Ch04

Chapter Four Test Bank Multiple Choice Questions
1. A city's General Fund general ledger includes accounts called Estimated Revenues,
Appropriations, and Encumbrances. This indicates that the city
a. formally integrates its budget into its accounts.
b. uses a cash plus encumbrances basis of accounting.
c. maintains its accounts on an accrual basis.
d. erroneously reports encumbrances as expenditures.
2. Legal authority to expend resources is adopted by a city council in the budgeting process.
These legal authorizations are called
a. appropriations.
b. authorizations.
c. encumbrances.
d. expenditures.
3. The purpose of encumbrance accounting is to
a. manage a government's cash flows.
b. avoid expenditures exceeding appropriations.
c. replace expense accounting in governments.
d. prevent government waste.
4. The "Unencumbered Balance" in an expenditure subsidiary ledger represents
a. appropriation less expenditures.
b. appropriation less encumbrances.
c. appropriation less expenditures and encumbrances.
d. estimated revenue less appropriation.
5. Which of the following budgetary entries would the town of Geneva make upon adoption of its Special Revenue Fund Budget for the year? Assume the following:
Estimated Revenues
Appropriations

$ 6,400,000
6,080,000
dr

a. Appropriations
Unreserved Fund Balance
Estimated Revenues
b. Estimated Revenues
Appropriations
Unreserved Fund Balance
c. Expenditures
Unreserved Fund Balance
Revenues
d. None of the above.

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cr

$ 6,080,000
320,000
$6,400,000
$ 6,400,000
$6,080,000
320,000
$ 6,080,000
320,000
$6,400,000

4-1

6. Which of the following budgetary entries would the township of Brussels make upon adoption of its General Fund budget for the year? Assume the following:
Estimated Revenues
Appropriations
Estimated Other Financing Sources (OFS)
Estimated Other Financing Uses (OFU)

$10,365,000
10,500,000
200,000
15,000
dr

a. Appropriations
Estimated OFU
Unreserved Fund