Family services, a small social service non-profit agency, began operations on

January 2016 with $40,000 cash and $150,000 worth of equipment, on which
$60,000 was owed on a note to City Bank. The equipment was expected to
have a remaining useful life of 15 years with no salvage value. During its first
year of operations, ending December 2016, Family services paid or
accrued the following:

1. Salaries and other personnel costs, $100,000.

2. Rent and utilities $24,000.
3. Debt service – interest $5,500 and payment on long term note principal
$10,000.
4. Capital outlay- additional equipment purchased January $30,000
expected to last 6 years and have a $6,000 salvage value.
5. Other current operating items paid with cash, $4,500.

Required:

Compute for the Family Services agency, for the year ended December 2016,
its total (a) expenses (b) expenditures.

1
 Solution
Expenses Expenditures

Salaries and other personnel costs 100,000 100,000

Rent and utilities 24,000 24,000

Interest on note 5,500 5,500

Note principal payment ------ 10,000

Capital outlay ------- 30,000

Depreciation of equipment (*) 14,000 -------

Other 4,500 4,500

Total $148,000 $174,000

(*)
Depreciation of equipment

i) $150,000/15 = $10,000

ii) ($30,000-$6,000)/6 = 4,000

14,000

2
 Balance sheet state budget
‫موازنة الدولة‬
Definition Financial statements indicate Financial statements
assets firm owns and how that indicate expenditure and
assets financed resources to achieve
‫قائمة مالية تحتوى على االصول التى‬ national task
‫تمتلكها الشركة فى فترة معينة‬
Components Assets Revenue (resources)
Liabilities Expense (uses)
‫اشوف موارد الدولة وازاى‬
‫استخدمها‬
Time Certain period (31/12) During the following year

Data Actual data or figure estimate data or figure

or
estimate resources or
expenditure

3
 Chapter 1 Governmental and Nonprofit Accounting—
Environment and Characteristics
1) Which of the following would not be considered a government or nonprofit organization?
A) A software company that sells software exclusively to state and local governments
B) A public elementary school
C) A church
D) A private trust organized for charitable purposes
Answer: A

2) Each of the following would be defined as a governmental entity based on the definition of a
government that was jointly developed by the GASB and FASB except
A) A Historic Preservation District created by the governing board of the municipal government.
B) A Charter School incorporated in accordance with state law and accountable to the state oversight
agency.
C) A hospital formerly owned by a local government entity that was sold to and is now owned by a
private, for-profit health care management corporation.
D) A financing authority that is legally separate from the municipal government, but provides
financing for the government's major capital projects. The governing board of the financing authority
is appointed by the municipal government's board.
E) All of the above would be defined as governmental entities.
Answer: C

3) The Financial Accounting Foundation has oversight responsibilities over

A) The Financial Accounting Standards Board (FASB).
B) The Governmental Accounting Standards Board (GASB).
C) The Government Accountability Office (GAO).
D) All of the above
E) Items A and B only
F) Items B and C only
Answer: E

4) The governmental GAAP hierarchy was established by

A) The Governmental Accounting Standards Board (GASB).
B) The Financial Accounting Standards Board (FASB).
C) The American Institute of Certified Public Accountants (AICPA).
D) The Financial Accounting Foundation (FAF).
E) The Government Accountability Office (GAO).
Answer: A

4
5) Which of the following is not specifically identified in the GAAP hierarchy for state and local
governments?
A) AICPA Industry Audit and Accounting Guides
B) GASB Technical Bulletins
C) GASB Implementation Guides
D) GAO's Yellow Book
E) AICPA Practice Bulletins
F) All of the above are specifically identified in the state and local government hierarchy.
Answer: D

6) Which of the following statements is false?

A) The power to tax is unique to governments.
B) Taxation is a nonexchange transaction.
C) Governmental entities may not finance a function or service with both a user fee and tax revenues.
D) All of the above statements are true statements.
E) Both items B and C are false statements.
Answer: C

7) The primary users of external financial reports, as identified by the GASB, include all of the
following except
A) Investors and creditors.
B) Citizens.
C) Governing boards.
D) All of the above are considered to be primary users of external financial reports.
E) Both items A and B.
Answer: D

8) Business-type activities differ from governmental-type activities in that

A) Most capital assets of business-type activities are considered to be revenue producing capital assets,
while those in governmental-type activities generally are not.
B) Business-type activities never have the power to levy a tax.
C) Business-type activities do not adopt a budget.
D) All of the above statements accurately reflect actual differences between business-type and
governmental-type activities.
E) Items B and C only accurately reflect primary differences between business-type and
governmental-type activities.
Answer: A

