GAC Budgeting & Financial Management 3

Question 1

A government's operating budget shows revenues of $8M and expenditures of $9M. The $1M shortfall is best addressed by which of the following in the short term?

Accepted Answer

Drawing from the general fund balance or reserves

Answer

Short-term operating deficits are typically bridged by using accumulated fund balance (reserves), though persistent deficits require structural budget corrections.

Question 2

Which of the following describes 'zero-based budgeting' (ZBB) in a governmental context?

Accepted Answer

All budget requests must be justified from scratch each year, without assuming prior-year funding continues

Answer

ZBB requires managers to justify every expenditure from the ground up each budget cycle, regardless of prior appropriations.

Question 3

Under GASB Statement No. 54, which of the following fund balance classifications represents amounts that are legally restricted by external parties or constitutional provisions?

Accepted Answer

Restricted fund balance

Answer

Restricted fund balance consists of amounts constrained by externally imposed conditions (e.g., creditors, grantors, laws, or constitutional provisions).

Question 4

A city council passes an ordinance reserving $2M of fund balance for a future park. Under GASB 54, this is classified as:

Accepted Answer

Committed fund balance

Answer

Committed fund balance results from formal action by the government's highest decision-making authority (e.g., ordinance by the governing body) constraining resources for specific purposes.

Question 5

In governmental financial management, 'allotments' are best described as:

Accepted Answer

Subdivisions of an appropriation released to departments on a periodic basis to control spending pace

Answer

Allotments divide an annual appropriation into smaller time periods (monthly or quarterly) to prevent agencies from exhausting funds too early in the fiscal year.

(GAC) Governmental Accounting Certification Practice Test

(GAC) Governmental Accounting Certification Practice Test

GAC Budgeting & Financial Management 3