GFOA CPFO Exam - Topic 2 Question 57 Discussion

Actual exam question for GFOA's CPFO exam

Question #: 57
Topic #: 2

''A cash received as a loan is shown as revenue not as a liability, on the balance sheet. To correct for such cases, most cash accounting systems recognize not only cash but also other assets and liabilities arising through prior cash transactions. This adjustment, though, does not alter the fact that outstanding obligations have been incurred but not accounted for, thus overstating the available balance.'' This is an example of possible mishandlings after the selection of ________________.

ACash basis of accounting

BAccrual basis of accounting

CModified basis of accounting

DNone of these

Show Suggested Answer

Suggested Answer: D

by Sylvia at Aug 23, 2022, 03:45 PM

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Kara

11 months ago

Not sure about that, seems like a stretch to me.

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Felix

11 months ago

This is classic cash accounting confusion.

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Tayna

11 months ago

Surprised to see cash loans treated as revenue!

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Kirby

11 months ago

I disagree, it sounds more like accrual mishandling.

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Ollie

12 months ago

That's definitely a cash basis issue!

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Quentin

12 months ago

I feel like I might be mixing things up, but isn't the cash basis supposed to only recognize cash transactions? So, it must be A.

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Tayna

12 months ago

This reminds me of a practice question we did on cash basis accounting where we discussed how it can lead to overstated revenues.

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Shenika

12 months ago

I'm not entirely sure, but I think this could also relate to the modified basis of accounting since it involves adjustments for cash transactions.

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Rhea

12 months ago

I remember studying the differences between cash and accrual accounting, and this definitely sounds like a cash basis issue.

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Derick

1 year ago

I'm leaning towards option B - setting the firming time fence to lead-time plus one week. That seems like it would give us the most flexibility and control over the planning process.

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Merlyn

1 year ago

Hmm, this seems like a tricky one. I'll need to carefully review the configuration settings to identify any potential issues.

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Rebeca

1 year ago

This looks like a pretty straightforward routing configuration issue. I'd start by checking the interface settings on Router 2 to make sure the IP address and subnet mask are configured correctly.

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Rosalind

1 year ago

I recall how varying dividends can impact investor confidence. Nelson's proposal might protect corporate assets, but will shareholders really prefer that over an immediate increase in dividends?

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Paola

1 year ago

UDP is the obvious choice here. The question is asking about the transport layer, and UDP is one of the main protocols that operates at that layer in the TCP/IP model.

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Precious

1 year ago

Haha, the cash basis strikes again! It's like trying to balance your checkbook with your eyes closed. No wonder the balance sheet is a hot mess. Time to break out the abacus and get serious about accrual accounting, my friends.

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Rasheeda

1 year ago

C: Let's make the switch before our balance sheet gets even more confusing.

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Janet

1 year ago

B: Totally agree, we can't keep ignoring those outstanding obligations.

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Corazon

1 year ago

A: Yeah, cash basis can really mess things up. We need to switch to accrual accounting.

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Twila

1 year ago

Cash basis, you've really let us down this time. Looks like you're the one taking the loan, but not recording it properly. Maybe it's time to switch to the accrual basis and get your finances in order. Or, you know, just win the lottery and call it a day.

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William

1 year ago

C: Maybe it's time for a change in our accounting methods.

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Marge

1 year ago

B: I agree, it's important to accurately reflect our financial obligations.

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Cathrine

1 year ago

A: Yeah, cash basis can be tricky. Accrual basis might be a better choice.

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Stevie

1 year ago

Hmm, this one's a real head-scratcher. But I gotta say, if you're not keeping track of those pesky assets and liabilities, you're just asking for trouble. Time to step up your accounting game, people!

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Reita

1 year ago

Aha, this is a clear-cut case of the cash basis of accounting gone wrong. The question is spot on in highlighting how it can lead to overstating the available balance. Accrual basis all the way, folks!

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Bethanie

1 year ago

Yes, the accrual basis of accounting provides a more accurate picture of a company's financial position.

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Isidra

1 year ago

I agree, the cash basis of accounting can definitely lead to some mishandlings like this.

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Alyce

1 year ago

Whoa, this is a tricky one! Looks like the cash basis of accounting is the culprit here. That's a classic case of not recognizing all the assets and liabilities, leading to a distorted financial picture. Gotta watch out for those sneaky cash transactions!

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Kent

1 year ago

I'm not sure, but I think A) Cash basis of accounting would not address the issue mentioned in the question. It only records transactions when cash is exchanged, not when obligations are incurred.

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Candra

1 year ago

I agree with Annamae. Accrual basis of accounting recognizes revenues when they are earned and expenses when they are incurred, which would prevent mishandlings like the one mentioned.

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Annamae

2 years ago

I think the correct answer is B) Accrual basis of accounting.

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