AICPA Governmental & Not-for-Profit Accounting 2

Question 1

How are capital assets (e.g., buildings, equipment) reported in government-wide financial statements?

Accepted Answer

Capitalized and depreciated over their useful lives

Answer

Under the full accrual basis used for government-wide statements, capital assets are capitalized and depreciated, matching the cost over their service lives.

Question 2

A special revenue fund is used to account for:

Accepted Answer

Resources legally restricted or committed for specific purposes other than debt service or capital projects

Answer

Special revenue funds segregate revenues that are legally restricted or committed to specific purposes, such as a dedicated gas-tax fund for road maintenance.

Question 3

What is an encumbrance in governmental accounting?

Accepted Answer

A commitment of fund resources against an approved appropriation for a purchase order or contract

Answer

An encumbrance represents a reservation of an appropriation for a future expenditure (e.g., when a purchase order is issued) to prevent over-spending the budget.

Question 4

Under GASB, enterprise funds are used to report activities that are financed primarily through:

Accepted Answer

User fees and charges for services to external parties

Answer

Enterprise funds account for activities where the cost of providing services is recovered primarily through fees charged to external users, similar to a business.

Question 5

The Management's Discussion and Analysis (MD&A) in a government's annual report is classified as:

Accepted Answer

Required supplementary information (RSI)

Answer

The MD&A is required supplementary information (RSI) that precedes the basic financial statements and provides an objective analysis of financial activities.

(AICPA) Association of International Certified Professional Accountants Practice Test

(AICPA) Association of International Certified Professional Accountants Practice Test

AICPA Governmental & Not-for-Profit Accounting 2