Problem 1. The traditional business model of accounting is inadequate for governments and not-for-profit organizations primarily because businesses differ from governments and not-for-profit organizations in that
a. They have different missions
b. They have fewer assets
c. Their assets are intangible
d. Taxes are a major expenditure of businesses
Problem 2: The primary objective of a not-for-profit organization or a government is to
a. Maximize revenues
b. Minimize expenditures
c. Provide services to constituents
d. All of the above
Problem 3: In governments, in contrast to businesses,
a. Expenditures are driven mainly by the ability of the entity to raise revenues
b. The amount of revenues collected is a signal of the demand for services
c. There may not be a direct relationship between revenues raised and the demand for the entity’s services
d. The amount of expenditures is independent of the amount of revenues collected
Problem 4: The organization responsible for setting accounting standards for state and local governments is the
a. FASB
b. GASB
c. FASAB
d. AICPA
Problem 5: Governments differ from businesses in that they
a. Do not raise capital in the financial markets
b. Do not engage in transactions in which they ‘‘sell’’ goods or services
c. Are not required to prepare annual financial reports
d. Do not issue common stock
Problem 6: Interperiod equity refers to a condition where by
a. Total tax revenues are approximately the same from year to year
b. Taxes are distributed fairly among all taxpayers regardless of income level
c. Current-year revenues are sufficient to pay for current-year services
d. Current-year revenues cover both operating and
capital expenditures
Question for Review:
In answering question 7 in 200-400 words, differentiate between a budget and a comprehensive Annual Financial Report (CAFR).
Problem 7: What is a CAFR? What are its main components?