[Dec-2025] Dumps Brief Outline Of The GAFRB Exam - DumpsActual
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NEW QUESTION # 69
Funds collected and spent to carry out an unemployment program established by federal statute are deposited in
- A. revolving funds.
- B. general funds.
- C. trust funds.
- D. enterprise funds.
Answer: C
Explanation:
Unemployment programs, such as those established by federal law (e.g., Unemployment Insurance), are typically funded through employment taxes and administered through federal trust funds. These funds are earmarked for specific purposes and are deposited into trust fund accounts, which are fiduciary in nature and maintained to provide benefits under the terms of a law or trust agreement.
The Unemployment Trust Fund is a specific example maintained by the U.S. Department of the Treasury.
Relevant References:
FASAB SFFAS No. 27 - Identifying and Reporting Earmarked Funds
Treasury Financial Manual - Trust Fund Accounts
GAO Glossary - Trust Fund Definition
C). trust funds
NEW QUESTION # 70
Which federal agency activities would most likely use a trust fund to account for funds received and paid?
- A. grant programs distributing funds awarded in prior years
- B. general government programs receiving annual appropriations
- C. business-type operations financed by exchange revenues
- D. provisions of benefits, goods or services financed by specific revenue sources
Answer: D
Explanation:
Comprehensive Detailed Explanation:
Trust funds in the federal government are used to account for assets held in a fiduciary capacity for specific purposes. These funds typically involve revenue dedicated by law for particular programs and purposes, such as:
Social Security Trust Fund
Medicare Trust Fund
Unemployment Trust Fund
These involve collections from earmarked taxes or contributions and are used to provide specific benefits or services.
Relevant References:
FASAB SFFAS No. 27 - Identifying and Reporting Earmarked Funds
Treasury Financial Manual - Trust Fund Accounts
OMB Circular A-11, Section 20 - Federal Fund and Trust Fund Definitions B). provisions of benefits, goods or services financed by specific revenue sources
NEW QUESTION # 71
The PAR includes all of the following elements EXCEPT the
- A. demographic section.
- B. agency-head message.
- C. performance section.
- D. financial section.
Answer: A
Explanation:
Comprehensive Detailed Explanation:
The Performance and Accountability Report (PAR) is a consolidated report that federal agencies are required to submit. It typically includes:
Agency Head's Message
Performance Section (performance goals/results)
Financial Section (financial statements, audit report, notes)
Other Accompanying Information (e.g., improper payments, internal control reports) There is no "demographic section" required or defined in the structure of a PAR.
Relevant References:
OMB Circular A-136 - Financial Reporting Requirements
GPRA Modernization Act of 2010
CFO Act of 1990
D). demographic section
NEW QUESTION # 72
Which of the following government-wide financial statements are required for state and local governments?
- A. balance sheet and operating statement
- B. statement of net position, statement of activities, and statement of cash flows
- C. statement of net position and statement of activities
- D. statement of net position and statement of changes in net position
Answer: C
Explanation:
The government-wide financial statements required by GASB Statement No. 34 include:
Statement of Net Position (similar to a balance sheet)
Statement of Activities (similar to an income statement)
These financial statements provide a consolidated view of the government's financial position and activities using the economic resources measurement focus and accrual basis of accounting.
There is no requirement under GASB for a government-wide statement of cash flows.
Relevant Standards and References:
GASB Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments GASB Codification Section 2200: Financial Reporting GFOA Budgeting Best Practices Therefore, Option C is correct.
NEW QUESTION # 73
Who is responsible for making apportionments and allotments?
- A. apportionments are made by committees, OMB makes allotments
- B. apportionments are made by Congress, OMB makes allotments
- C. apportionments are made by agencies, Congress makes allotments
- D. apportionments are made by OMB, agencies make allotments
Answer: D
Explanation:
In the federal budget execution process:
The Office of Management and Budget (OMB) makes apportionments. These divide appropriated funds into quarterly or program-specific portions to prevent premature spending.
