Accounting for Fiduciary Activities Agency and Trust Funds
Which of the following is a primary characteristic of fiduciary activities?
a) Ownership of assets by the government
b) The absence of any beneficiaries
c) The government holds resources for the benefit of others
d) Use of modified accrual accounting principles
Agency funds are primarily used for:
a) Managing the government’s own revenues
b) Safeguarding assets for external parties
c) Tracking capital project expenses
d) Recording internal service transactions
Trust funds typically include which of the following?
a) Pension trust funds
b) Enterprise funds
c) Debt service funds
d) Capital projects funds
Which accounting basis is used for fiduciary funds?
a) Cash basis
b) Accrual basis
c) Modified accrual basis
d) Budgetary basis
Fiduciary funds are reported in the:
a) Statement of Activities
b) Government-wide financial statements
c) Fund financial statements
d) Capital budget
Custodial funds replaced which type of fund in the GASB 84 implementation?
a) Internal service funds
b) Agency funds
c) Special revenue funds
d) Enterprise funds
Which of the following statements is true about fiduciary funds?
a) They do not include financial liabilities.
b) They are reported in the governmental activities column of the government-wide financial statements.
c) They account for resources the government manages for others.
d) They use modified accrual accounting principles.
GASB Statement 84 focuses on:
a) Reporting internal service activities
b) Defining fiduciary activities
c) Adjusting proprietary fund definitions
d) Eliminating custodial funds
Which type of fund is commonly used for escheat property?
a) Enterprise fund
b) Custodial fund
c) Capital projects fund
d) Internal service fund
Trust funds require financial reporting on:
a) Changes in net position only
b) Cash inflows and outflows exclusively
c) A statement of fiduciary net position and changes in fiduciary net position
d) Budgetary compliance measures
Fiduciary activities exclude which of the following?
a) Custodial funds
b) Private-purpose trust funds
c) Special revenue funds
d) Investment trust funds
The main difference between custodial funds and trust funds is:
a) Custodial funds are subject to more restrictive regulations.
b) Trust funds are managed for designated beneficiaries under trust agreements.
c) Custodial funds require less financial reporting.
d) Trust funds use cash basis accounting.
The primary purpose of an investment trust fund is to:
a) Pool and invest resources for external participants.
b) Manage government employee pension plans.
c) Provide grants to private entities.
d) Track internal investments.
Fiduciary fund liabilities are recorded when:
a) They are incurred.
b) They are paid.
c) They are budgeted.
d) The fiscal year ends.
Which statement best describes the role of agency funds?
a) Agency funds recognize revenues when earned.
b) Agency funds account for government-owned resources.
c) Agency funds serve as pass-through mechanisms for resources.
d) Agency funds hold assets for trust beneficiaries.
Fiduciary fund resources are not included in:
a) The government’s operating budget
b) Proprietary fund activities
c) Net position calculations
d) Enterprise fund transactions
Fiduciary activities are most often associated with:
a) Tax collection on behalf of other governments
b) Capital improvement projects
c) Public health services
d) Enterprise fund operations
What distinguishes fiduciary activities from proprietary activities?
a) Fiduciary activities generate profits.
b) Fiduciary activities are for the benefit of external parties.
c) Fiduciary activities use budgetary accounting.
d) Fiduciary activities involve service delivery to constituents.
Which fund accounts for resources held for the benefit of individuals, private organizations, or other governments?
a) Enterprise fund
b) Private-purpose trust fund
c) Custodial fund
d) Special revenue fund
GASB 84 clarifies that fiduciary activities include all the following except:
a) Assets controlled by the government
b) Assets for which the government has no administrative responsibility
c) Assets held for the benefit of others
d) Activities meeting specific fiduciary criteria
Which statement about fiduciary funds is incorrect?
a) Fiduciary funds require financial statements.
b) Fiduciary funds use full accrual accounting.
c) Fiduciary funds are included in government-wide financial statements.
d) Fiduciary funds account for resources held for others.
