Public Sector Accounting Exam Questions
Course Introduction
Public Sector Accounting explores the principles, practices, and regulatory frameworks that govern financial management and reporting within public sector organizations, such as government entities and not-for-profits. The course examines budgeting processes, fund accounting, financial reporting standards (such as IPSAS and GASB), and internal controls unique to public finances. Students will analyze the objectives of accountability and transparency in resource allocation, learn about auditing and performance measurement in the public sector, and understand the challenges associated with public funding and fiscal responsibility. Through case studies and practical exercises, the course equips students with skills necessary for effective financial stewardship and decision-making in the public domain.
Recommended Textbook
Accounting for Governmental and Nonprofit Entities 16th Edition by Jacqueline L. Reck Wilson
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Page 2
Chapter 1: Introduction to Accounting and Financial
Reporting for Governmental and Not-For-Profit Entities
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Sample Questions
Q1) Which of the following would typically not be included in the introductory section of a comprehensive annual financial report?
A) Title and contents page.
B) Letter of transmittal.
C) A description of the government.
D) Summary of the government's current financial position and results of financial activities.
Answer: D
Q2) The body that has been established to recommend accounting and financial reporting standards for the federal government is the
A) Financial Accounting Standards Board (FASB).
B) Governmental Accounting Standards Board (GASB).
C) Government Accountability Office (GAO).
D) Federal Accounting Standards Advisory Board (FASAB).
Answer: D
Q3) Explain the concepts fiscal and operational accountability and the basis of accounting used to capture each concept.
Answer: Not Answer
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Chapter 2: Principles of Accounting and Financial Reporting
for State and Local Governments
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Sample Questions
Q1) Generally accepted accounting principles applicable to state and local governments require that
A) Only governmental funds and proprietary funds should be established.
B) Only those funds required by law,GASB standards,and sound financial administration should be established.
C) Only those funds required by law should be established.
D) All categories of funds must be established.
Answer: B
Q2) List the seven fund financial statements that are required as part of the basic financial statements by GASB standards.What measurement focus and basis of accounting should be used in preparing each of these statements?
Answer: Not Answer
Q3) Individual fund financial information is reported in separate columns of governmental and proprietary fund financial statements for only those funds that meet the GASB size-related criteria as major funds.
A)True
B)False
Answer: False
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Chapter 3: Governmental Operating Statement Accounts; Budgetary Accounting
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Sample Questions
Q1) An allotment may be described as an internal allocation of funds on a periodic basis usually agreed upon by the department heads and the chief executive.
A)True
B)False
Answer: True
Q2) All decreases in fund financial resources,other than for repayment of fund liabilities,are termed "expenditures."
A)True
B)False
Answer: False
Q3) The Expenditures control account of a government is credited when:
A) Supplies are ordered.
B) Supplies previously encumbered are received.
C) The budget is recorded.
D) Temporary accounts are closed out at the end of the year.
Answer: D
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Page 5
Chapter 4: Accounting for Governmental Operating
Activities-Illustrative Transactions and Financial Statements
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Sample Questions
Q1) Which of the following would properly be reported in the operating statement of a governmental fund?
A) Interest on a tax anticipation note issued and repaid during the period.
B) Amortization expense.
C) Depreciation expense.
D) A grant that is intended to finance activities of the following period.
Q2) During January 2014 General Fund supplies ordered in the previous fiscal year and encumbered at an estimated amount of $2,000 were received at an actual cost of $2,200.The entry to record this transaction will require a debit to
A) Expenditures-2014 in the amount of $2,200.
B) Expenditures-2013 in the amount of $200.
C) Expenditures-2014 in the amount of $200.
D) Expenditures-2013 in the amount of $2,200.
Q3) Which of the following types of nonexchange transactions recognize revenue when all the eligibility requirements are met?
A) Voluntary nonexchange transactions.
B) Imposed nonexchange transactions.
C) Derived tax revenues.
D) Property tax revenues.
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Chapter 5: Accounting for General Capital Assets and Capital Projects
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Sample Questions
Q1) Capital projects funds should use the modified accrual basis of accounting for revenues and expenses.
A)True
B)False
Q2) General capital assets should be distinguished from capital assets that are specifically associated with activities financed by proprietary and fiduciary funds,since capital assets acquired by proprietary and fiduciary funds are accounted for by those funds.
A)True
B)False
Q3) General capital assets acquired under capital leases should not be recorded in the governmental activities accounts.
A)True
B)False
Q4) Streets,curbs,and sidewalks constructed or acquired through use of capital projects fund resources should never be reported in the financial statements of a government because they are for the use of the public,not for use by the government.
A)True
B)False
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Chapter 6: Accounting for General Long-Term Liabilities and Debt Service
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Sample Questions
Q1) Interest expenditures on bonds payable should be recorded in a debt service fund
A) At the end of the fiscal period if the interest due date does not coincide with the end of the fiscal period.
