You’re on a roll
Create a free account to save your CPA progress, track your accuracy by topic, and pick up right where you left off.
Free Questions › CPA › Business Analysis and Reporting
Free CPA Business Analysis and Reporting Practice Questions & Answers
500 exam-style Business Analysis and Reporting questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 361
An INTERNAL SERVICE fund serves:
Select an option first.
Correct answer: C — Primarily OTHER DEPARTMENTS of the government, on a cost-reimbursement basis
Explanation: An INTERNAL SERVICE fund provides goods or services primarily to OTHER FUNDS OR DEPARTMENTS of the same government (a motor pool, a print shop, a self-insurance fund), on a cost-reimbursement basis. An ENTERPRISE fund serves EXTERNAL customers.
Question 362
An interfund TRANSFER is reported in the sending governmental fund as:
Select an option first.
Correct answer: A — An OTHER FINANCING USE
Explanation: An INTERFUND TRANSFER is NOT an expenditure — no goods or services were received. It is an OTHER FINANCING USE in the sending fund and an OTHER FINANCING SOURCE in the receiving fund. In the government-wide statements, transfers within the primary government ELIMINATE entirely.
Question 363
Debt service expenditures for principal and interest are generally recognised:
Select an option first.
Correct answer: D — WHEN DUE (matured) — an exception to the general modified-accrual rule
Explanation: Debt service is an EXCEPTION: expenditures are recognised when the payment is DUE (matured), not as interest accrues. So no accrual is made for interest between the last payment date and year-end. This avoids reporting a liability the fund has no current resources to settle.
Question 364
GASB applies (rather than FASB) if the entity:
Select an option first.
Correct answer: B — Has the POWER TO ENACT AND ENFORCE A TAX LEVY, OR a majority of its board is appointed by a government, OR dissolution vests assets in a government
Explanation: GASB applies if ANY of the three criteria is met — the TAX LEVY power being the most decisive. Most public hospitals, universities and museums are GASB, which surprises candidates who assume 'non-profit' automatically means FASB.
Question 365
A component unit is DISCRETELY presented:
Select an option first.
Correct answer: A — As the DEFAULT — a separate column on the government-wide statements
Explanation: DISCRETE presentation (a separate column) is the DEFAULT for component units. BLENDING (treating the unit as part of the primary government) applies only if the governing bodies are substantively the same, services are provided almost exclusively to the primary government, or the debt is expected to be repaid by it.
Get the full CPA question bank — free
Drop your email and we'll send you fresh CPA practice questions, fully worked solutions and exam-deadline reminders. No spam — unsubscribe in one click.
Want to save your score and take a full mock exam? Create a free account →
Question 366
Deferred OUTFLOWS of resources are:
Select an option first.
Correct answer: B — A CONSUMPTION of net assets applicable to a FUTURE period — reported SEPARATELY, after assets
Explanation: DEFERRED OUTFLOWS are a distinct GASB element — a consumption of net assets applicable to a FUTURE period. They are NOT assets and are reported in a separate section AFTER assets. DEFERRED INFLOWS are the mirror image, reported after liabilities.
Question 367
The fund balance equation is:
Select an option first.
Correct answer: B — Assets + Deferred OUTFLOWS − Liabilities − Deferred INFLOWS
Explanation: Fund balance = Assets + Deferred OUTFLOWS − Liabilities − Deferred INFLOWS. The two DEFERRED elements are distinct GASB categories — neither an asset nor a liability — and both must appear in the equation.
Question 368
Property tax revenue in a governmental fund is recognised:
Select an option first.
Correct answer: A — When LEVIED, if MEASURABLE and AVAILABLE (collectible within 60 days after year-end)
Explanation: Property taxes are recognised when LEVIED, provided they are MEASURABLE and AVAILABLE. Amounts expected MORE than 60 days after year-end become DEFERRED INFLOWS OF RESOURCES — neither revenue nor a liability.
Question 369
Special items in the Statement of Activities are:
Select an option first.
Correct answer: D — Unusual OR infrequent, and WITHIN management's control
Explanation: SPECIAL items are unusual OR infrequent AND WITHIN management's CONTROL (a gain on selling land). EXTRAORDINARY items are unusual AND infrequent AND OUTSIDE management's control (a natural disaster). Note GASB RETAINS 'extraordinary items' even though FASB abolished them.
Question 370
A budgetary comparison schedule is required for:
Select an option first.
Correct answer: B — The GENERAL FUND and each MAJOR SPECIAL REVENUE FUND with a legally adopted budget
Explanation: A BUDGETARY COMPARISON is required (as RSI or a basic statement) for the GENERAL FUND and each MAJOR SPECIAL REVENUE FUND that has a legally adopted annual budget. It must show the ORIGINAL budget, the FINAL budget, and ACTUAL amounts.
