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AGA GAFRB Exam Syllabus Topics:
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Details
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AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Sample Questions (Q31-Q36):
NEW QUESTION # 31
State and local governments account for budgeted and actual expenditures to ensure that
Answer: D
Explanation:
State and local governments adopt legally binding budgets and are required to monitor compliance with those budgets. Budget-to-actual comparisons help ensure that public funds are spent only as authorized by the legislative body. This supports the core accountability principle of public sector financial reporting.
While budgets can also support planning and cash flow, the primary purpose of tracking budgeted vs. actual expenditures is legal compliance.
Relevant References:
GASB Statement No. 34 - Budgetary Comparison Schedules
GFOA - Budget Monitoring and Compliance
GAO Red Book - Legal Requirements for Public Spending
D). spending conforms to legal requirements.
NEW QUESTION # 32
If an internal service fund needs to develop an hourly billing rate, the calculation should include
Answer: A
Explanation:
An internal service fund is used to account for goods or services provided by one department or agency to other departments or agencies of the governmental unit, typically on a cost-reimbursement basis.
To establish accurate billing rates (e.g., hourly rates), the fund must use actual costs of providing services.
This includes materials consumed, labor, depreciation, and overhead. Materials purchased but not used should not be included in the rate calculation for the current period.
Relevant Standards and References:
FASAB SFFAS No. 4, Managerial Cost Accounting
GASB Codification Section 1800, Internal Service Funds
GFOA Best Practices - Internal Service Fund Rate Setting
Therefore, Option A is correct.
NEW QUESTION # 33
Congress plans to set up an activity within an agency that would:
* provide procurement services to other agencies;
* reimburse fees to the providing agency at a level that would cover the total estimated costs of the services.
The fees would be deposited in the providing agency's accounts and would remain available until expended, to carry out the purposes of the fund. This arrangement describes a
Answer: B
Explanation:
A revolving fund is a fund established to finance a continuing cycle of operations where the receipts (e.g., fees or reimbursements) are used to finance future operations. These funds are usually self-sustaining and are designed to recover full costs of providing goods or services.
The described situation - an agency providing procurement services to other agencies and using collected fees to continue operations - is a classic example of an intragovernmental revolving fund (also called a working capital fund).
Relevant References:
OMB Circular A-11, Section 20 - Fund Classifications
GAO Glossary of Terms - Revolving Fund
FASAB SFFAS No. 7 - Revenue and Other Financing Sources
A). revolving fund
NEW QUESTION # 34
Purchase orders are issued in the amount of $427,000. The general ledger entry to record the encumbrance should be
Answer: C
Explanation:
When a government issues purchase orders, it records encumbrances to reflect commitments against appropriations. This helps track budgetary commitments and avoid overspending.
The entry is recorded in the budgetary accounts (not proprietary accounts) as follows:
Debit Encumbrances: Recognizes the commitment
Credit Budgetary Fund Balance (or Reserve for Encumbrances): Reflects that part of the fund balance is committed This is consistent with modified accrual accounting and standard governmental fund practice.
Relevant References:
GASB Codification Section 1300 - Budgetary Accounting
GFOA Best Practices - Encumbrance Accounting
GAO Principles of Appropriation Law - Encumbrance Controls
D). Debit Encumbrances $427,000; Credit Budgetary Fund Balance $427,000
NEW QUESTION # 35
A federal entity would record a payment of a payable in which of the following journal entries?
Answer: B
Explanation:
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 References:
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 D). Debit Delivered Orders - Obligations, Unpaid; Credit Delivered Orders - Obligations, Paid; Debit Accounts Payable; Credit Fund Balance with Treasury
NEW QUESTION # 36
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