Appendix 10: Answers to Reinforcement Quiz ñ Section I, Chapter 3
Answers to Reinforcement Quiz ñ Section I, Chapter 3
1. A governmentís budget should incorporate only a short-term perspective
because the budget is only for a one-year period. True or false?
Answer: False. Although the budget is only for a one-year period, an
effective budget incorporates a long-term perspective focusing on long-
range goals and objectives. The budget, then, is a measure of what can
be accomplished during the one-year period to achieve the long-range
goals and objectives.
2. The phases of the budget process are:
a. preparation, execution, legislative
b. legislative, execution, preparation
c. preparation, legislative, execution
d. execution, preparation, legislative
e. legislative, preparation, execution
f. execution, legislative, preparation
Answer: (c).
3. Describe what takes place during the legislative phase of the budget
Answer: After receiving the budget from the executive branch, the
legislative branch begins its deliberations. Hearings are held with the
CEO, CFO, agency heads and other personnel. Special interest groups
and the general public have the opportunity to provide opinions. The
legislative branch then crafts and passes the appropriation ordinance or
act that sets forth the amounts that can be spent during the year.
If there are two houses in the legislative branch, each must pass a budget.
If they differ, a conference committee of both houses develops the final
In a number of states and local governments, the CEO has the ability to
veto certain items or the entire document. The legislative branch then has
the opportunity to override the veto.
4. Budgets are primarily organized by program. True or false?
Answer: False. Budgets tend to be organized around the department,
agency or other organizational unit.
Online version, for personal use only AGA Study Guide 2, 2016 Edition

Appendix 10: Answers to Reinforcement Quiz ñ Section I, Chapter 3
5. Which budget process is most appropriate for containing costs?
a. program
b. zero-based
c. performance
d. line item
Answer: (d). The line item budget sets forth the categories or objects of
expenditure. By limiting the amount that is available for spending, costs
can be contained. None of the other approaches specifies the things for
which monies are to be spent.
6. Describe the major features of the zero-based budget approach.
Answer: The process begins by assuming the function or activity ceases
to exist. Managers then describe the implications. The first decision
package prepared shows the minimum level of funding required.
Additional packages are prepared and prioritized. Eventually, the priorities
are matched to available revenues.
7. Capital budgets are funded in the same manner as operating budgets.
True or false?
Answer: False. Although capital budgets can be funded with current
resources, most are funded through long-term financing options.
8. A government wants to ensure that those who benefit from a capital
project should pay the cost of financing. How should a project that has a
20-year useful life be financed?
a. pay from current resources
b. issue a term bond with no sinking fund
c. issue a serial bond with level debt service
d. use grant funds
Answer: (c). If the project is paid from current resources, only current-
year taxpayers are paying for the project. Taxpayers in years two through
20 are not paying anything. If the government does not use a sinking fund
with the term bonds, then, most likely, taxpayers in the latter years or year
20 will pay for the project. If grant funds are used, no taxpayers of the
government will be required to pay directly.
Online version, for personal use only AGA Study Guide 2, 2016 Edition

Appendix 10: Answers to Reinforcement Quiz ñ Section I, Chapter 3
9. Describe the budgetary equation in its simplest form for state/local
governments and the federal government.
Answer: In its simplest form, the beginning balance is the starting point,
since it is a resource. Adding estimated revenues provides the amount
available for appropriation. The amount remaining after the appropriations
have been made is the estimated ending balance.
The budgetary equation for the federal government is estimate receipts,
less outlays, equals increase/decrease in the deficit.
10.Once the budget has been adopted, there is no need to monitor revenues.
True or false?
Answer: False. Governments need to monitor revenues to ensure they
are consistent with the estimates. If they are below estimates, action may
need to be taken to reduce appropriations or raise additional revenues.
11.During the quarter, an allotment has the following activity:
Beginning allotment balance $100,000
Payroll expenditures 80,000
Purchase order for office supplies 6,000
Final payment for office supplies 5,000
(Made prior to end of quarter)
Purchase order for computers 14,000
Final payment for computers 12,000
(Made prior to end of quarter)
What is the ...

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AGA CGFM Study Guide 2: Governmental Accounting, Financial Reporting and Budgeting