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Home / CPAUS-FAR · FAR: Financial Accounting and Reporting
Updated for the 2024 CPA Evolution exam format

ModuleCPAUS-FAR

FAR: Financial Accounting and Reporting

Prepare for FAR: Financial Accounting and Reporting with practice questions covering 39 topics. Build your knowledge, track your progress, and study effectively with GoCPAus.

Questions
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Units
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Topics
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What’s in it.

4 units

Sample questions

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A few questions from this module, with the answer and a full explanation. The complete bank is available when you start practising.

  1. A hospital NFP receives $800,000 in restricted grants for cardiac research, purchases $600,000 in qualifying equipment during the year, and earns $30,000 in unrestricted investment income. What is the net change in net assets with donor restrictions?

    • $800,000 increase
    • $170,000 increase ($800,000 − $600,000 − $30,000)
    • $200,000 increase ($800,000 received − $600,000 released)
      Correct answer
    • $230,000 increase ($800,000 − $600,000 + $30,000)
    Explanation

    Net assets with donor restrictions change due to: (1) restricted contributions received +$800,000; (2) amounts released from restriction when restriction satisfied −$600,000. The $30,000 investment income is unrestricted (no donor restriction on income), so it affects net assets without donor restrictions. Net change in with-donor-restrictions = $800,000 − $600,000 = $200,000 increase.

  2. What financial statements do governmental funds produce, and what are the formal titles of these statements?

    • Statement of Net Position and Statement of Revenues, Expenses, and Changes in Net Position
    • Statement of Net Position and Statement of Activities
    • Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances
      Correct answer
    • Income Statement and Balance Sheet
    Explanation

    Governmental funds produce two primary financial statements: (1) the Balance Sheet (presenting assets, deferred outflows, liabilities, deferred inflows, and fund balance in the five GASB 54 categories); and (2) the Statement of Revenues, Expenditures, and Changes in Fund Balances. The terminology is important: 'balance sheet' not 'statement of net position'; 'expenditures' not 'expenses'; 'fund balances' not 'net position.' These titles reflect the modified accrual/current financial resources basis used by governmental funds.

  3. A county government operates a central motor pool that provides vehicles to other county departments on a cost-recovery basis. Which fund type is used for this activity?

    • Internal service fund
      Correct answer
    • Enterprise fund
    • Capital projects fund
    • General fund
    Explanation

    Internal service funds account for activities that provide goods or services to other government departments or agencies on a cost-reimbursement basis. A central motor pool serving county departments (internal customers) is a textbook internal service fund. Enterprise funds serve external customers. This activity has no external customers, so enterprise fund treatment is not appropriate.