5
9) Which of the following activities would most likely be accounted for in a nonexpendable
(proprietary) fund?
A) Fire protection
B) Recreation
C) Water operations
D) Street maintenance
E) General government administration
Answer: C

10) Expenditures in a governmental (expendable) fund would potentially include

A) Salaries and wages.
B) Capital outlay.
C) Long-term debt principal retirement.
D) Long-term debt interest.
E) All of the above.
F) Items A, B, and D only.
Answer: E

11) Expenses in a proprietary (nonexpendable) fund would potentially include

A) Salaries and wages.
B) Capital outlay.
C) Long-term debt principal retirement.
D) Long-term debt interest.
E) Items A and D only.
F) Items B and C only.
Answer: E

12) Which of the following is a characteristic that distinguishes government and not-for-profit
(G&NP) organizations from business enterprises?
A) Borrowing is not a significant source of financing.
B) The resource providers of G&NP organizations often do not receive services commensurate with
the amount of resources they provide.
C) Net income is an appropriate performance evaluation measurement for most of these organizations.
D) Accumulating wealth on behalf of its constituents is a key goal of G&NP organizations and
business enterprises.
Answer: B

13) Which source of financial resources is unique to governments?

A) Borrowings
B) Gifts and grants
C) Charges for services provided
D) Taxation
Answer: D

6
14) What best describes the relationship of the FASB and the GASB?
A) They are co-equal bodies with different areas of responsibility for standards setting.
B) The FASB standards are authoritative for governments. However, the FASB asks the GASB to
establish guidelines for many unique transactions of government that the FASB does not have time to
consider.
C) GASB standards are authoritative for governments unless they have been overruled by the FASB.
D) Governments are not permitted to apply any FASB standard under any circumstances for any
government operations.
Answer: A

15) Which of the following is a government?

A) A school district
B) Library commission if governments appointed a voting majority of its governing board.
C) Neither would ever be a government.
D) Both items A and B.
Answer: D

16) Which of the following has the highest level of authority for a government under GAAP?
A) A FASB standard
B) A GASB Implementation Guide
C) AICPA Industry Audit and Accounting Guide for local governments cleared by the GASB
D) An article in the Journal of Accountancy
Answer: C

17) Which of the following has the highest level of authority for a government under GAAP?
A) A FASB standard on pension accounting
B) A GASB standard on pension accounting
C) AICPA state and local government audit guide coverage of pensions
D) The coverage of pensions in a Journal of Accountancy article
Answer: B

18) Which organization has the highest level of authority for a setting GAAP for a state or local
government?
A) FASB.
B) GASB
C) AICPA
D) NCGA
Answer: B

7
19) Which organization has the highest level of authority for a setting GAAP for nongovernment, not-
for-profit organizations?
A) FASB.
B) GASB
C) AICPA
D) NCGA
Answer: A

20) Which of the following is a government?

A) An entity that has 4 of its 7 governing board members appointed by government entities.
B) An entity that has the power to enact and enforce a property tax levy.
C) An entity that can be dissolved at the pleasure of a government and the assets of which revert to a
government upon dissolution.
D) All of the above would be considered government entities for the purpose of determining whether
government GAAP must be followed for financial reporting purposes.
Answer: D

21) Expenses and expenditures are least likely to differ in amount for which type of transactions?
A) Salaries
B) Capital asset purchases
C) Debt principal retirements and interest
D) Depreciation on capital assets
Answer: A

22) For which entities does the GASB establish GAAP?

A) Cities
B) School districts
C) Government airport authorities
D) All of the above
Answer: D

23) Which of the following is not a characteristic of a fund?

A) Fiscal entity
B) Separate legal entity
C) Accounting entity
D) Contains self-balancing set of accounts
Answer: B

8
24) The primary purpose of a fund is
A) To provide expenditure authority for a government or not-for-profit organization.
B) To segregate an organization's resources according to the purpose(s) for which they are to be used.
C) To keep an organization's constituency from trying to insist that the organization utilize resources
that it wants to save for a specific future objective.
D) All of the above are major purposes of using funds.
Answer: B

25) All not-for-profit organizations that do not meet the definition of governments must apply
A) FASB standards.
B) GASB standards.
C) The same standards as a similar business.
D) None of the above are true
Answer: A

26) Which of the following is considered to be an authoritative source of GAAP for a

nongovernmental not-for-profit organization?
A) GASB standards
B) AICPA AcSEC Practice Bulletins
C) FASB Accounting Standards Codification
D) Other accounting literature.
Answer: C

27) Fixed-dollar budgets and appropriations are most often found in

A) All funds of a government.
B) Expendable funds.
C) Nonexpendable funds.
D) In not-for-profit organizations, but not governments.
Answer: B