Agencies then make allotments, which further subdivide apportioned funds internally by responsibility centers or programs.
Relevant References:
OMB Circular A-11 - Section 120: Apportionments
Treasury Financial Manual - Fund Control
GAO Red Book - Budget Execution Terminology
B). apportionments are made by OMB, agencies make allotments
NEW QUESTION # 74
A basic financial statement that includes a budgetary comparison serves to
- A. demonstrate compliance with the legally adopted budget.
- B. measure the service potential of physical and other resources.
- C. demonstrate the ability of the entity to meet its commitments.
- D. disclose and document the restrictions on resources.
Answer: A
Explanation:
A basic financial statement that includes a budgetary comparison (typically the Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual) is used to demonstrate whether the government complied with its legally adopted budget.
This is a core element of accountability in governmental financial reporting and is required under GASB Statement No. 34.
Relevant References:
GASB Statement No. 34 - Budgetary Comparison Statements
GASB Codification Section 2400 - Budgetary Accounting and Reporting
GFOA Best Practices - Budget Monitoring and Reporting
B). demonstrate compliance with the legally adopted budget
NEW QUESTION # 75
What role do the U.S. Department of the Treasury, GAO and OMB have in the standard-setting activities of FASAB?
- A. They are all non-voting advisory board members of FASAB.
- B. They are all members whose agencies may be exempt from FASAB standards.
- C. They are all sponsors and voting members of FASAB.
- D. They are all members with authority to veto any standard approved by FASAB.
Answer: C
Explanation:
The Federal Accounting Standards Advisory Board (FASAB) was established in 1990 by the U.S. Department of the Treasury, the Office of Management and Budget (OMB), and the Government Accountability Office (GAO). These three entities are collectively known as the "sponsors" of FASAB. Each has a representative who serves as a voting member of the board.
FASAB is responsible for establishing GAAP for federal entities. The sponsor organizations appoint board members and have authority over standard-setting governance, but do not individually veto standards. Final standards are issued only after due process, including public comment and sponsor approval.
Relevant Standards and References:
FASAB Memorandum of Understanding (MOU) Among Treasury, OMB, and GAO (as amended): "These three agencies are the sponsors of FASAB and each appoints one voting member to the Board." FASAB Governance Manual (2023 Edition), Section 2: Identifies Treasury, OMB, and GAO as sponsors and voting members.
AGA's "CGFM Study Guide 2," Chapter 2: Highlights the role of sponsors in the standard-setting process.
Therefore, Option D is correct.
NEW QUESTION # 76
A state had problems with its cash reconciliation resulting in a difference between the total cash per books versus cash balance with banks. The possible loss could only be estimated within a range of $100 million to
$300 million with no amount within the range considered a better estimate than any other. The state should recognize a minimum liability of
- A. $200 million and disclose in the notes the exposure to an additional $100 million loss.
- B. $300 million with no additional disclosure required.
- C. an amount to be determined by external auditors.
- D. $100 million and disclose in the notes the exposure to an additional $200 million loss.
Answer: D
Explanation:
GASB Statement No. 62 (based on FASB ASC 450-20) provides guidance on recognizing loss contingencies.
If a loss is probable and the amount can only be estimated as a range, and no single amount within the range is better, the minimum amount in the range should be accrued.
The remainder of the range should be disclosed in the notes to the financial statements.
Thus:
Accrue: $100 million
Disclose: Additional exposure up to $200 million
Relevant References:
GASB Statement No. 62 - Paragraph 96
GAAP Implementation Guide - Loss Contingencies
AICPA Audit Guide - Government Auditing Standards
A). $100 million and disclose in the notes the exposure to an additional $200 million loss
NEW QUESTION # 77
An example of a non-exchange revenue is
- A. sales taxes.
- B. investment earnings.
- C. bond proceeds.
- D. licensing fees.
Answer: A
Explanation:
Non-exchange revenues are those in which a government gives or receives value without directly receiving or giving equal value in return. Sales taxes are a classic example of a non-exchange revenue because the payer (consumer) does not receive a direct, measurable benefit from the government in exchange for the tax paid.
