Free PDF Quiz Authoritative GAFRB - New Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Test Practice

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AGA GAFRB Exam Syllabus Topics:

Topic	Details
Topic 1	Governmental Financial Accounting, Reporting and Budgeting: General Knowledge:This section of the exam measures skills of government financial analysts and covers the unique aspects of governmental accounting that distinguish it from private sector practices, such as service over profit and the critical role of the budget. It emphasizes the objectives of financial reporting in the public sector, the role of standard-setting bodies like GASB, FASB, FASAB, and IPSASB, and the due process for setting accounting standards. It also includes knowledge of interperiod equity, budgetary compliance, sustainability, and the characteristics of quality financial information.
Topic 2	Federal Financial Accounting and Reporting: This section of the exam measures skills of government financial analysts and covers the roles of FASAB, OMB, Treasury, and GAO in federal accounting. It includes an understanding of federal budgetary terminology and the federal budgetary equation. The section differentiates between budgetary and proprietary accounting and outlines the structure and use of various federal fund types. It explains how to record key budgetary transactions like appropriations and obligations and proprietary transactions such as payroll and depreciation.
Topic 3	State and Local Financial Accounting and Reporting: This section of the exam measures skills of public sector accountants and focuses on applying GASB standards to define reporting entities and component units. It explores the structure and purpose of various fund types and the basis of accounting for each. Candidates must understand the format and content of the Annual Comprehensive Financial Report and the purpose of popular reports for public transparency.

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AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Sample Questions (Q48-Q53):

NEW QUESTION # 48
Which of the following federal collections are typically accounted for in a deposit fund?

A. funds held temporarily until ownership is determined (e.g., earnest money paid by bidders)
B. exchange revenues collected to finance a continuing cycle of business-type operations (e.g., revenue paid to service centers)
C. general tax receipts funding government operations overall (e.g., personal income taxes)
D. taxes dedicated to a specific purpose (e.g., gasoline taxes funding highway projects)

Answer: A

Explanation:
Deposit funds are a type of fiduciary fund used by federal agencies to account for monies held temporarily for others and where the government does not have ownership. These funds are not available for general government use and are excluded from budgetary resources.
Examples include:
Unidentified remittances
Bid deposits or earnest money
Collections awaiting resolution of ownership
These do not represent revenue to the federal government and are instead liabilities until disbursed.
Relevant References:
Treasury Financial Manual (TFM), Volume I, Part 2, Chapter 1500 - Deposit Fund Accounts GAO Red Book - Federal Appropriations Law FASAB SFFAS No. 1 - Accounting for Selected Assets and Liabilities C). funds held temporarily until ownership is determined

NEW QUESTION # 49
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. $1,475,000
B. $750,000
C. $975,000
D. $1,575,000

Answer: C

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

NEW QUESTION # 50
State and local governments account for budgeted and actual expenditures to ensure that

A. actual expenditures are used to formulate next year's budget.
B. spending conforms to legal requirements.
C. cash is available to pay bills when they come due.
D. GASB standards are met when producing the basic financial statements.

Answer: B

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 # 51
A state had problems with its cash reconciliation resulting in a difference between the total cash per books versus cash balance with banks. The possible loss could only be estimated within a range of $100 million to
$300 million with no amount within the range considered a better estimate than any other. The state should recognize a minimum liability of

A. an amount to be determined by external auditors.
B. $300 million with no additional disclosure required.
C. $100 million and disclose in the notes the exposure to an additional $200 million loss.
D. $200 million and disclose in the notes the exposure to an additional $100 million loss.

Answer: C

Explanation:
GASB Statement No. 62 (based on FASB ASC 450-20) provides guidance on recognizing loss contingencies.
If a loss is probable and the amount can only be estimated as a range, and no single amount within the range is better, the minimum amount in the range should be accrued.
The remainder of the range should be disclosed in the notes to the financial statements.
Thus:
Accrue: $100 million
Disclose: Additional exposure up to $200 million
Relevant References:
GASB Statement No. 62 - Paragraph 96
GAAP Implementation Guide - Loss Contingencies
AICPA Audit Guide - Government Auditing Standards
A). $100 million and disclose in the notes the exposure to an additional $200 million loss

NEW QUESTION # 52
State Medicaid caseloads have been exceeding projections for the past two months. Review of the data indicates the increase is likely to continue, leading to the need for significant supplemental appropriations before the end of the fiscal year. Based upon this information, what is the first action the state director of Medicaid should take?

A. Confer with the chairmen or staff directors of the House and Senate appropriations committees concerning the need to call a legislative special session.
B. Inform the legislative counsel bureau about the potential over-expenditure.
C. Inform the governor of the situation and options for addressing the shortfall.
D. Impose a hiring freeze and hold all spending approvals for contracts and purchases on the affected departments.

Answer: C

Explanation:
The first and most appropriate action for the state Medicaid director is to inform the governor. This ensures that executive leadership is aware of the fiscal shortfall early and can weigh in on how to proceed. The governor plays a central role in budget planning and proposing supplemental appropriations.
While informing legislators or freezing spending may be necessary later, those steps should occur after executive leadership has been notified and involved in decision-making.
Relevant References:
GFOA Best Practices - Budget Monitoring and Adjustment
State Budget Procedures Manuals (varies by state, but consistent in escalation path) National Association of State Budget Officers (NASBO) Guidance A). Inform the governor of the situation and options for addressing the shortfall

NEW QUESTION # 53
......

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Free PDF Quiz Authoritative GAFRB - New Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Test Practice

AGA GAFRB Exam Syllabus Topics:

AGA GAFRB Exam | New GAFRB Test Practice - Instant Download of GAFRB Latest Material

AGA Examination 2: Governmental Accounting, Financial Reporting and Budgeting (GAFRB) Sample Questions (Q48-Q53):

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