CPM Government Budgeting & Finance 2

Question 1

Which budgeting approach requires each department to justify every expenditure from zero each fiscal year?

Accepted Answer

Zero-based budgeting

Answer

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.

Question 2

A government's general obligation bonds are backed by:

Accepted Answer

The full faith and credit of the issuing government

Answer

General obligation bonds are secured by the issuer's pledge to use legally available resources, including taxing power, to repay bondholders.

Question 3

What is the purpose of an encumbrance in governmental accounting?

Accepted Answer

To reserve funds for a contractual obligation not yet paid

Answer

Encumbrances are commitments of budgetary resources before actual expenditures occur, ensuring funds are reserved for outstanding purchase orders or contracts.

Question 4

The term 'fund balance' in governmental accounting refers to:

Accepted Answer

The difference between fund assets and fund liabilities

Answer

Fund balance represents the net position of a governmental fund, calculated as total assets and deferred outflows minus total liabilities and deferred inflows.

Question 5

Which of the following is an example of a regressive tax?

Accepted Answer

A flat-rate sales tax on consumer goods

Answer

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.

(CPM) Certified Public Manager Practice Test

(CPM) Certified Public Manager Practice Test

CPM Government Budgeting & Finance 2