AGA GAFRB Exam Questions Instant Access - No Installation Required

Question 1

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 2

A municipality would establish an internal service fund to capture the activities of a data processing center, in order to account for

Afinancial resources to be used for acquisition of facilities.

Bservices rendered to the general public on a fee basis.

Cproceeds of revenue sources restricted to expenditure for specified purposes.

Dfinancing of services provided to other governmental units on a cost reimbursement basis.
Comprehensive Detailed
Internal service funds are proprietary funds used to account for the operations of departments or functions that provide goods or services to other departments within the same government on a cost-reimbursement basis. Examples include:
Centralized IT/data processing
Fleet management
Print shops or mail centers
These are not used for general public services, capital acquisitions, or restricted revenues (which belong in special revenue or capital projects funds).
Relevant Reference:
GASB Statement No. 34 -- Fund Types
GASB Codification Section 1300 -- Internal Service Funds
GFOA Fund Accounting Best Practices
Answer : D. financing of services provided to other governmental units on a cost
reimbursement basis.

Answer : D

Question 3

A private bank provides a student loan that the government has insured against default. This is an example of

Aloan insurance.

Ba loan guarantee.

Ca secured loan.

Da Pell Grant.
When a private bank issues a student loan that is insured by the government in case of default, the federal government is acting as a guarantor---not issuing the loan directly, but promising repayment to the lender if the borrower defaults. This is a classic example of a federal loan guarantee program.
Loan guarantees are off-budget unless called, and the government only incurs a liability if the student defaults.
Relevant Reference:
FASAB SFFAS No. 2 -- Accounting for Direct Loans and Loan Guarantees
Credit Reform Act of 1990
OMB Circular A-11, Section 185 -- Federal Credit Programs
Answer : B. a loan guarantee

Answer : B

Question 4

The roles of GASB and FASAB are to

Aestablish auditing standards.

Bissue joint accounting standards.

Cpromulgate accounting standards.

Dfollow FASB accounting standards.
The Governmental Accounting Standards Board (GASB) and the Federal Accounting Standards Advisory Board (FASAB) are both responsible for promulgating (i.e., formally establishing and issuing) accounting standards:
GASB: for state and local governments
FASAB: for federal entities
They do not establish auditing standards (that is the role of GAO and AICPA), nor do they issue joint standards or follow FASB unless no applicable guidance exists.
Relevant Reference:
GASB Statement No. 1 -- Authoritative Status of GASB Pronouncements
FASAB Mission and Responsibilities
GAO Yellow Book (Government Auditing Standards)
Answer : C. promulgate accounting standards

Answer : C

Question 5

Which of the following fund types would be used to collect water utility user fees?

Aspecial revenue fund

Bcapital projects fund

Cpension fund

Denterprise fund
Enterprise funds are a type of proprietary fund used by governments to account for operations that are financed and operated in a manner similar to private business enterprises. These include activities like water, sewer, and electricity utilities, where user fees or charges for services are the primary revenue source.
In this case, a water utility charging users is best accounted for using an enterprise fund.
Relevant Reference:
GASB Codification Section 1300 -- Fund Types
GASB Statement No. 34 -- Fund Classification
GFOA Best Practices -- Utility and Enterprise Fund Accounting
Answer : D. enterprise fund

Answer : D

Question 6

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$705.000

C$755,000

D$915.000
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 Reference:
GASB Statement No. 51 -- Paragraphs 6--12
GFOA Guidelines -- Capitalization of Intangible Assets
Answer : C. $755,000

Answer : C

Question 7

What is the annual projected sales tax revenue if in nine months the revenue earned is $26.5 million, and no other factors are known?

A$26.5 million

B$35.3 million

C$40.0 million

D$53.0 million
To annualize the projected sales tax revenue from 9 months of actual data:
Step 1: Determine the monthly average:
$26.5 million 9 months = $2.944 million/month
Step 2: Project for 12 months:
$2.944 million 12 = $35.33 million $35.3 million
However, the closest and most likely answer choice based on rounding is:
Answer : B. $35.3 million
Correction to earlier assumption: The original intended answer was marked as C. $40.0 million, but that would only apply if growth or seasonal adjustments were involved, which the question states are unknown. Therefore, the correct projected revenue based on straight-line extrapolation is:
Final Answer : B. $35.3 million

Answer : B

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