CDFM Accounting and Financial Reporting 5

Question 1

Which federal accounting standard establishes the hierarchy of accounting standards applicable to federal entities?

Accepted Answer

SFFAS No. 34

Answer

SFFAS No. 34 establishes the hierarchy of generally accepted accounting principles (GAAP) for federal entities, identifying the authoritative sources in order of priority.

Question 2

In DoD's two-phase budget execution process, 'commitment' refers to:

Accepted Answer

An administrative reservation of funds in anticipation of an obligation

Answer

A commitment is an internal administrative action that reserves funds before a formal obligation is recorded, reducing the risk of over-obligation.

Question 3

Under SFFAS No. 7, exchange revenues in the federal government are recognized when:

Accepted Answer

The government provides goods, services, or assets and is entitled to consideration

Answer

Exchange revenues (e.g., user fees, sales) are recognized under the accrual method when the government has provided value and is entitled to receive payment.

Question 4

What is the primary difference between 'gross cost' and 'net cost' as presented on the Statement of Net Cost?

Accepted Answer

Net cost equals gross cost minus earned revenues

Answer

Net cost of operations equals gross cost of operations less revenues earned from exchange transactions, showing the cost borne by the taxpayer.

Question 5

A DoD auditor finds that disbursements were recorded in the wrong appropriation account. This error most directly affects which financial statement assertion?

Accepted Answer

Accuracy and valuation

Answer

Recording disbursements to the wrong account violates accuracy because the amounts are not attributed to the correct appropriation, distorting both the SBR and the Statement of Net Cost.

CDFM - Certified Defense Financial Manager Practice Test

CDFM - Certified Defense Financial Manager Practice Test

CDFM Accounting and Financial Reporting 5