Other examples of non-exchange revenues include property taxes, grants, and fines. In contrast, licensing fees and investment earnings are exchange or exchange-like revenues, since they involve a mutual benefit or earnings return.
Relevant Standards and References:
GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions GASB Codification Section N50 GFOA Revenue Classification Guidelines
NEW QUESTION # 78
A city utilizing a 60-day availability period has a June 30 year-end. It levies property taxes in January that are due in March, which are used to finance the general fund. The city levied S15 million in taxes in the current fiscal year, collecting $12 million during the fiscal year. In addition, the following amounts were collected in the months after year-end:
July $1,000,000
August $ 500,000
September $ 250,000
How much revenue should the general fund recognize for the fiscal year?
- A. $15 million
- B. $13.5 million
- C. $12 million
- D. $13 million
Answer: D
Explanation:
The city has a June 30 fiscal year-end and applies the 60-day availability rule, which is standard under modified accrual accounting for governmental funds like the general fund.
Total collections within:
Fiscal year: $12 million
60-day window (July + August): $1 million + $500,000 = $1.5 million
Revenue recognized = $12 million + $1.5 million = $13.5 million
However, under GASB Interpretation No. 5 and GASB Statement No. 33, only amounts expected to be collected within 60 days after year-end should be recognized as revenue in the general fund. The city uses the
60-day rule.
Thus, the correct amount to recognize is:
$12 million (collected during fiscal year)
$1 million (July)
$500,000 (August) = $13.5 million
C). $13.5 million
Relevant References:
GASB Statement No. 33 - Accounting and Financial Reporting for Nonexchange Transactions GASB Interpretation No. 5 - Property Tax Revenue Recognition GASB Codification Section 1600.115 (Modified Accrual Basis)
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NEW QUESTION # 79
A state department has been developing a new computer system for managing federal grants. The project has the following costs:
What amount should be recorded as the value of the intangible asset?
- A. $575.000
- B. $915.000
- C. $705.000
- D. $755,000
Answer: D
Explanation:
According to GASB Statement No. 51 (Accounting and Financial Reporting for Intangible Assets), only costs incurred during the "application development stage" are capitalized for internally generated software. These include:
#Development of the system - $500,000
#Development of interfaces - $75,000
#Data conversion necessary to make software operational - $50,000
#Testing the software - $130,000
Excluded (should be expensed):
#Evaluation of needs (preliminary) - $100,000
#Selection of developer - $25,000
#Staff training - $15,000
#Ongoing maintenance - $20,000
Total Capitalizable Costs:
$500,000 + $75,000 + $50,000 + $130,000 = $755,000
Relevant References:
GASB Statement No. 51 - Paragraphs 6-12
GFOA Guidelines - Capitalization of Intangible Assets
C). $755,000
NEW QUESTION # 80
A government issues general obligation bonds at a premium. The associated amortization would be reported on the
- A. Statement of Revenues, Expenditures, and Changes in Fund Balance as a component of interest expenditures.
- B. Statement of Activities as a component of interest expense.
- C. Statement of Activities as a component of depreciation expense.
- D. Statement of Revenues, Expenditures, and Changes in Fund Balance as a component of depreciation expenditures.
Answer: B
Explanation:
When a government issues general obligation bonds at a premium, the premium is amortized over the life of the bond. Under the full accrual basis used in the government-wide financial statements (e.g., Statement of Activities), this amortization reduces the reported interest expense over time.
The fund financial statements (e.g., Statement of Revenues, Expenditures, and Changes in Fund Balance) follow the modified accrual basis and generally do not account for amortization of bond premiums.
Relevant References:
GASB Statement No. 34 - Government-Wide Financial Reporting
GASB Statement No. 65 - Items Previously Reported as Assets and Liabilities GFOA - Debt Reporting Best Practices B). Statement of Activities as a component of interest expense
NEW QUESTION # 81
What is the entry when rent of $500 is paid?