B) When bonds are issued.
C) When the interest is paid.
D) When the interest is legally payable.
Q2) Immediately after making its annual $20,000 lease payment on June 30,2014,the last day of its fiscal year,Capitol City had an unpaid capital lease obligation of $95,000.The interest rate applicable to the lease is 10 percent.When the $20,000 lease payment due on June 30,2015 is made,the journal entry for the governmental activities accounts will include
A) A debit to Capital Lease Obligation Payable in the amount of $10,500.
B) A debit to Capital Lease Obligation Payable in the amount of $20,000.
C) A debit to Cash in the amount of $20,000.
D) A debit to Capital Lease Obligation Payable in the amount of $12,500.
Q3) The sale of revenue bonds by a water utility fund would be recorded
A) In the governmental activities accounts as a liability.
B) In an enterprise fund as "Proceeds of Bonds."
C) In an enterprise fund as a liability.
D) In an enterprise fund as a revenue.
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Chapter 7: Accounting for the Business-Type Activities of
State and Local Governments
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Sample Questions
Q1) To facilitate the combination of utility financial statements with the statements of other enterprise funds,GAAP permits utilities to follow the customary format used by nonutility business organizations.
A)True
B)False
Q2) Revenues of internal service funds should be recognized only when they are expected to be available in time to pay current liabilities of the fund.
A)True
B)False
Q3) Capital assets acquired under a capital lease for use by an internal service fund should be recorded in the General Fund in order to report all leased assets in one financial statement.
A)True
B)False
Q4) In some local government financial reports you will find activities such as solid waste disposal and sewage disposal accounted for as a part of the General Fund.In other reports apparently identical activities are accounted for as enterprise funds.Under what conditions would each treatment be proper?
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Chapter 8: Accounting for Fiduciary Activities-Agency and Trust Funds
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Sample Questions
Q1) When a cash and investment pool is created,the assets of each fund entering the pool should be transferred to the pool at their fair value at the date of the transfer.
A)True
B)False
Q2) Which of the statements concerning agency funds is true?
A) Agency funds use the same basis of accounting as permanent funds.
B) Agency funds are reported only on the statement of fiduciary net position.
C) Agency funds use the temporary accounts Additions and Deductions.
D) Agency funds never receive cash.
Q3) Explain the purpose of the account "undistributed change in fair value of investments" used in a cash and investment pool and describe how it should be reported in the government's financial statements.
Q4) An agency fund should be used to account for special assessment billing and collection,and related debt service of special assessment debt,if the government has no responsibility for the debt.
A)True
B)False
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Chapter 9: Financial Reporting of State and Local Governments
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Sample Questions
Q1) Which of the following is a required program revenue category in the government-wide statement of activities?
A) Special assessments.
B) Operating grants and contributions.
C) Sales taxes.
D) Transfers.
Q2) According to the guidance of GASB Concepts Statement 3,financial information can be communicated by recognition in the financial statements,disclosure in the notes to the financial statements,presentation as required supplementary information,or presentation as supplementary information.
A)True
B)False
Q3) Describe the alternative processes for capturing the financial accounting information required for government-wide financial statements.
Q4) Describe the objectives of financial reporting by state and local governments.
Q5) What is meant by the term "reporting entity" in accounting for state and local governments?
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Chapter 10: Analysis of Governmental Financial Performance
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Sample Questions
Q1) Cash solvency is the government's long-run ability to pay all the costs of doing business.
A)True
B)False
Q2) "Financial statements are virtually useless in evaluating a city's financial condition." Do you agree with this statement? Why or why not?
Q3) A financial capability ratio that measures the degree to which the annual budget is loaded with disbursements to pay off long-term debt is:
A) Revenue dispersion.
B) Debt service load.
C) Financing margin-bonded debt per capita.
D) Financing margin-legal debt limit.
Q4) Environmental factors facing a government have little impact on a city's fiscal policy.
A)True B)False
Q5) "Benchmarking is a simple method for comparing one government to another." Do you agree or disagree with this statement? Explain.
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Chapter 11: Auditing of Governmental and Not-For-Profit Organizations
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Sample Questions
Q1) Attestation engagements include
A) Assessment of the extent to which entity programs met their objectives.
B) Reviews of interim financial information.
C) Services that provide various levels of assurance on such matters as internal control,compliance,MD&A presentation,and reliability of performance measures.
D) Examining whether the entity's financial statements fairly present in conformity with GAAP.
Q2) Which of the following statements concerning the Single Audit Act of 1984 (with 1996 Amendments)is correct?
A) Only those entities receiving over $500,000 a year in federal financial assistance are required to have a single audit.
B) Those entities expending under $500,000 a year in federal awards are exempt from single audit requirements.
C) The Single Audit Act only applies if an entity has high risk programs.
D) The single audit is optional for all entities receiving federal awards.
Q3) How is an OMB Circular A-133 audit related to a GAGAS audit? How is an OMB Circular A-133 audit different from a GAGAS audit?
