collects $500,000 in cash before December 31,2012.It collects an additional $375,000 of 2013 property taxes during calendar year 2013,$20,000 during January 1 - February 28,2014,and the remaining $5,000 in June 2014.How much property tax revenue should the county report in its 2013 fund and government-wide financial statements? \(\begin{array}{lll}&\text { Fund } & \text { Government-wide } \\
&\text { Statements } & \text { Statement }\\
\text { a. } & \$ 375,000 & \$ 100,000 \\
\text { b. } & \$ 875,000 & \$ 900,000 \\
\text { c. } & \$ 875,000 & \$ 895,000 \\
\text { d. } & \$ 895,000 & \$ 900,000
\end{array}\)
Q2) On the government-wide statement of net position,assets and liabilities may be reported:
A)in a classified format
B)in order of relative liquidity
C)in either order of relative liquidity or a classified format
D)in separate columns
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Chapter 11: Federal Government Accounting and Reporting
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Q1) What does a credit balance in the account "Allotments - realized resources" show?
A)The agency's cash balance with the Treasury.
B)The amount available to a department for allotment to an agency
C)The amount of goods or services ordered by an agency but not received.
D)The amount of resources available to an agency for obligation or commitment.
Q2) A federal agency that uses commitment accounting makes a commitment for supplies in the amount of $40,000.When it places the purchase order,however,the cost of the supplies is only $38,000.How is the $2,000 difference accounted for in the budgetary accounts?
A)No budgetary entry is needed at this point in the budgetary accounting cycle.
B)Commitments is debited for $40,000,Allotments - realized resources is credited for $2,000,and Undelivered orders - obligations,unpaid is credited for $40,000.
C)Commitments is debited for $38,000 and Undelivered orders - unpaid is credited for $38,000.
D)Allotments - realized resources is debited for $2,000 and Commitments is credited for $2,000.
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Chapter 12: Accounting for Not-For-Profit Organizations
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Q1) Say No To Meth,a not-for-profit entity devoted to informing the public about the hazards of methamphetamine,sends out brochures to a large number of doctors,urging that the brochures be placed in the doctors' waiting rooms.The four-page brochure contains a description of the addictive and destructive nature of the drug,but half of the last page contains an appeal for funds,in relatively large type.How should the entity report the $30,000 expense of preparing,printing,and mailing the brochure in its statement of activities?
A)The entire $30,000 must be reported as a fund-raising expense.
B)The entire $30,000 must be reported as a program expense.
C)The $30,000 should be allocated between fund-raising and program expenses,using appropriate cost accounting techniques.
D)The $30,000 should be reported under the caption "Program and fund-raising expenses."
Q2) When a not-for-profit entity's funds are classified as restricted,who has imposed the restrictions?
A)the entity's board of trustees
B)donors
C)the bondholders
D)government regulators
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Chapter 13: Accounting for Health Care Organizations
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Q1) A not-for-profit hospital purchased an equity security for $150,000 on September,2012.When it prepared its 2012 financial statements,the security had a fair value of $145,000.It sold the security for $160,000 in 2013.What was the net effect of the sale of the security on the hospital's net assets in the year 2013?
A)no effect
B)an increase of $10,000
C)an increase of $15,000
D)an increase of $160,000
Q2) (Distinguishing among the three net asset classifications)
Assume that Andy Kelly Hospital (Problem 44)is a not-for-profit hospital.For each of the six transactions or events shown in that problem,state which of the three net asset classifications are affected: unrestricted;temporarily restricted;or permanently restricted.
Q3) The accounting and financial reporting procedures for which fund category apply to governmental hospitals?
A)governmental type funds
B)proprietary type funds
C)fiduciary type funds
D)restricted type funds
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Chapter 14: Analysis of Financial Statements and Financial Condition
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Sample Questions
Q1) A not-for-profit entity had revenues,gains,and other support of $18 million;program expenses of $12 million;and administrative and fund raising expenses of $4 million.What was the entity's program services ratio?
A)11%
B)67%
C)75%
D)300%
Q2) What information could a financial analyst potentially obtain by reviewing the statement of activities?
A)whether the resources obtained during the year were sufficient to cover the cost of providing services
B)whether services provided were sufficient for the government's constituencies
C)the current financial condition of a government
D)the current status of a government's assets and liabilities
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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Q1) John pays cash to buy auto insurance for a three-year period starting January 1.What is the accounting effect of this transaction on John's records when he makes the payment?
A)An asset increases and an asset decreases
B)An asset increases and a liability increases
C)Equity increases and a liability decreases
D)An asset decreases and equity decreases
Q2) Which of the following statements is true about control accounts?
A)control accounts are used to control amounts spent during the year
B)control account totals must equal the total of the individual subsidiary accounts
C)control accounts are used to limit the amounts of liabilities incurred during the year
D)control accounts avoid the need for making postings to ledgers.
Q3) Angel's Appliances buys four washing machines for its inventory at a price of $400 each.It makes the purchase on credit.It then sells three of the machines for cash at $550 each.Make journal entries to record these transactions.Then state how much gross profit Angel made.
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