Custodial fund reporting includes:
a) Budgetary compliance notes
b) Statements of revenues and expenses
c) Additions and deductions of resources
d) Cost analysis of fund administration
Which is a common example of a custodial fund?
a) General obligation bond fund
b) External tax collection fund
c) Internal depreciation fund
d) Pension liability fund
Fiduciary funds differ from proprietary funds in that they:
a) Serve governmental operations.
b) Report activities unrelated to resource stewardship.
c) Are excluded from budgetary controls.
d) Use a cash accounting basis exclusively.
The Statement of Fiduciary Net Position does not include:
a) Total liabilities
b) Additions to fund balances
c) Total assets
d) Net position restricted for fiduciary purposes
26. In fiduciary fund accounting, additions and deductions are recorded in:
a) Income and expense accounts
b) Net investment accounts
c) Statements of changes in fiduciary net position
d) Budgetary compliance reports
27. Which of the following is NOT a fiduciary fund?
a) Pension trust fund
b) Custodial fund
c) Debt service fund
d) Investment trust fund
28. Fiduciary fund activities must meet all of the following criteria EXCEPT:
a) Assets must be controlled by the government.
b) Activities must benefit the government directly.
c) Assets must be for the benefit of entities other than the government.
d) The government cannot have significant administrative involvement.
GASB 84 requires fiduciary activities to meet which key element?
a) The assets must be permanently restricted.
b) The government must have custody but no control.
c) The government must act in a trust or custodial capacity.
d) The activities must be recorded in the general fund.
Investment trust funds are used primarily for:
a) Managing internal investments of the government.
b) Safeguarding taxes collected on behalf of other entities.
c) Pooling investments for external participants.
d) Funding capital improvements.
Custodial funds are appropriate for:
a) Pension contributions
b) Grant disbursement tracking
c) Temporary holding of assets on behalf of others
d) Debt repayment management
A distinguishing feature of private-purpose trust funds is that they:
a) Are limited to government employee benefits.
b) Serve specific individuals or entities outside the government.
c) Do not generate any investment income.
d) Cannot be used for scholarships or endowments.
Fiduciary fund assets are excluded from:
a) Proprietary fund statements
b) Net position in government-wide statements
c) Financial reporting requirements
d) Budgetary controls of the primary government
Which of the following is required for financial reporting of trust funds?
a) Statement of Revenues, Expenses, and Changes in Fund Balance
b) Statement of Fiduciary Net Position and Changes in Fiduciary Net Position
c) Balance Sheet and Income Statement
d) Comprehensive Annual Financial Report only
Custodial funds often include resources collected on behalf of:
a) Other government entities, such as property taxes
b) Internal government operations
c) Governmental utility services
d) General fund expenditures
In fiduciary fund reporting, a liability should be recognized when:
a) The government collects cash.
b) Resources are not under the government’s control.
c) The government has an obligation to disburse resources.
d) The resources are received in advance.
Fiduciary funds exclude:
a) Pension trust funds
b) Custodial funds
c) General funds
d) Investment trust funds
The primary distinction between agency funds and custodial funds under GASB 84 is:
a) Custodial funds have expanded reporting requirements.
b) Agency funds no longer exist post-GASB 84 implementation.
c) Custodial funds cannot be used for intergovernmental activities.
d) Agency funds are restricted to investment income reporting.
Fiduciary activities must exclude:
a) Significant administrative involvement by the government
b) Custody of resources
c) Assets used to support governmental programs
d) Resources held for external parties
Which fund type is used for managing pension resources?
a) General fund
b) Pension trust fund
c) Special revenue fund
d) Enterprise fund
GASB 84 applies to fiduciary activities primarily to:
a) Expand proprietary fund use
b) Improve clarity and consistency in fiduciary reporting
c) Eliminate fiduciary fund reporting
d) Limit the number of fiduciary fund types
Fiduciary activities typically involve:
a) Revenue generation for the government
b) Expenditure tracking for public services
c) Asset management for third parties
d) Internal financial audits
A custodial fund must report which of the following?
a) Revenue and expenditure details
b) Additions and deductions
c) Budgetary compliance metrics
d) Administrative expense breakdown
Private-purpose trust funds typically finance:
a) General government operations
b) Special district expenditures
c) Scholarships or endowments for private individuals
d) Long-term capital improvements
Fiduciary fund reporting ensures that:
a) All government activities are consolidated in the government-wide statements.
b) Activities unrelated to the government are clearly identified.
c) Fund operations remain under strict budgetary control.
d) Fiduciary assets are reported alongside proprietary fund assets.