28) Which of the following is not a characteristic used to determine if an organization is a

government?
A) The majority of governing board members are appointed by government entities.
B) An entity that has the power to enact and enforce a property tax levy.
C) An entity receives over half of its resources from other governmental entities.
D) The potential for unilateral dissolution with the net assets reverting to a government upon
dissolution.
Answer: C

9
29) If a government is obligated legally to report information in a manner that differs from GAAP
A) GAAP take precedence over the legal requirements.
B) Legal requirements take precedence over GAAP.
C) Both GAAP requirements and legal requirements must be met.
D) Information should be presented that meets as many legal requirements as possible without
violating GAAP in a material manner.
Answer: C

30) The primary users of government financial reports do not include

A) The citizenry.
B) Legislative and oversight bodies.
C) Investors and creditors.
D) Government administrators.
E) All of the above have been identified as primary users.
Answer: E

31) A government accounting system must make it possible to

A) Present financial information in conformity with GAAP.
B) Demonstrate compliance with finance related legal and contractual provisions.
C) Meets as many legal requirements as possible without violating GAAP.
D) Both A and B.
Answer: D

10
Chapter 17 Accounting for Colleges and Universities
1) Charges for tuition for the current semester of a local college totaled $300,000. Academic
scholarships were awarded to students in the amount of $25,000 and tuition wavers were given to
children of employees in the amount of $10,000. The college should report
A) Revenues $300,000.
B) Expenses of $35,000.
C) Revenues of $275,000, net of $25,000 in allowances.
D) Expenses of $10,000.
E) Both items A and B.
F) Both items C and D.
Answer: F

2) A college has a June 30 fiscal year end. Assume that tuition revenue for the summer session that
begins June 1, 20X8, and ends August 31, 20X8 totals $270,000. Tuition is billed and is due at the
beginning of the session term. How much revenue should be reported as of the fiscal year ended June
30, 20X8?
A) $270,000
B) $90,000
C) $180,000
D) $135,000
E) $0
Answer: B

3) If a government university provides loans to qualifying students for tuition and fees, the loans
should be reported on the statement of cash flows as
A) Operating activities.
B) Noncapital financing activities.
C) Capital and related financing activities.
D) Investing activities.
E) Loans are not reported on the statement of cash flows.
Answer: A

4) A government university that chooses to report as a business-type special purpose government,

purchases land for a planned dormitory by securing a ten year bank loan. The entry to record the
purchase and procurement of funding would include
A) A DEBIT to assets.
B) A CREDIT to notes payable.
C) A DEBIT to expenditures.
D) A CREDIT to other financing sources.
E) Both items A and B.
F) Both items C and D.
Answer: E

11
5) A wealthy alum donated land to be used for a new athletics facility at the local state university. The
land has a fair market value of $250,000. The donor purchased the land ten years ago at a cost of
$75,000. The entry to record the receipt of the donation would be
A) dr cr
Land $250,000
Capital Contributions $250,000
B) dr cr
Land $250,000
Other Financing Sources $250,000
C) dr cr
Land $75,000
Capital Contributions $75,000
D) dr cr
Land $250,000
Special Item $250,000
E) dr cr
Land $75,000
Special Item $75,000
Answer: A

6) Stock valued at $15,000 was donated to a college. The donor stipulated that the stock was to be
immediately sold and the proceeds used toward college's capital campaign. The entry to record the
receipt of the gift would be
A) dr cr
Restricted Assets — Capital Campaign $15,000
Deferred Revenue $15,000
B) dr cr
Restricted Assets — Capital Campaign $15,000
Capital Contributions $15,000
C) dr cr
General Investments $15,000
Deferred Revenue $15,000
D) dr cr
General Investments $15,000
Special Item $15,000
Answer: B

12
7) A university received a restricted donation from one of their trustees. The donation was to be used
to pay debt service costs for one year on the new athletic field. When received, the donation will be
reported on the statement of cash flows as
A) Operating activities.
B) Noncapital financing activities.
C) Capital and related financing activities.
D) Investing activities.
E) None of the above.
Answer: C

8) A university's endowment fund has investments that were purchased for $400,000. As of the end of
the fiscal year, the fair value of the investments decreased by $33,000. What journal entry is required
to reflect the change in the fair market value of the investments?
A) dr cr
Loss on Endowment Investments $33,000
Endowment Investments $33,000
B) dr cr
Interest Expense $33,000
Endowment Investments $33,000
C) dr cr
Interest Revenues $33,000
Endowment Investments $33,000
D) dr cr
Interest Expense $33,000
Deferred Revenue $33,000
E) None of the above.
Answer: C

13