Pass the AGA Government Financial Manager GAFRB Questions and answers with CertsForce

Comprehensive Detailed Explanation:

In governmental funds (using the modified accrual basis), expenditures are recorded when financial resources are used — typically when cash is disbursed. However, in government-wide statements (accrual basis), only the portion of the asset’s cost consumed in the period is recorded as an expense (i.e., depreciation).

Paying for capital assets such as vehicles is an expenditure in the governmental funds, but not an expense in the accrual-based government-wide financials. Instead, the cost is capitalized and depreciated over time.

Relevant References:

GASB Statement No. 34 – Government-wide vs. Fund Financial Reporting

GASB Codification Section 1300 – Modified Accrual Accounting

GFOA Best Practices – Capital Asset Reporting

Answer: C. At the end of the fiscal year, the government pays for ten vehicles which will be depreciated over five years.

Governmental fund accounting uses the modified accrual basis of accounting. Under this basis, revenues are recognized when:

They are measurable (amount can be reasonably determined)

They are available (collectible within the current period or soon enough thereafter to pay current liabilities — typically within 60 days)

This is the key difference from full accrual accounting, which recognizes revenue when it is earned, regardless of when received.

Relevant References:

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

GASB Statement No. 34 – Fund Accounting and Modified Accrual Basis

GASB Codification Section 1600 – Fund Financial Reporting

Answer: C. recognized when they become measurable and available

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.

The Government Management Reform Act (GMRA) of 1994 amended the Chief Financial Officers (CFO) Act of 1990 to require each executive agency to prepare and submit audited financial statements covering all accounts and associated activities.

This extended the audit requirement beyond the pilot CFO agencies and laid the groundwork for the Financial Report of the U.S. Government.

Relevant References:

Government Management Reform Act of 1994 (Public Law 103-356)

CFO Act of 1990

OMB Circular A-136 – Financial Reporting Requirements

Answer: B. audited financial statements of the executive departments

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