PCP Budget and Financial Management 1 — Questions and Answers
Question 1: What is the primary purpose of a school's general fund?
- To purchase specialized equipment for extracurricular activities
- To finance the day-to-day operational expenses of the school (Correct answer)
- To support capital improvement projects only
- To manage federal grant funds exclusively
Correct answer: To finance the day-to-day operational expenses of the school
The general fund covers routine operational expenses such as salaries, utilities, and instructional materials that keep the school running daily.
Question 2: Which budgeting approach begins with a zero balance each fiscal year and requires justification for all expenditures?
- Incremental budgeting
- Line-item budgeting
- Zero-based budgeting (Correct answer)
- Program budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting starts from scratch each year, requiring administrators to justify every budget item regardless of prior year allocations.
Question 3: In school budget accounting, salaries and employee benefits are classified under which category?
- Capital outlay
- Debt service
- Current operating expenditures (Correct answer)
- Special revenue
Correct answer: Current operating expenditures
Salary and benefit expenses are classified as current operating expenditures because they are recurring costs necessary to maintain normal school functions.
Question 4: When a school principal moves funds from one budget line item to another within the same fund category, this action is called a:
- Budget amendment
- Budget transfer (Correct answer)
- Encumbrance
- Carryover
Correct answer: Budget transfer
A budget transfer moves funds between line items within the same fund and typically requires approval from district administration.
Question 5: Title I funds provided to schools with high percentages of low-income students are classified as which type of revenue source?
- Local revenue
- State revenue
- Federal revenue (Correct answer)
- Private grants
Correct answer: Federal revenue
Title I is a federal program enacted under the Elementary and Secondary Education Act, making its funding a federal revenue source.
Question 6: In school budgeting, an encumbrance refers to:
- Funds already spent on completed purchases
- Reserved funds committed to a specific future expenditure (Correct answer)
- Unspent funds returned to the district at year-end
- Emergency funds set aside for crisis management
Correct answer: Reserved funds committed to a specific future expenditure
An encumbrance represents funds reserved for a purchase order or contract that has been issued but not yet fulfilled or paid.
Question 7: Which financial document provides a snapshot of a school's assets, liabilities, and equity at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (Correct answer)
- Budget variance report
Correct answer: Balance sheet
A balance sheet displays what an organization owns (assets) and owes (liabilities) at a specific date, revealing its net financial position.
PCP Budget and Financial Management 1
What is the primary purpose of a school's general fund?