University of Texas ACCOUNTING 3321, Spring 2014 Chapter 1: Governmental and Not-for-Profit…MCQ’

Chapter 1: Governmental and Not-for-ProfitAccounting Environment and CharacteristicsMultiple Choice1. Which of the following is a distinguishing characteristic of a nonbusiness organization?a. Its revenues do not exceed its expensesb. There is an absence of ownership interests that can be sold, transferred, or redeemedc. It does not depreciate its capital assetsd. It does not charge fees for any of its services2. Which of the following activities is performed by governments but not by not-for-profit organizations?a. Issuing federal tax-free debtb. Receiving grantsc. Preparing budgetsd. Providing services to constituents3. Government and nonprofit accounting focuses on which of the following?a. Calculating profit or lossb. Protecting investors from fraudc. Demonstrating accountabilityd. Reporting to management4. Which of the following is not a reason that governmental accounting is different from business accounting?a. Different users of financial reportsb. Expected long-life of governmentsc. Capital assets are used by governmentsd. Revenues that are unique to governments5. Which basis of accounting is used for the basic governmental functions of state and local governments?a. Cash basis of accountingb. Modified accrual basis of accountingc. Accrual basis of accountingd. Regulatory basis of accounting6. For which types of organizations is the Financial Accounting Standards Board (FASB) responsible for establishing accounting and financial reporting standards?a. Business-type organizations and not-for-profit organizations, including not-for-profit colleges, universities and health care providersb. Business-type organizations; not-for-profit organizations; and all colleges, universities and health care providers, whether organized as not-for-profit or governmental entitiesc. Business-type organizations onlyd. All entities, except for those under the jurisdiction of the American Institute of CPAs7. A not-for-profit organization performs all of the following activities excepta. Charging a fee for services providedb. Paying dividends to shareholdersc. Purchasing long-lived (capital) assetsd. Paying overtime to employees8. The Governmental Accounting Standards Board (GASB) establishes financial reporting standards for state and local governmental entities. An entity possessing the following characteristics should follow GASB standards:a. The power to enact and levy a tax.b. The power to issue debt, for which its interest is exempt from federal taxation.c. The potential that a government could unilaterally dissolve the entity and assume their assets and liabilities.d. All of the above.e. Only a and b.9. For which types of organizations is the Governmental Accounting Standards Board (GASB) responsible for establishing accounting and financial reporting standards?a. All state, local, and Federal organizationsb. All state and local governmental organizations, except for state and local governmental colleges, universities, health care providers, and utilitiesc. All state and local governmental organizations, including government-sponsored colleges, universities, health care providers, and utilitiesd. All governmental and not-for-profit organizations10. Which entity establishes financial accounting standards and principles for the federal government?a. FASBb. GASBc. FASABd. None of the above.11. Which of the following is the most authoritative source of accounting standards for cities and counties?a. Current practices widely used by not-for-profit entitiesb. GASB Statements and Interpretationsc. AICPA Industry Audit Guidesd. Implementation guides published by GASB staff12. Concepts statements issued by the GASB and the FASAB emphasize which of the following objectives of governmental financial reporting?a. It should help the chief executive assess the entity’s financial condition.b. It should help department heads assess their department’s results of operations.c. It should help the judiciary determine whether the government has complied with the law.d. It should help report users assess accountability.13. An activity that is unique to governments isa. Budgetingb. Cash managementc. Levying taxesd. Advertising14. To what extent do organizations that use fund accounting also report on the entity as a whole?a. Organizations that use fund accounting are not required to report on the entity as a wholeb. Organizations that choose to report on the entity as a whole are not permitted to use fund accounting for internal purposesc. Organizations that use fund accounting are required to report on the entity as a wholed. Organizations that use fund accounting have the option of reporting either on funds or on the organization as a whole15. Not-for-profit organizations obtain their revenues primarily froma. Sales to customersb. Contributions from donorsc. Taxes on personal propertyd. Taxes on real property