Question 371
The government-wide reconciliation ADDS to fund balance:
Select an option first.
Correct answer: A — CAPITAL ASSETS, net of accumulated depreciation
Explanation: Governmental funds report NO capital assets and NO long-term debt. The reconciliation therefore ADDS BACK capital assets (net of depreciation) and SUBTRACTS long-term debt, converting fund balance (current financial resources) into government-wide net position (economic resources).
Question 372
A MAJOR fund is one where the fund's assets, liabilities, revenues or expenditures are at least:
Select an option first.
Correct answer: D — 10% of the corresponding total for its FUND CATEGORY, AND 5% of the corresponding total for ALL governmental AND enterprise funds combined
Explanation: The MAJOR FUND test is a TWO-PART threshold: the element must be at least 10% of the corresponding total for its fund CATEGORY (governmental or enterprise) AND at least 5% of the corresponding total for ALL governmental and enterprise funds COMBINED. Both must be met. The GENERAL FUND is ALWAYS major.
Question 373
The General Fund is:
Select an option first.
Correct answer: D — ALWAYS reported as a MAJOR fund
Explanation: The GENERAL FUND is ALWAYS a MAJOR fund, regardless of size. Other funds must meet the two-part 10%/5% test — though a government may CHOOSE to report any fund as major if it believes it is important to users.
Question 374
Internal Service Fund activity in the government-wide statements is generally reported in:
Select an option first.
Correct answer: D — GOVERNMENTAL activities — because internal service funds primarily serve governmental departments
Explanation: Although an Internal Service Fund is a PROPRIETARY fund at the fund level, in the GOVERNMENT-WIDE statements its activity is usually folded into GOVERNMENTAL activities — because its customers are predominantly governmental departments. Substance over form.
Question 375
Enterprise Fund activity in the government-wide statements is reported in:
Select an option first.
Correct answer: D — BUSINESS-TYPE activities
Explanation: ENTERPRISE funds serve EXTERNAL customers and are reported in BUSINESS-TYPE ACTIVITIES in the government-wide statements — a separate column from governmental activities.
Question 376
The Statement of Cash Flows for a PROPRIETARY fund uses:
Select an option first.
Correct answer: A — FOUR categories: operating, non-capital financing, capital and related financing, and investing
Explanation: A GASB proprietary fund cash flow statement has FOUR categories: OPERATING; NON-CAPITAL FINANCING; CAPITAL AND RELATED FINANCING; and INVESTING. It also REQUIRES the DIRECT method — both differ from FASB, which uses three categories and permits the indirect method.
Question 377
GASB requires proprietary fund cash flow statements to use:
Select an option first.
Correct answer: B — The DIRECT method
Explanation: GASB REQUIRES the DIRECT method for proprietary fund cash flow statements (with a reconciliation of operating income to operating cash flows). FASB permits either method and most companies choose indirect — a clear divergence.
Question 378
In a governmental fund, inventory may be accounted for using:
Select an option first.
Correct answer: C — EITHER the PURCHASE method (expenditure when bought) or the CONSUMPTION method (expenditure when used)
Explanation: Governmental funds may use the PURCHASE method (expenditure recorded when acquired) or the CONSUMPTION method (expenditure recorded when consumed). Under either, significant inventory on hand at year-end is reported as an asset with a corresponding NONSPENDABLE fund balance.
Question 379
A special assessment for a capital improvement, where the government is OBLIGATED in some manner, is reported in:
Select an option first.
Correct answer: D — A CAPITAL PROJECTS fund (and a Debt Service fund for the related debt)
Explanation: If the government is OBLIGATED IN SOME MANNER for the special assessment debt, the construction is reported in a CAPITAL PROJECTS fund and the debt service in a DEBT SERVICE fund, with the long-term debt in the government-wide statements. If the government is NOT obligated, it is a CUSTODIAL (fiduciary) activity.
Question 380
Capital assets in the government-wide statements are:
Select an option first.
Correct answer: B — REPORTED and DEPRECIATED (with an exception for certain infrastructure under the modified approach)
Explanation: The government-wide statements REPORT capital assets and DEPRECIATE them. An exception exists for INFRASTRUCTURE (roads, bridges) under the MODIFIED APPROACH: if the government maintains the assets at or above a disclosed condition level and documents it, depreciation need not be recorded.
Question 381
Under the MODIFIED APPROACH for infrastructure, the government must:
Select an option first.
