Question: 1. What is a key difference between budgets prepared by governmental units and by commercial organizations?

a. Budgets prepared by commercial organizations must be approved by a governing body, whereas those prepared by governmental units need no approvals.

b. Budgets prepared by governmental units are legal documents, whereas those prepared by commercial organizations are not.

c. Operating and capital budgets and cash forecasts are prepared by governmental units, but only operating budgets are prepared by commercial organizations.

d. Budgets prepared by commercial organizations are formally recorded in the organizations' operating accounts, whereas those prepared by governmental units are not.

2. Which of the following is not included when preparing cash forecasts?

a. Personal services

b. Redemption of bonds

c. Utilities

d. Depreciation

3. Who prepares a nondepartmental expenditures request?

a. The department heads as a group b. The auditor

c. The city council

d. The CEO or the budget director

4. When the city's budget is approved, the total amount appropriated is greater than the estimated revenues. What are the implications of that budget?

a. The city anticipates a budget surplus for the year.

b. The city anticipates a budget deficit for the year.

c. The city anticipates neither a budget surplus nor a deficit for the year.

d. The city will need to credit the account Budgetary fund balance.

5. Which of the following events results in a debit to the Encumbrances account?

a. The budget is approved.

b. Supplies are received.

c. A purchase order is placed.

d. An invoice is paid.

6. In the appropriations ledger, the amount available for appropriation is equal to

a. the total appropriation minus total invoices paid.

b. the total appropriation minus outstanding encumbrances.

c. the total appropriation minus expenditures.

d. the total appropriation minus both outstanding encumbrances and expenditures.

7. A city places a purchase order for police sedans at an estimated price of $100,000. The purchase order allows the supplier to increase the price by up to 5 percent if the price of steel increases. The city receives the sedans along with an invoice for $104,000. With what amount should the city credit the Encumbrances account?

a. $1,000

b. $4,000

c. $100,000

d. $104,000