Certified Public Accountant Governmental & Not-for-Profit Accounting 2

Question 1

Under GASB standards, which basis of accounting do proprietary funds (enterprise and internal service funds) use?

Accepted Answer

Full accrual basis

Answer

Proprietary funds use full accrual accounting because they are business-like activities that follow a capital maintenance (economic resources) measurement focus.

Question 2

A county receives bond proceeds to construct a new courthouse. These resources should be accounted for in which fund?

Accepted Answer

Capital Projects Fund

Answer

Capital Projects Funds account for financial resources restricted to the acquisition or construction of major capital facilities, such as a courthouse.

Question 3

Which of the following government activities would be classified as a business-type activity in government-wide statements?

Accepted Answer

Municipal water utility

Answer

Business-type activities are government services financed primarily through user charges, such as a water utility, and are reported separately in government-wide statements.

Question 4

What is the term for the residual interest in a government's assets after deducting liabilities and adjusting for deferred items, used in government-wide statements?

Accepted Answer

Net position

Answer

Net position is the GASB equivalent of equity for governmental entities, representing the residual interest after deducting liabilities and adding deferred outflows of resources.

Question 5

Under FASB ASC 958, a donation requiring the principal to be maintained in perpetuity with only investment income available for spending creates:

Accepted Answer

Net assets with donor restrictions

Answer

An endowment gift requiring principal preservation in perpetuity creates net assets with donor restrictions, as the donor has placed permanent restrictions on the use of the funds.

Certified Public Accountant Practice Test

Certified Public Accountant Practice Test

Certified Public Accountant Governmental & Not-for-Profit Accounting 2