CDFM Accounting and Financial Reporting 2 — Questions and Answers
Question 1: Under DoD accounting standards, which financial statement presents the net cost of operations for a federal agency?
- Balance Sheet
- Statement of Net Cost (Correct answer)
- Statement of Budgetary Resources
- Statement of Changes in Net Position
Correct answer: Statement of Net Cost
The Statement of Net Cost shows the net cost of operations by responsibility segment, reflecting gross costs less earned revenues.
Question 2: What is the primary purpose of the Statement of Budgetary Resources (SBR) in federal financial reporting?
- Show the agency's net worth
- Report on budgetary authority and its status (Correct answer)
- Disclose contingent liabilities
- Reconcile proprietary and budgetary accounts
Correct answer: Report on budgetary authority and its status
The SBR provides information on budgetary resources made available and their status, linking budget execution to financial reporting.
Question 3: In federal accounting, 'intragovernmental' transactions refer to transactions between:
- A federal entity and state governments
- Two federal entities within the same reporting entity (Correct answer)
- Federal entities and foreign governments
- Federal agencies and non-federal entities
Correct answer: Two federal entities within the same reporting entity
Intragovernmental transactions occur between federal entities and must be eliminated in consolidated financial statements to avoid double-counting.
Question 4: Which accounting basis is required for federal agency financial statements under SFFAS No. 1?
- Cash basis
- Modified accrual basis
- Full accrual basis (Correct answer)
- Obligation basis
Correct answer: Full accrual basis
SFFAS No. 1 requires full accrual accounting for federal financial statements, recognizing revenues when earned and expenses when incurred.
Question 5: A DoD component receives a reimbursable order from another federal agency. When should revenue be recognized?
- When the order is received
- When goods are delivered or services are performed (Correct answer)
- When payment is collected
- When the order is accepted
Correct answer: When goods are delivered or services are performed
Under accrual accounting, reimbursable revenue is recognized when the earning event occurs — delivery of goods or performance of services.
Question 6: Which SFFAS establishes standards for accounting for property, plant, and equipment (PP&E) in the federal government?
- SFFAS No. 1
- SFFAS No. 5
- SFFAS No. 6 (Correct answer)
- SFFAS No. 10
Correct answer: SFFAS No. 6
SFFAS No. 6 establishes accounting standards for federal PP&E, including recognition, measurement, and depreciation requirements.
Question 7: Under federal accounting standards, heritage assets are generally:
- Depreciated over their useful life
- Capitalized at historical cost and not depreciated (Correct answer)
- Expensed in the period acquired
- Reported only in supplemental information
Correct answer: Capitalized at historical cost and not depreciated
Heritage assets (monuments, historical artifacts, etc.) are capitalized but not depreciated because they have indeterminate useful lives and are held for public benefit.
CDFM Accounting and Financial Reporting 2
Under DoD accounting standards, which financial statement presents the net cost of operations for a federal agency?