Freeman10e TIF Ch01 MC
Freeman10e TIF Ch01 MC
2. Which of the following activities would most likely be accounted for as a business-type
activity?
A. Fire protection.
B. Recreation.
C. Water operations.
D. Street maintenance.
(Answer: C; Moderate; LO1)
3. Prior to the creation of the Governmental Accounting Standards Board in 1984, which of the
following organizations had the greatest influence over accounting concepts, principles, and
standards for the state and local governments?
A. The National Council on Governmental Accounting (NCGA)
B. The National Association of College and University Business Officers (NACUBO).
C. The American Institute of Certified Public Accountants (AICPA).
D. The Comptroller General of the United States.
(Answer: A; Moderate; LO1)
5. Which of the following characteristics best distinguishes a government entity from a business
entity?
A. Governments operate in a very small section of the economy while businesses operate
globally.
B. Cost analysis and other control and evaluation techniques are essential to ensure that
resources are used economically and efficiently.
C. Those contributing resources to the entity do not necessarily receive a direct or
proportionate share the services.
D. Businesses must acquire and convert scarce resources while governments can demand
whatever they need.
(Answer: C; Moderate; LO3)
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6. Which source of financial resources is unique to governments?
A. Borrowings.
B. Gifts and grants.
C. Charges for services provided.
D. Taxation.
(Answer: D; Easy: (LO4)
8. Which of the following is not a primary financial reporting objective of state and local
government (SLG) reporting?
A. Provide information necessary to assess the level of LG services and its ability to
continue to finance its activities and meet its obligations.
B. Provide information necessary for investment and credit decisions.
C. Provide a means of demonstrating the SLG’s accountability that enables users to assess
that accountability.
D. Provide information necessary to evaluate the SLG’s operating results for the period.
(Answer B; Difficult; LO4)
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11. 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; Moderate; LO4)
14. Expenses and expenditures are least likely to differ in amount for which type of transaction?
A. Salaries.
B. Capital asset purchases.
C. Debt principal retirements.
D. Depreciation on capital assets.
(Answer: A; Moderate; LO4)
15. The primary users of external financial reports, as identified by the GASB, include all of the
following except
A. Investors and creditors.
B. Other governments.
C. Citizens.
D. Legislative and oversight bodies.
(Answer: B; Moderate; LO5)
16. Which of the following organizations has had the least - impact on the development of
GAAP for state and local governments?
A. American Hospital Association.
B. Federal Accounting Standards Advisory Board
C. National Association of College and University Business Officers.
D. National Committee on Governmental Accounting.
(Answer B: Easy; LO6)
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17. The Financial Accounting Foundation does not have oversight responsibilities over
A. The Financial Accounting Standards Board (FASB).
B. The Federal Accounting Standards Advisory Board (FASAB).
C. The Financial Accounting Standards Advisory Council (FASAC).
D. The Governmental Accounting Standards Board (GASB).
(Answer: B; Easy; LO6)
18. 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; Moderate; LO6)
19. Which organization has the highest level of authority for a setting GAAP for nongovernment,
not-for-profit organizations?
A. Financial Accounting Standards Board (FASB).
B. Governmental Accounting Standards Board (GASB).
C. American Institute of Certified Public Accountants (AICPA).
D. National Council on Governmental Accounting (NCGA).
(Answer: A; Easy; LO6)
20. All not-for-profit organizations that do not meet the definition of governments must apply
A. FASB standards.
B. GASB standards.
C. FASAB standards.
D. AICPA Audit and Accounting Guide, Not-for-Profit Organizations.
(Answer: A; Moderate; LO6)
21. 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.
(Answer: C; Moderate; LO6)
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22. 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. AICPA Audit and Accounting Guide, Not-for-Profit Organizations.
(Answer: C; Difficult; LO6)
25. Which of the following publications is specifically identified in the GAAP hierarchy for state
and local governments as authoritative?
A. FASB Accounting Standards Codification.
B. GASB Implementation Guides.
C. GAO Yellow Book.
D. GASB Concepts Statements.
(Answer: B; Moderate; LO7)
26. 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; Moderate; LO7)
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27. Which of the following has the highest level of authority for a government in the
governmental GAAP hierarchy?
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; Moderate; LO7)
28. Which of the following has the highest level of authority for a government in the
governmental GAAP hierarchy?
A. GASB Codification of Governmental Accounting and Financial Reporting Standards.
B. GASB Concepts Statement.
C. GASB Technical Bulletin.
D. AICPA Industry Audit and Accounting Guide.
(Answer: A; Moderate; LO7)
29. Rank the following documents in the proper order in the governmental GAAP hierarchy:
A. a; b; c; d.
B. b; a; c; d.
C. b; c; d; a.
D. c; d; b; a.
(Answer: C; Moderate; LO7)
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