CDFM Accounting and Financial Reporting 3 — Questions and Answers
Question 1: In DoD financial management, what does the term 'unliquidated obligation' (ULO) represent?
- Funds that have been disbursed but not yet recorded
- Obligated amounts for which disbursement has not yet occurred (Correct answer)
- Appropriations that have expired
- Funds returned to the Treasury
Correct answer: Obligated amounts for which disbursement has not yet occurred
An unliquidated obligation is an amount obligated but not yet paid; it reduces available budget authority until disbursement or deobligation occurs.
Question 2: What is the key distinction between 'expired' and 'canceled' appropriations under federal budget law?
- Expired funds can still be obligated; canceled funds cannot
- Canceled funds can be used for new obligations; expired funds cannot
- Expired funds retain their unobligated balances for 5 years; canceled balances are withdrawn (Correct answer)
- There is no distinction — both terms mean the same thing
Correct answer: Expired funds retain their unobligated balances for 5 years; canceled balances are withdrawn
Expired appropriations retain unobligated balances for 5 years to liquidate valid obligations; after that, balances are canceled and returned to Treasury.
Question 3: Which document serves as the primary source for recording obligations in the DoD accounting system?
- Disbursement voucher
- Reimbursable agreement
- Commitment document
- Obligation document or contract award (Correct answer)
Correct answer: Obligation document or contract award
Obligations are formally recorded upon execution of a legal obligation such as a contract award, purchase order, or similar obligating document.
Question 4: Under SFFAS No. 5, which of the following is classified as a contingent liability that must be recognized on the balance sheet?
- A possible loss from a lawsuit that is unlikely to occur
- A probable loss from litigation where the amount can be reasonably estimated (Correct answer)
- A remote chance of losing a contract dispute
- A potential environmental cleanup cost with no estimate available
Correct answer: A probable loss from litigation where the amount can be reasonably estimated
SFFAS No. 5 requires recognition of a contingent liability when a loss is probable and the amount can be reasonably estimated.
Question 5: In the DoD's General Fund financial statements, 'Fund Balance with Treasury' represents:
- Cash held in an agency's bank account
- The agency's remaining borrowing authority
- The agency's account balance maintained at the U.S. Treasury (Correct answer)
- Undeposited collections in transit
Correct answer: The agency's account balance maintained at the U.S. Treasury
Fund Balance with Treasury is an asset representing the agency's remaining available budget held by the U.S. Treasury, not a commercial bank account.
Question 6: Which financial statement reconciles the beginning and ending balances of net position for a federal entity?
- Statement of Net Cost
- Statement of Budgetary Resources
- Statement of Changes in Net Position (Correct answer)
- Balance Sheet
Correct answer: Statement of Changes in Net Position
The Statement of Changes in Net Position explains how net position changed during the period through net cost of operations, financing sources, and other transactions.
Question 7: DoD's 'accountable property' system requires physical inventory verification primarily to ensure:
- Compliance with tax reporting requirements
- That PP&E records agree with actual physical assets on hand (Correct answer)
- That all property is properly insured
- That depreciation rates are correctly applied
Correct answer: That PP&E records agree with actual physical assets on hand
Physical inventory reconciliation ensures that property records in the financial system match actual assets, supporting both stewardship and financial statement accuracy.
CDFM Accounting and Financial Reporting 3
In DoD financial management, what does the term 'unliquidated obligation' (ULO) represent?