- A. debit expense $500, credit cash $500
- B. debit cash $500, credit payables $500
- C. debit expense S500, credit payables $500
- D. debit cash $500, credit expense $500
Answer: A
Explanation:
When a payment is made for rent, an expense is incurred and cash is reduced. The correct journal entry is:
Debit Rent Expense $500 # to recognize the cost
Credit Cash $500 # to reflect the cash outflow
D). debit expense $500, credit cash $500
Relevant References:
FASAB SFFAS No. 4 - Managerial Cost Accounting Concepts and Standards
Basic governmental and commercial accounting journal entry conventions
NEW QUESTION # 82
The Department of the Interior has the following costs associated with the development of a new visitor tracking system.
Research cost determining if system should be internally or externally developed $100,000 Software configuration and system development $750,000 Cost of testing the new system for fiscal usage $225,000 Converting data from old tracking system to new tracking system $500,000 How much should be capitalized as the cost of the asset?
- A. $975,000
- B. $1,575,000
- C. $1,475,000
- D. $750,000
Answer: A
Explanation:
FASAB SFFAS No. 10 (Accounting for Internal Use Software) provides guidance for capitalizing software development costs. The following costs are capitalized:
Software configuration and development: $750,000
Testing for functionality (ready for use): $225,000
These fall within the "software development stage."
The following are not capitalized:
Research costs (e.g., feasibility studies): $100,000 # Expense
Data conversion costs: $500,000 # Expense (unless part of application development, which it's not here) Capitalized total = $750,000 + $225,000 = $975,000 Relevant References:
FASAB SFFAS No. 10 - Accounting for Internal Use Software
OMB Circular A-136 - Capitalization Guidance
Treasury Financial Manual (TFM) - Capital Assets
B). $975,000
NEW QUESTION # 83
Which of the following federal collections are typically accounted for in a deposit fund?
- A. general tax receipts funding government operations overall (e.g., personal income taxes)
- B. exchange revenues collected to finance a continuing cycle of business-type operations (e.g., revenue paid to service centers)
- C. taxes dedicated to a specific purpose (e.g., gasoline taxes funding highway projects)
- D. funds held temporarily until ownership is determined (e.g., earnest money paid by bidders)
Answer: D
Explanation:
Deposit funds are a type of fiduciary fund used by federal agencies to account for monies held temporarily for others and where the government does not have ownership. These funds are not available for general government use and are excluded from budgetary resources.
Examples include:
Unidentified remittances
Bid deposits or earnest money
Collections awaiting resolution of ownership
These do not represent revenue to the federal government and are instead liabilities until disbursed.
Relevant References:
Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 1500 - Deposit Fund Accounts GAO Red Book - Federal Appropriations Law FASAB SFFAS No. 1 - Accounting for Selected Assets and Liabilities C). funds held temporarily until ownership is determined
NEW QUESTION # 84
GASB considers interperiod (intergenerational) equity when
- A. selecting alternatives in budgeting procedures.
- B. evaluating grant recipient awards.
- C. performing historical trend analysis.
- D. issuing financial reporting guidelines.
Answer: D
Explanation:
Comprehensive Detailed Explanation:
Interperiod (or intergenerational) equity is the concept that current-year revenues should be sufficient to pay for current-year services, so that future taxpayers are not burdened with today's costs.
GASB incorporates interperiod equity as a core principle when developing financial reporting standards, especially to evaluate whether financial reporting helps users assess if the government is living within its means.
Relevant References:
GASB Concepts Statement No. 1 - Objectives of Financial Reporting
GASB Statement No. 34 - Emphasizes accountability and long-term sustainability GFOA Budgeting Best Practices C). issuing financial reporting guidelines
NEW QUESTION # 85
GAAP requires that the ACFR be accompanied by separate financial statements documenting
- A. fiduciary and proprietary funds.
- B. statistical data on the population.
- C. program goals and objectives.
- D. annual appropriations.
