AICPA Governmental Accounting 1 — Questions and Answers
Question 1: Which basis of accounting is used by governmental funds under GASB standards?
- Accrual basis
- Modified accrual basis (Correct answer)
- Cash basis
- Full accrual basis
Correct answer: Modified accrual basis
Governmental funds use the modified accrual basis, recognizing revenues when measurable and available, and expenditures when the related liability is incurred.
Question 2: Under GASB standards, which of the following is classified as a governmental fund?
- Enterprise fund
- Internal service fund
- General fund (Correct answer)
- Pension trust fund
Correct answer: General fund
The General Fund is a governmental fund; enterprise and internal service funds are proprietary funds, and pension trust funds are fiduciary funds.
Question 3: What is the measurement focus of governmental funds?
- Economic resources
- Current financial resources (Correct answer)
- Capital resources
- Long-term liabilities
Correct answer: Current financial resources
Governmental funds use the current financial resources measurement focus, concentrating on near-term inflows and outflows of spendable resources.
Question 4: Government-wide financial statements are prepared using which basis of accounting?
- Modified accrual basis
- Cash basis
- Accrual basis (Correct answer)
- Budgetary basis
Correct answer: Accrual basis
Government-wide financial statements (statement of net position and statement of activities) are prepared using the full accrual basis of accounting.
Question 5: Which GASB statement established the current financial reporting model for state and local governments?
- GASB Statement No. 14
- GASB Statement No. 34 (Correct answer)
- GASB Statement No. 54
- GASB Statement No. 68
Correct answer: GASB Statement No. 34
GASB Statement No. 34, issued in 1999, established the current financial reporting model including government-wide and fund financial statements.
Question 6: Revenues in governmental funds are recognized when they are:
- Earned and realizable
- Received in cash
- Measurable and available (Correct answer)
- Obligated by a legal document
Correct answer: Measurable and available
Under modified accrual, governmental funds recognize revenues when they are both measurable and available — collectible within the current period or soon enough to pay current liabilities.
Question 7: Which of the following is classified as a proprietary fund?
- Special revenue fund
- Capital projects fund
- Enterprise fund (Correct answer)
- Permanent fund
Correct answer: Enterprise fund
Enterprise funds are proprietary funds that account for operations financed and operated similarly to private business enterprises, such as utilities or airports.
AICPA Governmental Accounting 1
Which basis of accounting is used by governmental funds under GASB standards?