AGA GAFRB Exam Questions Instant Access - No Installation Required

Question 1

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$750,000

B$975,000

C$1,475,000

D$1,575,000
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 Reference:
FASAB SFFAS No. 10 -- Accounting for Internal Use Software
OMB Circular A-136 -- Capitalization Guidance
Treasury Financial Manual (TFM) -- Capital Assets
Answer : B. $975,000

Answer : B

Question 2

Who is responsible for making apportionments and allotments?

Aapportionments are made by committees, OMB makes allotments

Bapportionments are made by OMB, agencies make allotments

Capportionments are made by agencies, Congress makes allotments

Dapportionments are made by Congress, OMB makes allotments
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 Reference:
OMB Circular A-11 -- Section 120: Apportionments
Treasury Financial Manual -- Fund Control
GAO Red Book -- Budget Execution Terminology
Answer : B. apportionments are made by OMB, agencies make allotments

Answer : B

Question 3

An agency's Fund Balance with Treasury is increased by which of the following events?

Areceipt of a Treasury warrant

Brescission of an appropriation

Ca recovery of prior year obligations

Dcollection of custodial revenue
Fund Balance with Treasury (FBWT) increases when an agency receives a Treasury warrant. A warrant is the official document issued by the U.S. Treasury that provides budgetary authority to the agency and establishes funds available for obligation and disbursement.
Other options:
Rescission of appropriation decreases FBWT
Recovery of prior-year obligations may restore budgetary authority, but not necessarily FBWT
Custodial revenue collected on behalf of others; not retained by the collecting agency
Relevant Reference:
Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 5100
FASAB SFFAS No. 1 -- Fund Balance with Treasury
USSGL Guidance on Fund Balance Transactions
Answer : A. receipt of a Treasury warrant

Answer : A

Question 4

The summary of significant accounting policies in the notes to the financial statements includes all of the following information EXCEPT

Aa description of the reporting entity and major components.

Bsummary of accounting principles followed by the entity, and methods followed applying those principles.

Cdisclosure of receipt of budget authority from the entity.

Dsummary of changes to the GAAP impacting the financial statements.
The Summary of Significant Accounting Policies (SSAP), included in the notes to the financial statements, typically includes:
Description of the reporting entity
Basis of presentation and accounting principles
Methods used to apply those principles
Policy changes from prior years
However, disclosures regarding receipt or use of budget authority are not included in the SSAP. Budget authority and execution are typically addressed in the Required Supplementary Information (RSI) or other budgetary sections of federal financial reports.
Relevant Reference:
FASAB SFFAS No. 34 -- Notes to the Financial Statements
OMB Circular A-136 -- Section II.4.4: Summary of Significant Accounting Policies
GAO Federal Accounting Handbook
Answer : C. disclosure of receipt of budget authority from the entity

Answer : C

Question 5

The Federal Financial Management Improvement Act of 1996 formally recognized which of the following organizations as the standard-setting body for federal accounting and reporting standards?

AOMB

BFASB

CGAO

DFASAB
The Federal Financial Management Improvement Act (FFMIA) of 1996 established the requirement for federal agencies to implement and maintain financial systems that comply with federal accounting standards. It formally recognized the Federal Accounting Standards Advisory Board (FASAB) as the source of GAAP for federal agencies.
FASAB's standards are authoritative for federal entities, much like GASB for state and local governments and FASB for private-sector entities.
Relevant Reference:
Federal Financial Management Improvement Act of 1996 (Public Law 104--208, Title VIII)
FASAB Handbook -- Introduction & Authority
GAO Federal Accounting Standards Overview
Answer : D. FASAB

Answer : D

Question 6

Using the cost recovery method of recognizing revenue, premiums are recognized as revenue

Aonce the ultimate premium can be reasonably estimated.

Bthroughout the duration of the policy when claim costs are incurred.

Cwhen received.

Dwhen the policy takes effect.
Under the cost recovery method, revenue is recognized only as costs are recovered. In the context of insurance or risk-financing activities (such as self-insurance), GASB and FASAB require that premium revenues be recognized over the term of the policy, in proportion to the recognition of related costs (e.g., claims incurred).
This aligns revenue with expenses and ensures no profit is recognized before related obligations are met.
Relevant Reference:
FASAB SFFAS No. 7 -- Revenue and Other Financing Sources
GASB Statement No. 10 -- Accounting for Risk Financing and Related Insurance Issues
GFOA Risk Management and Insurance Practices
Answer : B. throughout the duration of the policy when claim costs are incurred

Answer : B

Question 7

A federal entity would record a payment of a payable in which of the following journal entries?

ADebit Undelivered Order-Obligations, Unpaid
Credit Delivered Orders-Obligations, Paid Debit Accounts Payable
Credit Fund Balance with Treasury

BDebit Unapportioned Authorities
Credit Delivered Orders-Obligations, Paid Debit Accounts Payable
Credit Fund Balance with Treasury

CDebit Commitments
Credit Delivered Orders-Obligations, Unpaid Debit Accounts Payable
Credit Fund Balance with Treasury

DDebit Delivered Orders-Obligations. Unpaid
Credit Delivered Orders-Obligations, Paid Debit Accounts Payable
Credit Fund Balance with Treasury
When a federal entity pays off a payable:
Budgetary accounting moves the status of the obligation from unpaid to paid
Proprietary accounting reduces the payable and cash (Fund Balance with Treasury)
The correct journal entry is:
Budgetary:
Debit Delivered Orders -- Obligations, Unpaid
Credit Delivered Orders -- Obligations, Paid
Proprietary:
Debit Accounts Payable
Credit Fund Balance with Treasury
This reflects the transition from an unpaid liability to a disbursed payment, complying with federal financial reporting.
Relevant Reference:
Treasury Financial Manual (TFM) Vol. I, Part 2, Chapter 4700
FASAB SFFAS No. 1 and No. 7 -- Accounting for Liabilities and Budgetary Resources
USSGL (U.S. Standard General Ledger) -- Posting Logic for Obligation Transactions
Answer : D. Debit Delivered Orders -- Obligations, Unpaid; Credit Delivered Orders --
Obligations, Paid; Debit Accounts Payable; Credit Fund Balance with Treasury

Answer : D

AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting GAFRB Exam Questions