Which of the following fiduciary fund types accounts for external investment pools?
a) Custodial funds
b) Investment trust funds
c) Pension trust funds
d) Private-purpose trust funds
The primary reporting document for fiduciary activities is:
a) The Statement of Revenues and Expenses
b) The Statement of Fiduciary Net Position
c) The General Fund Budgetary Report
d) The Statement of Cash Flows
Under GASB 84, fiduciary funds include all the following except:
a) Custodial funds
b) Internal service funds
c) Pension trust funds
d) Private-purpose trust funds
Which statement about custodial funds is correct?
a) They are used to hold resources for the government’s own use.
b) They are reported in government-wide financial statements.
c) They track short-term resources held on behalf of others.
d) They are subject to budgetary control.
Fiduciary activities generally:
a) Contribute to the government’s net position.
b) Do not appear in government-wide financial statements.
c) Require the use of modified accrual accounting.
d) Include only proprietary fund activities.
The primary purpose of pension trust funds is to:
a) Manage retirement benefits for government employees.
b) Collect taxes on behalf of other governments.
c) Fund large-scale public infrastructure projects.
d) Track internal investments for the general fund.
Which of the following is an example of a fiduciary activity?
a) Operating a municipal water utility
b) Managing escheat property for the state
c) Financing a school district’s construction project
d) Overseeing the general fund’s investments
Investment trust funds report:
a) Additions and deductions for the general fund.
b) The pooled investments of external participants.
c) The operating costs of fiduciary management.
d) Revenues generated by government-owned enterprises.
A fiduciary activity is excluded from government-wide financial reporting because:
a) It is consolidated with proprietary fund activities.
b) It does not benefit the government’s constituents directly.
c) It is tracked using modified accrual accounting.
d) It has no financial liabilities.
Fiduciary fund financial statements do NOT include:
a) Statement of Fiduciary Net Position
b) Statement of Changes in Fiduciary Net Position
c) Statement of Cash Flows
d) Notes to the financial statements
Custodial funds differ from other fiduciary funds because they:
a) Require a trust agreement
b) Do not involve net position reporting
c) Have specific beneficiaries
d) Are always restricted to pension-related activities
Which of the following is required for reporting fiduciary fund investments?
a) Market value only
b) Cost basis or fair value
c) Book value
d) Replacement cost
GASB 84 clarifies that fiduciary fund activities:
a) Must always be included in the general fund.
b) Should exclude liabilities that exceed assets.
c) Must meet specific control and benefit criteria.
d) Are reported only when revenues exceed expenses.
Investment trust funds account for:
a) Government employee pension assets only
b) Private investments for individuals and corporations
c) External participant investments in pooled funds
d) Short-term financial transactions
Fiduciary funds are classified as major funds:
a) Based on government discretion
b) If they meet materiality thresholds
c) Automatically under GASB standards
d) When reported in the general fund
The management of resources held in fiduciary funds typically includes:
a) Tax collection for internal government use
b) Monitoring and reporting to beneficiaries
c) Allocating resources to general fund activities
d) Adjusting annual government budgets
Which of the following is NOT a characteristic of fiduciary activities?
a) Assets are owned by the government.
b) Resources benefit external parties.
c) Administrative involvement by the government is limited.
d) Assets are controlled but not owned by the government.
A private-purpose trust fund would be appropriate for:
a) Managing a city’s utility services
b) Allocating retirement benefits for government employees
c) Handling a scholarship fund for specific individuals
d) Collecting and distributing sales tax for multiple jurisdictions
Fiduciary fund liabilities should be reported when:
a) Cash is collected.
b) A legal obligation is established.
c) The fiscal year ends.
d) The budget is approved.
