Government Budgeting & Finance Flashcards
7 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Government Budgeting & Finance flashcards as text
Which budgeting approach requires each department to justify every expenditure from zero each fiscal year?
Answer: Zero-based budgeting
Zero-based budgeting (ZBB) starts from a 'zero base' and requires justification for all expenditures, unlike incremental budgeting which uses the prior year's budget as a baseline.
A government's general obligation bonds are backed by:
Answer: The full faith and credit of the issuing government
General obligation bonds are secured by the issuer's pledge to use legally available resources, including taxing power, to repay bondholders.
What is the purpose of an encumbrance in governmental accounting?
Answer: To reserve funds for a contractual obligation not yet paid
Encumbrances are commitments of budgetary resources before actual expenditures occur, ensuring funds are reserved for outstanding purchase orders or contracts.
The term 'fund balance' in governmental accounting refers to:
Answer: The difference between fund assets and fund liabilities
Fund balance represents the net position of a governmental fund, calculated as total assets and deferred outflows minus total liabilities and deferred inflows.
Which of the following is an example of a regressive tax?
Answer: A flat-rate sales tax on consumer goods
A flat-rate sales tax is regressive because lower-income individuals spend a higher proportion of their income on taxable goods, resulting in a greater relative tax burden.
In GASB standards, what distinguishes a major fund from a nonmajor fund?
Answer: Major funds meet specific percentage thresholds of total governmental assets, liabilities, revenues, or expenditures
GASB Statement 34 defines major funds based on quantitative thresholds — typically 10% of the relevant total and 5% of the aggregate total for all governmental or enterprise funds.
A government issues $5 million in revenue bonds to finance a new water treatment facility. Which factor most directly determines the bonds' creditworthiness?
Answer: The projected revenues from water utility fees
Revenue bonds are repaid solely from specified revenues generated by the financed project, so the creditworthiness depends primarily on the projected revenue stream from that project.