GFOA Exam CPFO Topic 2 Question 57 Discussion

Actual exam question for GFOA's CPFO exam

Question #: 57
Topic #: 2

[All CPFO Questions]

''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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Precious

1 months 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

15 days ago

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

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Janet

19 days ago

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

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Corazon

20 days ago

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

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Twila

1 months 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

13 days ago

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

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Marge

20 days ago

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

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Cathrine

21 days ago

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

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Stevie

1 months 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

2 months 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

29 days ago

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

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Isidra

1 months ago

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

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Alyce

2 months 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

2 months 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

2 months 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 months ago

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

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