Question 1

What are the three categories of funds used in governmental accounting?

Accepted Answer

Governmental funds, proprietary funds, and fiduciary funds. These categories organize a government's financial activities by purpose and measurement focus.

Question 2

Which fund is used to account for a government's general operating activities not required to be reported in another fund?

Accepted Answer

The General Fund. Every government has only one General Fund, and it is always a major fund.

Question 3

What type of governmental fund accounts for proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes?

Accepted Answer

Special Revenue Funds. These funds capture dedicated revenue streams such as grants or earmarked taxes restricted by law or external parties.

Question 4

Which proprietary fund type accounts for activities that provide services to the general public on a user-charge basis, similar to a private business?

Accepted Answer

Enterprise Funds. They use full accrual accounting and the economic resources measurement focus, mirroring private-sector accounting.

Question 5

What is the key difference between an Internal Service Fund and an Enterprise Fund?

Accepted Answer

Internal Service Funds provide goods or services primarily to other departments or agencies within the same government, while Enterprise Funds serve the general public or external users.

Governmental Accounting – CPA Exam Flashcards

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