GASB standards require fiduciary activities to:
a) Be fully integrated with enterprise fund reporting.
b) Use cash basis accounting for transparency.
c) Be excluded from the government-wide net position.
d) Appear in the operating budget for audit purposes.
What type of fiduciary fund is used to administer resources for retirees of a government organization?
a) Custodial Fund
b) Pension Trust Fund
c) Private-Purpose Trust Fund
d) General Fund
The fiduciary fund statement of changes in net position includes:
a) Only additions
b) Additions and deductions
c) Only expenses
d) Revenue and capital asset changes
In which scenario would a custodial fund be appropriate?
a) Managing funds for a government scholarship program
b) Pooling external investments for multiple governments
c) Collecting and disbursing property taxes for other jurisdictions
d) Administering employee benefit plans
GASB 84 clarified the classification of fiduciary activities by introducing:
a) Expanded criteria for custodial funds
b) A new requirement for consolidated fund reporting
c) Uniform rules for fiduciary and governmental funds
d) Specific control and benefit requirements
Under GASB 84, fiduciary funds can only exist if:
a) The government benefits directly from the resources.
b) There is a trust or custodial arrangement.
c) The funds are used for general public services.
d) They are managed as part of the general fund.
Fiduciary fund liabilities are recognized when:
a) Cash is received from external parties.
b) The government establishes a legal obligation to transfer resources.
c) Assets are disbursed to beneficiaries.
d) Budgetary allocations are approved.
A private-purpose trust fund would manage resources for:
a) School district operations
b) Public employee pensions
c) A donor-specified endowment
d) Infrastructure repairs
Investment trust funds primarily:
a) Record earnings on internal government investments
b) Handle pooled investments for external participants
c) Account for cash flow in governmental programs
d) Manage custodial responsibilities for short-term loans
Custodial funds typically exclude:
a) Revenues earned from government activities
b) Resources held on behalf of other entities
c) Transactions related to shared taxes
d) Funds allocated for temporary resource management
Fiduciary fund reporting requires:
a) Modified accrual basis for custodial funds
b) Separation of internal and external fund uses
c) Comprehensive disclosure of net position changes
d) Presentation of fiduciary assets in government-wide statements
The Statement of Fiduciary Net Position reports:
a) Both current and noncurrent liabilities only
b) Assets and liabilities with no net position
c) Additions, deductions, and net position changes
d) Assets, liabilities, and net position
Which of the following funds would be used to account for escheat property?
a) Custodial fund
b) General fund
c) Capital projects fund
d) Special revenue fund
GASB standards require that fiduciary activities:
a) Use the accrual basis of accounting
b) Be included in the general fund statements
c) Report revenues on a cash basis
d) Track expenditures using modified accrual
An example of an addition in a fiduciary fund would be:
a) Disbursement of pension benefits
b) Interest earned on trust investments
c) Allocation of internal government resources
d) Depreciation on long-term assets
Which fund is appropriate for managing resources held for investment in a state-sponsored 529 college savings plan?
a) Custodial fund
b) Pension trust fund
c) Private-purpose trust fund
d) Investment trust fund
What distinguishes private-purpose trust funds from pension trust funds?
a) They are restricted to capital projects.
b) Their beneficiaries are external private entities or individuals.
c) They cannot generate investment income.
d) They must adhere to government-wide financial reporting.
Fiduciary activities must meet which condition under GASB 84?
a) The government has direct ownership of the resources.
b) The resources benefit the government’s general operations.
c) The government controls the assets for the benefit of others.
d) The resources are internally allocated for government projects.
Which type of fiduciary fund accounts for scholarships funded by a private donor’s endowment?
a) Custodial fund
b) Pension trust fund
c) Private-purpose trust fund
d) General fund
Fiduciary fund statements exclude:
a) Current liabilities
b) Net position
c) Changes in fund balance
d) Long-term obligations
Custodial funds are generally used for:
a) Resources held temporarily for external parties
b) Long-term investments of the government
c) Employee benefit administration
d) Financing public infrastructure