Free Practice Questions for AGA GAFRB Exam

Separate fund financial statements are required for:

Governmental Funds (e.g., general fund, special revenue)

Proprietary Funds (e.g., enterprise, internal service funds)

Fiduciary Funds (reported separately but not combined with government-wide statements)

Long-term debt and capital assets are components within the financial statements—not fund types.

Relevant References:

GASB Statement No. 34 – Financial Reporting Model

GASB Codification Section 2200 – Financial Reporting

GFOA Fund Reporting Framework

Answer: B. governmental and proprietary funds

This is the point when a proprietary entry and a budgetary entry must both be recorded:

Proprietary entry: To record the asset (e.g., equipment) and recognize the payable

Budgetary entry: To move from unpaid obligation (Undelivered Orders) to paid obligation (Delivered Orders)

Receiving goods/services triggers both the accrual of the expense and the update of the obligation’s status in the budgetary accounts.

Relevant References:

FASAB SFFAS No. 1 – Accounting for Selected Assets and Liabilities

Treasury Financial Manual, Part 2, Ch. 4700 – Proprietary vs. Budgetary Accounting

GAO Red Book – Appropriations Law

Answer: B. A contracting officer's representative receives delivery of previously ordered printers.

Temporary accounts (revenues, expenditures, and transfers) are closed at the end of the fiscal year to prepare the books for the next fiscal period. Tax revenues are a temporary account and are closed at year-end by transferring balances to fund balance accounts.

In contrast:

Taxes receivable (A) is a balance sheet (permanent) account.

Supplies inventory (C) is an asset.

Unassigned fund balance (D) is an equity account.

Relevant References:

GASB Codification Section 2200 – Fund Accounting and Closing Procedures

GFOA Accounting and Financial Reporting Manual

GAAP Fundamentals

Answer: B. tax revenues

Non-exchange revenues are those in which a government gives or receives value without directly receiving or giving equal value in return. Sales taxes are a classic example of a non-exchange revenue because the payer (consumer) does not receive a direct, measurable benefit from the government in exchange for the tax paid.

Other examples of non-exchange revenues include property taxes, grants, and fines. In contrast, licensing fees and investment earnings are exchange or exchange-like revenues, since they involve a mutual benefit or earnings return.

Relevant Standards and References:

GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions

GASB Codification Section N50

GFOA Revenue Classification Guidelines

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 References:

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

The Annual Comprehensive Financial Report (ACFR) includes three categories of fund financial statements:

Governmental funds

Proprietary funds (e.g., enterprise and internal service funds)

Fiduciary funds (e.g., pension trust, custodial funds)

GAAP (specifically GASB Statement No. 34) requires separate financial statements for proprietary and fiduciary funds because they use different accounting bases (full accrual) than governmental funds (modified accrual). These are included in the basic financial statements section of the ACFR.

Relevant References:

GASB Statement No. 34 – Basic Financial Statements

GASB Codification Section 2200 – Financial Reporting

GFOA Governmental Reporting Guidelines

Answer: B. fiduciary and proprietary funds

Serial bonds mature in installments over the life of the bond (e.g., every year or every few years). This structure allows the cost of repaying the debt to align more closely with the periods in which the capital asset is used — achieving intergenerational equity by spreading the cost over the same span as the asset’s useful life.

Term bonds, zero-coupon bonds, and pay-as-you-go do not align costs with benefits across multiple years in the same way.

Relevant References:

GFOA Best Practices – Debt Management and Capital Planning

GASB Concepts Statement No. 1 – Interperiod Equity

MSRB Educational Materials on Bond Types

Answer: A. 30-year serial bonds

A special-purpose government (e.g., a school district, utility authority) is considered a primary government when it meets at least one of the following conditions:

Has a separately elected governing body

Is legally separate

Is fiscally independent of other governments

The reliance on revenue projections from another entity does not preclude a government from being a primary government. What matters is legal and fiscal independence.

Relevant References:

GASB Statement No. 14 – The Financial Reporting Entity

GASB Statement No. 39 and No. 61 (Amendments to Statement 14)

GASB Codification Section 2100 – Defining the Financial Reporting Entity

Answer: A. relies on revenue projections from another government entity

A special revenue fund is used to account for the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes (other than debt service or capital projects). In this case, 40% of the operation is funded by specific revenues, which triggers the use of a special revenue fund, provided those revenues are legally restricted or committed to the operation.

Even though 60% of the funding comes from the general fund, the existence of a dedicated revenue stream (40%) for a specific purpose qualifies it for reporting in a special revenue fund.

Relevant References:

GASB Statement No. 54 – Fund Balance Reporting and Governmental Fund Type Definitions

GASB Codification Section 1300 – Fund Types

GFOA – Fund Structure Guidance

Answer: B. special revenue fund

════════════════════════

When full costs cannot be directly traced to a product or service, indirect costs must be allocated using a rational and systematic basis. The preferred method is to use a cause-and-effect relationship between the resource consumed and the output generated. This aligns with cost accounting principles under FASAB SFFAS No. 4 and managerial accounting frameworks.

Other options, such as direct labor or opportunity cost approaches, may be helpful in specific settings but do not meet the standard requirement for full cost allocation.

Relevant References:

FASAB SFFAS No. 4 – Managerial Cost Accounting Standards

OMB Circular A-136 – Full Cost Accounting

GAO Cost Estimating and Assessment Guide

Answer: D. a cause-and-effect relationship between resource costs and outputs