Answer: A
Explanation:
The Annual Comprehensive Financial Report (ACFR) includes three categories of fund financial statements:
Governmental funds
Proprietary funds (e.g., enterprise and internal service funds)
Fiduciary funds (e.g., pension trust, custodial funds)
GAAP (specifically GASB Statement No. 34) requires separate financial statements for proprietary and fiduciary funds because they use different accounting bases (full accrual) than governmental funds (modified accrual). These are included in the basic financial statements section of the ACFR.
Relevant References:
GASB Statement No. 34 - Basic Financial Statements
GASB Codification Section 2200 - Financial Reporting
GFOA Governmental Reporting Guidelines
B). fiduciary and proprietary funds
NEW QUESTION # 86
A city issues S100,000 of 10-year general obligation bonds on April 1, 2024. Debt service of $10,000 must be paid each year on March 31, with 5% interest paid on the unpaid balance. Based upon this information, the interest expense reported on the government-wide statement for fiscal year ending March 31, 2025, is
- A. $15.000.
- B. $5,000.
- C. $ 4,500.
- D. $ 3,750.
Answer: B
Explanation:
The city issues $100,000 in general obligation bonds on April 1, 2024, and the first principal payment of
$10,000 is due on March 31, 2025. The interest rate is 5% annually on the unpaid principal balance.
As of April 1, 2024, the full $100,000 is outstanding. For the full fiscal year (April 1, 2024 to March 31,
2025), interest accrues on the full amount until payment is made. The interest on $100,000 for one year at 5%
=
Interest Expense = $100,000 × 5% = $5,000
Note: Interest is typically calculated on the beginning-of-period balance, and since the payment is made at the end of the year (March 31, 2025), the full $5,000 interest is recognized for that year.
Relevant Standards and References:
GASB Statement No. 34, Basic Financial Statements for State and Local Governments GASB Codification Section 2200 (Government-Wide Financial Statements) GFOA Guidance on Long-Term Debt Accounting
NEW QUESTION # 87
An agency offers service for a fee; bad debts have historically averaged 5% of each year's fee revenue. During the past fiscal year, $1.1 million in fee revenue was recorded and $1 million in fees was collected. What is the bad debt expense recorded for the past fiscal year?
- A. $ 55.000
- B. $100,000
- C. $ 5.000
- D. $ 50.000
Answer: A
Explanation:
The agency uses accrual accounting, meaning bad debt expense should be recognized based on the revenue earned, not the cash collected. The historical bad debt rate is 5%.
Fee revenue recorded = $1.1 million
Bad debt expense = 5% × $1,100,000 = $55,000
This matches the standard accounting treatment under FASAB SFFAS No. 1, where the expense is estimated and recognized in the same period as the related revenue.
Relevant References:
FASAB SFFAS No. 1 - Accounting for Selected Assets and Liabilities
GAAP treatment for allowance for doubtful accounts
Treasury Financial Manual - Accounts Receivable Accounting
C). $55,000
NEW QUESTION # 88
The Prompt Payment Act requires federal agencies to
- A. take discounts when economically justified.
- B. pay invoices no later than sixty days from receiving the invoice.
- C. pay invoices by the invoice due date.
- D. pay invoices when received.
Answer: C
Explanation:
The Prompt Payment Act (31 U.S.C. Chapter 39) mandates that federal agencies pay vendors on time.
Specifically, if a contract specifies a due date for payment, agencies are required to pay by that date. If no specific due date is mentioned, payment must be made within 30 days after the later of either:
Receipt of a proper invoice, or
Acceptance of goods/services.
If agencies fail to pay by the due date, they must automatically calculate and pay interest penalties to the vendor.
Relevant Standards and References:
31 U.S.C. § 3903 (Prompt Payment Act): "A payment is timely if it is made by the due date prescribed by the contract or within 30 days after receipt of a proper invoice or acceptance of goods or services." OMB Circular A-125, "Prompt Payment," Section 7(a) Treasury Financial Manual (TFM), Volume I, Part 6, Chapter 8040 Therefore, Option D is correct.
NEW QUESTION # 89
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