CGFM Governmental Accounting and Fund Accounting 1 — Questions and Answers
Question 1: Which basis of accounting is used by governmental funds under GAAP?
- Full accrual basis
- Modified accrual basis (Correct answer)
- Cash basis
- Budgetary basis
Correct answer: Modified accrual basis
Governmental funds use the modified accrual basis, recognizing revenues when measurable and available and expenditures when incurred.
Question 2: Under the modified accrual basis, revenues are recognized when they are:
- Earned and realizable
- Measurable and available (Correct answer)
- Collected in cash
- Appropriated by the legislature
Correct answer: Measurable and available
Modified accrual requires revenues to be measurable and available (collectible within the current period or soon enough to pay current liabilities) for recognition.
Question 3: Which of the following is a proprietary fund type?
- General Fund
- Special Revenue Fund
- Enterprise Fund (Correct answer)
- Capital Projects Fund
Correct answer: Enterprise Fund
Enterprise Funds are proprietary funds used to account for activities financed by user charges, similar to private business operations.
Question 4: The General Fund accounts for:
- All capital asset acquisitions
- Financial resources legally restricted for specific purposes
- All financial resources not required to be accounted for in another fund (Correct answer)
- Debt service payments only
Correct answer: All financial resources not required to be accounted for in another fund
The General Fund is the chief operating fund and accounts for all financial resources except those required to be accounted for in another fund.
Question 5: Internal Service Funds are classified as which type of fund?
- Governmental fund
- Fiduciary fund
- Proprietary fund (Correct answer)
- Special revenue fund
Correct answer: Proprietary fund
Internal Service Funds are proprietary funds used to account for services provided by one department to other departments on a cost-reimbursement basis.
Question 6: Which fund type is used to account for resources held by a government in a trustee or agency capacity?
- Proprietary funds
- Fiduciary funds (Correct answer)
- Governmental funds
- Debt Service funds
Correct answer: Fiduciary funds
Fiduciary funds account for assets held by a government in a trustee or agent capacity for others, such as pension trust funds and custodial funds.
Question 7: Under GASB standards, which measurement focus do governmental funds use?
- Economic resources measurement focus
- Current financial resources measurement focus (Correct answer)
- Capital maintenance measurement focus
- Operating capability measurement focus
Correct answer: Current financial resources measurement focus
Governmental funds use the current financial resources measurement focus, emphasizing the flow of current financial resources rather than total economic resources.
CGFM Governmental Accounting and Fund Accounting 1
Which basis of accounting is used by governmental funds under GAAP?