Select the best answer for each of the following items:
1. When used in fund accounting, the term “fund” usually refers to
(a) A sum of money designated for a special purpose.
(b) A liability to other governmental units.
(c) The equity of a municipality in its own assets.
(d) A fiscal and accounting entity having a set of self-balancing accounts.

2. Authority granted by a legislative body to make expenditures and to incur obligations during a fiscal year is the definition of an
(a) Appropriation.
(b) Authorization.
(c) Encumbrance.
(d) Expenditure.

3. What type of account is used to earmark the fund balance to liquidate the contingent obligations of goods ordered but not yet received?
(a) Appropriations.
(b) Encumbrances.
(c) Obligations.
(d) Reserve for encumbrances.

4. A city’s General Fund budget for the forthcoming fiscal year shows estimated revenues in excess of appropriations. The initial effect of recording this will result in an increase in
(a) Taxes receivable.
(b) Fund balance.
(c) Reserve for encumbrances.
(d) Encumbrances.

5. The Reserve for Encumbrances account is properly considered to be a
(a) Current liability if payable within a year; otherwise, a long-term debt.
(b) Fixed liability.
(c) Floating debt.
(d) Reservation of the fund’s equity.

6. In preparing the General Fund budget of Dover City for the forthcoming fiscal year, the City Council appropriated a sum greater than expected revenues. This action of the Council will result in
(a) A cash overdraft during that fiscal year.
(b) An increase in encumbrances by the end of that fiscal year.
(c) A decrease in the fund balance.
(d) A necessity for compensatory offsetting action in the Debt Service Fund.

7. What would be the effect on the General Fund balance in the current fiscal year of recording a $150,000 purchase for a new fire truck out of General Fund resources, for which a $146,000 encumbrance had been recorded in the General Fund in the previous fiscal year?
(a) Reduce the General Fund balance by $150,000.
(b) Reduce the General Fund balance by $146,000.
(c) Reduce the General Fund balance by $4,000.
(d) Have no effect on the General Fund balance.