Chapter 3 Governmental Operating Statement Accounts; Budgetary Accounting

1. Which of the following best describes the recommended format for the government-wide
statement of activities?
a. Revenues minus expenses equals change in net position.
b. Revenues minus expenditures equals change in net position.
c. Expenses minus program revenues equals net (expense) revenue.
Net ( expense) revenue plus general revenues equals change in net
position.
d. Program revenues minus expenses minus general revenues equals changes
in net position.

2. Which of the following is an acceptable method of reporting depreciation

expense for depreciable assets used by governmental activities?
a. Report as a general expense in the bottom section of the statement of activities.
b. Report as a direct expense of the function or program with which the
related depreciable assets are identified.
c. Report as an indirect expense on a separate line, or as an expense of the
general government (or similar) function, for depreciable assets that benefit all functions or programs.
d. Either b or c.
Either report as a direct expense of the function or program with which the related
depreciable assets are identified or report as an indirect expense on a separate line, or
as an expense of the general government (or similar) function, for depreciable assets
that benefit all functions or programs.

3. GASB standards require that fund balances of governmental funds be classified

according to whether the fund balance is spendable or nonspendable.
Spendable fund balances are further classified as:
a. Reserved, unreserved, and designated.
b. Restricted, committed, assigned, and unassigned.
c. Restricted, unrestricted, encumbered, and unencumbered.
d. Restricted, reserved, and unreserved.
Restricted, committed, assigned, and unassigned
Chapter 3 Governmental Operating Statement Accounts; Budgetary Accounting

4. When determining taxable property for the purpose of property tax levy,
which of the following would likely be excluded from the calculation?
a. Property owned by governments.
b. Property exempted from taxation by the government.
c. Property used by religious or charitable organizations.
d. All of the above.
5. One characteristic that generally distinguishes other financing uses from
expenditures is that other financing uses:
a. Arise from interfund transfers out.
b. Decrease fund balances when they are closed at year-end.
c. Are not included in budgetary entries.
d. Have a normal credit balance.
6. An internal allocation of funds on a periodic basis, which is often used to
regulate the use of appropriations over a budgetary period, is called:
a. An encumbrance.
b. A budgetary levy.
c. An ad valorem assessment.
d. An allotment.
7. According to GASB standards, expenditures may be classified by:
a. Fund, function or program, organization unit, source, and character.
b. Fund, function or program, organization unit, activity, character, and object.
c. Fund, appropriation, organization unit, activity, character, and object.
d. Fund, organization unit, encumbrance, activity, character, and object.
Fund, function or program, organization unit, activity, character, and object.

8. Under GASB requirements for external financial reporting, one would find
the budgetary comparison schedule (or statement) in the:
a. Required supplementary information (RSI).
b. Basic financial statements.
c. Either a or b, as elected by the government.
d. Neither a nor b.
Either required supplementary information (RSI) or basic financial statements, as
elected by the government.
Chapter 3 Governmental Operating Statement Accounts; Budgetary Accounting

9. Before placing a purchase order, a department should check that available

appropriations are sufficient to cover the cost of the item being ordered. This
type of budgetary control is achieved by reviewing:
a. Appropriations minus expenditures.
b. Appropriations plus expenditures minus encumbrances.
c. Appropriations minus estimated revenues.
d. Appropriations minus the sum of expenditures and encumbrances.
Appropriations minus the sum of expenditures and encumbrances.

10. Spruce City’s finance department recorded the recently adopted General
Fund budget at the beginning of the current fiscal year. The budget approved
estimated revenues of $1,100,000 and appropriations of $1,000,000. Which
of the following is the correct journal entry to record the budget?
Debits Credits

a. Estimated Revenues ................................... 1,100,000

Budgetary Fund Balance......................... 100,000

Appropriations ....................................... 1,000,000

b. Appropriations .......................................... 1,100,000

Budgetary Fund Balance......................... 100,000

Estimated Revenues ............................... 1,000,000

c. Revenues Receivable .................................. 1,000,000

Budgetary Deficit ....................................... 100,000

Appropriations ....................................... 1,100,000

d. Memorandum entry only

General Journal Debit Credit

Estimated Revenues 1,100,000
Chapter 3 Governmental Operating Statement Accounts; Budgetary Accounting

Budgetary Fund Balance 100,000

Appropriations 1,000,000