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QUESTION 1

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Governments use Special Revenue Funds to provide elected officials, resource providers, and the citizenry with a greater degree of assurance that the revenues provided for specified purposes are used only for those purposes.

Select one:

True

False

QUESTION 2

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In the General Fund, interest on short-term investments always should be accrued as revenue at a government's fiscal year-end.

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True

False

QUESTION 3

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According to GASB financial reporting requirements, the General Fund and major Special Revenue Funds are required to prepare a budgetary comparison statement.

Select one:

True

False

QUESTION 4

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What is the general rule for recognizing revenues in governmental funds?

Select one:

A. Revenues should be recognized when measurable and available

B. Revenues may be recognized either when collected in cash or when the budget is adopted, at the option of the government

C. Revenues should be recognized when collected in cash

D. Revenues should be recognized when the budget is adopted

QUESTION 5

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The Village of Monroe borrowed $500,000 for a period of six months using a tax anticipation note on November 1, 2019. The Village is charged interest on the borrowing at annual rate of 6 percent. The Village's fiscal year-end is December 31, 2019. What journal entry, if any, should be made in the Village's General Fund on December 31, 2019?

Select one:

A.

Expenditures—interest

15,000

Interest payable

15,000

B.

Expenditures—interest

5,000

Interest payable

5,000

C.

Interest expense

5,000

Interest payable

5,000

D. No entry is required on December 31, 2019.

QUESTION 6

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The City of Watsonville places a purchase order for street maintenance supplies of $56,000 in its General Fund. This would result in:

Select one:

A. A debit to Encumbrances—street maintenance supplies

B. A credit to Fund balance

C. A debit to Expenditures—street maintenance supplies

D. A credit to Vouchers payable

QUESTION 7

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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?

Select one:

A. It should reduce encumbrances by $300,000

B. It should reduce encumbrances by $200,000

C. It should make no encumbrance entry until all three trucks have been received

D. It should reduce encumbrances by $100,000

QUESTION 8

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Which of these line items is not appropriate in the statement of revenues, expenditures, and changes in fund balance of the General Fund?

Select one:

A. Fund balance, beginning of year

B. Revenues—property taxes

C. Property taxes receivable

D. Expenditures—public safety supplies

QUESTION 9

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The accounting and financial reporting for the General Fund is least similar to that of

Select one:

A. A Special Revenue Fund

B. A Debt Service Fund

C. An Enterprise Fund

D. A Capital Projects Fund

QUESTION 10

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A tax roll for property taxes serves as a:

Select one:

A. A multi-year list of cumulative property taxes owed to a jurisdiction.

B. A subsidiary ledger for property taxes receivable.

C. A control account for property taxes receivable.

D. A contra account for property taxes receivable.

QUESTION 11

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Under the modified accrual basis of accounting

Select one:

A. The accrual basis of accounting is modified when recognizing and measuring revenues, but not when recognizing and measuring expenditures

B. Encumbrances are equivalent to expenditures

C. Property tax revenues are recognized when earned

D. Property tax revenues are recognized when measurable and available

QUESTION 12

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When a city borrows cash short-term in anticipation of the receipt of property tax revenues, which account would it credit?

Select one:

A. Property taxes receivable

B. Property tax revenues

C. Estimated other financing sources

D. Tax anticipation notes payable

QUESTION 13

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In governmental accounting, vouchers payable is most similar to which of the following accounts used by business enterprises?

Select one:

A. Dividends payable

B. Unearned revenues

C. Contributed capital

D. Accounts payable

QUESTION 14

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A city borrows $800,000 in January because it does not receive property taxes until May. It borrows on a tax anticipation note, which it will repay in May when taxes are collected. How would the city classify the note if it were to prepare governmental-type fund financial statements on March 31?

Select one:

A. As a revenue

B. As an other financing source

C. As a liability

D. As a direct increase in equity

QUESTION 15

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The city council passed a budget for its only Special Revenue Fund. The budget included estimated revenues of $380,000 and appropriations of $410,000. The budget was recorded in the general ledger at the beginning of the year and no amendments to the budget occurred during the year. What journal entry should be made to close the city's budgetary accounts for its Special Revenue Fund at its fiscal year-end?

Select one:

A.

Appropriations

410,000

Estimated revenues

380,000

Budgetary fund balance

30,000

B.

Appropriations

410,000

Estimated revenues

380,000

Unassigned fund balance

30,000

C.

Estimated revenues

380,000

Budgetary fund balance

30,000

Appropriations

410,000

D.

Estimated revenues

380,000

Unassigned fund balance

30,000

Appropriations

Expenditures—interest

15,000

Interest payable

15,000

Explanation / Answer

Answer to qns 1 : True - Because this fund purposefully established by the govenment to collect money in form of taxes and will be used for specific purpose or project only. It also provides full accountability and transparency to taxpayers that their money will be used for intended purpose only.

Answer to qns 2 : True - This forms part of current assets and cash will be received within less than 1 year.

Answer to qns 3 : True - Budgetary comparison statement is prepared to compare item by item allocated funds alongwith actual results where the funds are used or operations made.

Answer to qns 4 : Option A. Revenues should be recognized when measurable and available

Answer to qns 5 : Option C. Interest expense Dr. 5000

Interest payable Cr. 5000

Since interest will be paid for 2 months i.e. November and December ($500000 x 6% x 2months)

Answer to qns 6 : Option C. Debit to Expenditures—street maintenance supplies since it is not burden but a necessary expenditure

Answer to qns 7 : Option B. It should reduce encumbrances by $200,000 since 2 trucks are received

Answer to qns 8 : Option C. Property taxes receivable since it is a balance sheet item

Answer to qns 9 : Option A. A Special Revenue Fund.

Answer to qns 10 : Option A. A multi-year list of cumulative property taxes owed to a jurisdiction. Since this an official information provided wherein breakdown of all properties within a jurisdiction are provided.

Answer to qns 11 : Option A. The accrual basis of accounting is modified when recognizing and measuring revenues, but not when recognizing and measuring expenditures

Answer to qns 12 : Option D. Tax anticipation notes payable. This is because when property tax receipts will be received the short term debt will be repayed.

Answer to qns 13 : Option D. Accounts payable

Answer to qns 14 : Option C. As a liability - because it is to be paid in near future.

Answer to qns 15 : Option A Journal entry

Appropriations Dr. 410,000

Estimated Revenues Cr. 380,000

Budgetary fund balance Cr. 30,000

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