,1. Which of the following is a primary source of funding for
governmental entities?
A) Donations
B) Grants
C) Taxes
D) Investments
Correct Answer: C) Taxes
Rationale : Taxes are the fundamental revenue source for
governmental entities, allowing them to fund public services.
2. In GASB standards, which fund type is primarily used for day-
to-day operations?
A) Capital Projects Fund
B) Special Revenue Fund
C) General Fund
D) Debt Service Fund
Correct Answer: C) General Fund
Rationale : The General Fund is used for general operating
purposes and accounts for all financial resources except those
required to be accounted for in another fund.
3. Which of the following is NOT considered a component of net
position in government-wide financial statements?
A) Net investment in capital assets
B) Restricted net position
C) Unrestricted net position
D) Deferred inflows of resources
Correct Answer: D) Deferred inflows of resources
Rationale : Deferred inflows are not a component of net
position; they are separate elements on the balance sheet.
, 4. What is the primary purpose of the Statement of Cash Flows in
nonprofit organizations?
A) To report financial position
B) To show sources and uses of cash
C) To provide budgetary comparisons
D) To report on fundraising activities
Correct Answer: B) To show sources and uses of cash
Rationale : The statement of cash flows provides insight into
cash inflows and outflows, crucial for assessing liquidity.
5. Which of the following statements about contributions is false?
A) Donor-restricted contributions are considered temporarily
restricted until fulfilled.
B) Contributions with no restrictions are considered permanently
restricted.
C) Unconditional pledges are recognized as revenue when made.
D) Conditional pledges are not recognized until the conditions
are satisfied.
Correct Answer: B) Contributions with no restrictions are
considered permanently restricted.
Rationale : Contributions with no restrictions are considered
unrestricted, not permanently restricted.
Fill-in-the-Blank Questions
6. The __________ method of accounting is commonly used in
governmental accounting to track expenses and revenues.
Correct Answer: modified accrual
Rationale : Modified accrual accounting is used to recognize
revenues when they are measurable and available.
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