AGA GAFRB Exam Practice Test Instant Access

Question 1

The primary purpose of accumulating and reporting cost information is to O

Ainform stockholders of detailed operational data.

Bprovide a means for management to assess decision performance.

Cinclude specific details in external financial statements.

Dmeet a SEC reporting requirement.
The primary purpose of accumulating and reporting cost information---especially in government and nonprofit environments---is to support internal decision-making. Cost data help managers assess program efficiency, evaluate resource use, and make policy or operational decisions.
While external financial statements may incorporate summarized cost information, and stockholders and regulatory agencies may have interests in private-sector settings, the most direct and core purpose is to support management.
Relevant Reference:
FASAB SFFAS No. 4 -- Managerial Cost Accounting Concepts and Standards
GFOA -- Cost Accounting for Decision-Making
OMB Circular A-136 and A-11 (federal reporting objectives)
Answer : B. provide a means for management to assess decision performance

Answer : B

Question 2

In an ACFR. the Independent Auditor's Report should be included in the

Afinancial section before the MD&A.

Bfinancial section before the basic financial statements.

Cintroductory section after the Letter of Transmittal.

Dstatistical section before the Information on Debt Capacity.
In an Annual Comprehensive Financial Report (ACFR), the Independent Auditor's Report is part of the Financial Section. It is placed immediately before the basic financial statements and after the Management's Discussion and Analysis (MD&A), not before it.
The proper sequence within the Financial Section of the ACFR is:
Independent Auditor's Report
Management's Discussion and Analysis (MD&A)
Basic Financial Statements
Required Supplementary Information (RSI)
Other Supplementary Information (as applicable)
Relevant Reference:
GASB Statement No. 34 -- Basic Financial Statements and MD&A
GFOA's Governmental Accounting, Auditing, and Financial Reporting (GAAFR)
GFOA Checklist for ACFR Preparation
Answer : B. financial section before the basic financial statements

Answer : B

Question 3

Management's need for real-time access to data is facilitated when

Adata is represented visually and includes information that indirectly relates to the subject matter.

Bdata supporting dashboards are updated every quarter.

Cthe prior year's financial statement data underlies the management reports used to decide on future
expenditures.

Dcomplex data sets are available on demand, presented with minimal distractions.
Why Does Management Need Real-Time Data Access?
Real-time access to data enables managers to make timely and informed decisions.
Complex data sets presented clearly and concisely (with minimal distractions) allow decision-makers to focus on the critical insights necessary for strategic and operational planning.
Why Is Option D Correct?
On-demand access ensures managers can retrieve updated data whenever needed. Presenting the data in a focused and distraction-free format facilitates quick comprehension and decision-making.
Why Other Options Are Incorrect:
A . Visual representation with indirect information: Including unrelated data can overwhelm users and detract from effective decision-making.
B . Dashboards updated quarterly: Quarterly updates do not meet the need for real-time access.
C . Prior year's financial data: Decisions based solely on historical data are not responsive to real-time needs.
Reference and Documents:
GAO Data Analytics and Visualization Framework: Stresses the importance of real-time, actionable, and distraction-free data for decision-making.
AICPA Dashboard Guidelines: Recommends presenting complex data sets in a clear and accessible format for management use.

Answer : D

Question 4

At the beginning of the fiscal year a school district held the following capital assets:

A$200.000

B$207.500

C$233.333

D$240.833
We calculate straight-line depreciation for each asset using the formula:
Depreciation = Cost Useful Life
Given:
Refrigerators: $150,000 20 = $7,500
Heating system: $500,000 15 = $33,333.33
Buses: $1,000,000 5 = $200,000
Total Depreciation:
$7,500 (Refrigerators)
$33,333.33 (Heating system)
$200,000 (Buses)
= $240,833.33
So the correct depreciation expense (rounded to the nearest dollar) is:
Answer : D. $240,833
Note: Option B ($207,500) is incorrect because it does not reflect total depreciation based on the useful lives provided.
Relevant Reference:
GASB Statement No. 34 -- Capital Asset Reporting
GFOA Best Practices -- Capital Assets and Depreciation
FASAB SFFAS No. 6 -- Accounting for Property, Plant, and Equipment
Answer : D. $240,833

Answer : B

Question 5

GASB establishes standards through a

Aunanimous vote of the board members, after discussing the results of written and oral comments offered by interested parties on an exposure draft submitted by GASB staff.

Bvote of the majority of board members, after discussing the results of a preliminary views document submitted by GASB staff.

Cunanimous vote of the board members, confirming that the standards would improve the usefulness of financial reports.

Dvote of the majority of board members, after discussing the written and oral comments offered by interested parties on an exposure draft of a statement of proposed standards.
The Governmental Accounting Standards Board (GASB) issues accounting standards after a structured due process that includes:
Publication of a Discussion Document (e.g., Preliminary Views)
Publication of an Exposure Draft
Solicitation and analysis of public comments (written/oral)
Deliberation by the full Board
A majority vote (not unanimous) of the GASB board members is required to approve and issue a final standard.
Relevant Reference:
GASB Rules of Procedure
GASB Due Process Manual
GASB Website -- Standard-Setting Process
Answer : D. vote of the majority of board members, after discussing the written and oral
comments offered by interested parties on an exposure draft of a statement of proposed standards

Answer : D

Question 6

The quarterly inventory record below has been provided for use in preparing the organization's financial statements. Based upon the information provided, what method of inventory valuation is used by the organization?

AFIFO

Baverage cost

CLIFO

Dnet weight scale
The organization's inventory records show that the beginning and ending amounts and values change each month, and the relationship between units and dollar values suggests that the cost per unit is averaged, not fixed (as with FIFO or LIFO). Let's evaluate January:
Beginning: 1,200 units / $2,400 $2.00 per unit
Purchased: 800 units / $2,000 $2.50 per unit
Ending: 600 units / $1,500 $2.50 per unit
The ending value of $1,500 for 600 units gives a per-unit cost of $2.50, matching the purchase cost in January. This suggests the system uses a weighted average cost method rather than tracking the specific cost layers (as FIFO or LIFO would).
Relevant Reference:
FASAB SFFAS No. 3 -- Accounting for Inventory and Related Property
GAAP and GASB guidelines on inventory valuation
GFOA Best Practices -- Inventory and Supply Chain Management
Answer : B. average cost

Answer : B

Question 7

Which entity assists the president in overseeing the preparation of the President's Budget?

AGAO

BCongressional Budget Office

COMB

Dthe U.S. Department of the Treasury
The OMB assists the President in preparing the President's Budget, which is submitted annually to Congress. OMB coordinates budget instructions, evaluates agency requests, and ensures alignment with presidential policies.
Other roles:
GAO: Supports Congress and performs audits
CBO: Provides nonpartisan budget analysis to Congress

US. Treasury: Manages federal finances but does not oversee budget preparation
Relevant Reference:
OMB Circular A-11 -- Role in Budget Formulation

US. Code Title 31 -- Role of OMB
GAO Budget Glossary
Answer : C. OMB

Answer : C

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