Correct answer: B — MAINTAIN an asset management system, perform condition assessments at least every 3 years, and document that the assets are preserved at or above the established condition level
Explanation: The MODIFIED APPROACH permits eligible INFRASTRUCTURE assets to escape depreciation — but only if the government maintains an asset management system, performs CONDITION ASSESSMENTS at least every THREE YEARS, and DOCUMENTS that assets are preserved at or above the established condition level. Maintenance costs are then expensed.
Question 382
A government's pension liability reported in the government-wide statements is the:
Select an option first.
Correct answer: D — NET pension liability — the total pension liability LESS the fiduciary net position (plan assets)
Explanation: The NET PENSION LIABILITY = Total pension liability − Plan fiduciary net position (assets). GASB 68 requires the employer to report this NET liability on the face of the government-wide statements — a change that put large previously-hidden obligations onto balance sheets.
Question 383
In a governmental fund, a capital lease at inception is recorded as:
Select an option first.
Correct answer: B — An EXPENDITURE and an OTHER FINANCING SOURCE, both at the present value of the payments
Explanation: At the FUND level (modified accrual), a lease is recorded as an EXPENDITURE — Capital Outlay and an OTHER FINANCING SOURCE, both at PV — grossing up both sides. The capital asset and lease liability appear only in the GOVERNMENT-WIDE statements. It looks strange, and it is correct.
Question 384
GASB requires which basic financial statements?
Select an option first.
Correct answer: D — Government-wide statements, FUND statements, AND the notes
Explanation: The BASIC financial statements comprise: (1) GOVERNMENT-WIDE statements; (2) FUND financial statements; and (3) the NOTES. MD&A and certain schedules are REQUIRED SUPPLEMENTARY INFORMATION — required, but not part of the basic statements.
Question 385
An Investment Trust Fund accounts for:
Select an option first.
Correct answer: D — The EXTERNAL portion of an investment pool held for OTHER governments
Explanation: An INVESTMENT TRUST FUND (a fiduciary fund) reports the EXTERNAL portion of an investment pool — the amounts belonging to OTHER governments participating in a pool sponsored by the reporting government. The government's OWN share is reported in its own funds.
Question 386
A Private-Purpose Trust Fund benefits:
Select an option first.
Correct answer: D — INDIVIDUALS, private organisations or OTHER GOVERNMENTS — not the reporting government itself
Explanation: A PRIVATE-PURPOSE TRUST benefits INDIVIDUALS, private organisations or other governments — NOT the reporting government. Contrast a PERMANENT FUND, whose earnings benefit the GOVERNMENT or its citizenry. That distinction decides which fund type applies.
Question 387
Grant revenue with ELIGIBILITY requirements is recognised when:
Select an option first.
Correct answer: C — The ELIGIBILITY requirements are MET (and, in a governmental fund, the resources are AVAILABLE)
Explanation: GASB 33 distinguishes ELIGIBILITY requirements (which must be MET before revenue is recognised) from PURPOSE restrictions (which do NOT delay recognition — they merely restrict how the money may be used). In a governmental fund, the AVAILABILITY criterion also applies.
Question 388
A PURPOSE RESTRICTION on a grant:
Select an option first.
Correct answer: C — Does NOT delay revenue recognition — it restricts how the resources may be USED
Explanation: A PURPOSE RESTRICTION limits how resources may be SPENT but does NOT delay REVENUE recognition. An ELIGIBILITY requirement (a required matching, a specified time period, an allowable-cost reimbursement basis) DOES delay recognition until it is met. Confusing the two is the classic GASB 33 error.
Question 389
A reimbursement-type (expenditure-driven) grant is recognised as revenue when:
Select an option first.
Correct answer: C — The QUALIFYING EXPENDITURE is INCURRED — the expenditure is the eligibility requirement
Explanation: For a REIMBURSEMENT (expenditure-driven) grant, incurring the QUALIFYING EXPENDITURE is itself the ELIGIBILITY requirement. Revenue is recognised as those expenditures are incurred. Cash received in advance is a LIABILITY (unearned revenue).
Question 390
The GASB financial reporting entity comprises:
Select an option first.
Correct answer: C — The PRIMARY GOVERNMENT plus its COMPONENT UNITS
Explanation: The FINANCIAL REPORTING ENTITY = the PRIMARY GOVERNMENT + its COMPONENT UNITS (legally separate organisations for which the primary government is financially accountable). Component units are presented DISCRETELY (the default) or BLENDED.
More free CPA topics
Ten questions in
- The ones you miss are saved as a drill you can repeat
- Your place is kept, on this device and any other
- A streak, if that is the thing that gets you back tomorrow
Every question on this page stays free and open either way.