CMC Financial Administration & Budgets 2

Question 1

Which budgeting approach requires each department to justify every expenditure from zero rather than using the prior year as a baseline?

Accepted Answer

Zero-based budgeting

Answer

Zero-based budgeting (ZBB) requires justification for every dollar requested, with no automatic carryover from the prior year's appropriations.

Question 2

A municipality issues a $5 million general obligation bond. Who is ultimately responsible for repaying this debt?

Accepted Answer

The full faith and credit of the municipality's taxpayers

Answer

General obligation bonds are backed by the full faith and credit of the issuing government, meaning taxpayers are the ultimate guarantors.

Question 3

What is an encumbrance in governmental accounting?

Accepted Answer

A reservation of appropriation for an anticipated expenditure

Answer

An encumbrance reserves a portion of an appropriation when a purchase order or contract is executed, before the actual expenditure occurs.

Question 4

Under GASB standards, what type of fund accounts for activities financed by user charges where the intent is to recover costs through fees?

Accepted Answer

Enterprise fund

Answer

Enterprise funds account for government activities—like water or utilities—that are financed primarily through user charges in a business-like manner.

Question 5

A city's budget shows revenues of $10M and expenditures of $11.5M with a $1.5M fund balance draw. What best describes this budget?

Accepted Answer

A deficit budget

Answer

When expenditures exceed revenues and the difference is covered by drawing down fund balance, the budget is operating at a deficit.

(CMC) Certified Municipal Clerk Practice Test

(CMC) Certified Municipal Clerk Practice Test

CMC Financial Administration & Budgets 2