CPA Governmental & Not-for-Profit Accounting 2

Question 1

Which governmental fund is used to account for the accumulation of resources for and the payment of general long-term debt principal and interest?

Accepted Answer

Debt Service Fund

Answer

The Debt Service Fund accounts for financial resources set aside for repayment of general long-term debt obligations including principal and interest.

Question 2

Under the modified accrual basis, property tax revenues are recognized when they are:

Accepted Answer

Measurable and available within 60 days after year-end

Answer

Under modified accrual, property taxes are recognized as revenue when measurable and available, with GASB generally defining available as collectible within 60 days of year-end.

Question 3

A not-for-profit hospital receives a $500,000 donation restricted by the donor for equipment purchases. Before the equipment is purchased, this amount should be classified as:

Accepted Answer

Net assets with donor restrictions

Answer

Donor-restricted contributions are recorded as net assets with donor restrictions until the restriction is satisfied through expenditure for the specified purpose.

Question 4

Which GASB concept requires governments to report on their fiscal accountability by using the modified accrual basis in fund statements?

Accepted Answer

Fiscal accountability

Answer

Fiscal accountability focuses on whether the government raised and spent resources in accordance with the budget and legal requirements, which is served by fund-level modified accrual reporting.

Question 5

In governmental accounting, which of the following would be recorded as an expenditure rather than an expense?

Accepted Answer

Depreciation of general capital assets

Answer

Governmental funds do not record depreciation because they use current financial resources focus; capital asset costs are recorded as expenditures when purchased, not depreciated over time.

(CPA) Certified Practicing Accountant Practice Test

(CPA) Certified Practicing Accountant Practice Test

CPA Governmental & Not-for-Profit Accounting 2