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Page 13
Chapter 12: Budgeting and Performance Measurement
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Sample Questions
Q1) Some of the budgeting approaches governments have experimented with as alternatives to line-item,incremental budgeting include performance budgeting,program budgeting,the planning-programming-budgeting system,and zero-based budgeting.
A)True
B)False
Q2) Balanced scorecards integrate all of the following into a document that can be shared with employees and stakeholders except
A) GASB financial reporting standards.
B) Internal business processes measures.
C) Nonfinancial measures,such as customer satisfaction.
D) Financial performance measures.
Q3) The concepts of total quality management (TQM)are consistent with earlier budget approaches such as performance budgeting and PPBS.
A)True
B)False
Q4) What advantages does total quality management (TQM)offer a government? Is it fundamentally a budget approach?
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Chapter 13: Accounting for Not-For-Profit Organizations
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Sample Questions
Q1) The FASB Codification requires the following financial statements for all nongovernmental,not-for- profit organizations
A) Statement of financial position,statement of activities,statement of cash flows,and statement of functional expenses.
B) Statement of financial position,statement of operations,statement of cash flows,and statement of functional expenses.
C) Statement of financial position,statement of activities,and statement of cash flows.
D) Statement of financial position,statement of revenues and expenses,statement of cash flows,and statement of functional expenses.
Q2) Would a not-for-profit library that receives the majority of its resources from a specific tax levy on local citizens remitted to the city follow the same financial reporting principles as would a library that operates without a dedicated tax and instead relies on contributions from individuals and grants from foundations and governments? Explain.
Q3) Describe the difference between fund accounting and the accounting methods required by FASB.
Q4) Explain the accounting for contributions received by a financial intermediary.
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Page 15
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Sample Questions
Q1) A good measure of whether a not-for-profit organization is a "going concern" and can sustain its operations into the future is
A) Total revenues divided by assets.
B) Percentage of unrestricted net assets to operating expenses.
C) Percentage of total expenses spent on the program function as opposed to support function.
D) Fund-raising expenses as a percentage of public support.
Q2) Only 501(c) (3)organizations receiving at least 50 percent of their support from the public at large rather than a few individual donors can be considered public charities.
A)True
B)False
Q3) A good measure of whether a not-for-profit organization is "liquid" and can meet its short-term obligations is
A) Percentage of total expenses spent on the program function as opposed to support function.
B) Total revenues divided by total expenses.
C) Current assets divided by current liabilities.
D) Percentage of unrestricted net assets to operating expenses.
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Chapter 15: Accounting for Colleges and Universities
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Sample Questions
Q1) FASB standards applicable to private colleges and universities require that their financial statements include
A) A statement of functional expenses.
B) A statement of net changes in financial position.
C) A statement of activities.
D) Private colleges and universities are required to prepare all of the above statements under FASB standards.
Q2) State educational appropriations received by a public university are classified as which of the following on the statement of revenues,expenses,and changes in net position?
A) Nonoperating revenue.
B) Operating revenue.
C) Other financing source.
D) Increase in unrestricted net position.
Q3) A private college would record a federal grant received to test a medical device that the federal government intends to patent as Contributions-Temporarily Restricted.
A)True
B)False
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Chapter 16: Accounting for Health Care Organizations
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Sample Questions
Q1) Patient service revenues and related receivables exclude charges for charity care services.
A)True
B)False
Q2) Which of the following volunteer service is most likely to be reported by a private hospital as contribution revenue and an expense?
A) Community members who plant flowers on the grounds once a year in the spring.
B) Volunteers in the gift shop who work a few hours a day serving customers.
C) Nurses from a religious organization who volunteer to assist in the care of critically ill children.
D) An accountant who is a member of the board of directors.
Q3) How would the cash acquisition of equipment be reported on a health care entity's statement of cash flows?
A) Investing activity applying GASB standards.
B) Investing activity applying FASB standards.
C) Financing activity applying FASB standards.
D) Operating activity applying GASB standards.
Q4) Describe what prepaid health care plans are and some of the related accounting issues.
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Chapter 17: Accounting and Reporting for the Federal Government
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Sample Questions
Q1) The Comptroller General of the United States is the head of the:
A) Office of the Management and Budget.
B) Government Accountability Office.
C) Congressional Budget Office.
D) Federal Accounting Standards Advisory Board.
Q2) The financial statements of the U.S.government are prepared using generally accepted accounting principles promulgated by the Governmental Accounting Standards Board.
A)True
B)False
Q3) Explain the process of financial reporting of the U.S.Government as a whole.Does the federal government receive an unqualified audit opinion on its financial report?
Q4) Explain the "dual-track" accounting system used by federal agencies and why it is needed.
Q5) Heritage assets are defined as beneficial investments of the federal government in items such as nonfederal physical property,human capital,and research and development.
A)True
B)False
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