AGA GAFRB Practice Exam Questions & Answers

7 Free Questions Last reviewed November 9, 2026 Prepared & Reviewed by the ValidExamDumps Editorial Team

115 Practice Questions (Our Bank)
120 minutes Exam Duration
500 out of 700 Passing Score
USD 150 Official Exam Fee
Exam Facts

AGA GAFRB Exam Details

Key details for this exam, checked against the published exam outline

Exam Code
GAFRB
Full Name
Examination 2: Governmental Accounting, Financial Reporting and Budgeting
Issuing Body
Association of Government Accountants (AGA)
Question Format (Our Bank)
Multiple Choice
Delivery
Online proctored through OnVUE or at a Pearson VUE Professional Testing Center
Eligibility
Bachelor's degree from an accredited college or university and at least two years of professional-level experience in U.S. government financial management
Validity
The CGFM certification does not expire
Full Question Set
115 questions Get All Questions
Practice Questions

Free GAFRB Practice Questions

Each question shows the correct answer and an explanation of why it is right

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ValidExamDumps Editorial Team Every question and its answer is checked by our GAFRB exam preparation team, who also write the explanation shown with each one. How we research and review these pages

Question 1 Domain 3 Federal Financial Accounting and Reporting

A specific operation of the government is funded by 60% from the general fund, 40% from specific revenues. This should be reported in which fund?

Correct Answer B
Explanation The Statement of Budgetary Resources is one of the four principal federal financial statements required by FASAB standards. It shows the budgetary resources available to a federal agency during the period and how those resources were used. The other options like balance sheets or statements of activities are not among the primary federal financial statements that differ from state and local reporting.

Question 2 Domain 2 State and Local Financial Accounting and Reporting

The quarterly inventory record below has been provided for use in preparing the organization's financial statements. Based upon the information provided, what method of inventory valuation is used by the organization?

Question 2 exhibit

Correct Answer B
Explanation GASB standards require capitalizing certain costs for internally generated computer software, specifically those incurred during the development phase for activities that directly contribute to creating the software asset. Testing for functionality and ease of use is part of development. Planning and maintenance activities are not capitalized. Training and conversion costs are also expensed rather than capitalized.

Question 3 Domain 3 Federal Financial Accounting and Reporting

Funds collected and spent to carry out an unemployment program established by federal statute are deposited in

Correct Answer C
Explanation The Federal Accounting Standards Advisory Board, or FASAB, is the authoritative body that establishes accounting standards for federal agencies. The OMB provides budget guidance, the Treasury manages the general fund, and the GAO provides audit oversight. Only FASAB sets the actual GAAP standards that federal agencies must follow.

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Question 4 Domain 2 State and Local Financial Accounting and Reporting

When a new combined government replaces the separate governments of a city and a county, this is an example of

Correct Answer A
Explanation Governmental funds report expenditures on a modified accrual basis, while the Statement of Activities requires accrual accounting. Capital outlays are expensed in the fund statement but must be capitalized in the government-wide statement. The reconciliation adds back the $2 million in capital outlays since they were deducted as expenditures but should not reduce net change in accrual-basis activities.

Question 5 Domain 3 Federal Financial Accounting and Reporting

Wasteful year-end spending may be discouraged by including which of the following in the appropriation law?

Correct Answer D
Explanation Under federal accounting, an accounts receivable should be recognized when a federal agency has an enforceable claim to cash against another entity. This represents the point at which a transaction or event has occurred that creates a binding obligation for the other party to pay. Other answers that reference receipt or payment do not represent the proper recognition point under accrual accounting.

Question 6 Domain 3 Federal Financial Accounting and Reporting

In an ACFR. the Independent Auditor's Report should be included in the

Correct Answer B
Explanation When a contracting officer's representative receives delivery of previously ordered printers, two entries must be made. A proprietary entry records the asset and expense in the normal accounting records. A budgetary entry records the obligation and outlay to track the use of budgetary authority. Receipt of goods completes both the budgetary and proprietary processes.

Question 7 Domain 1 Governmental Financial Accounting, Reporting and Budgeting: General Knowledge

A city pays a bond payable as well as interest. The journal entry to record this in the debt service fund would be to credit cash and debit

Correct Answer A
Explanation A loan guarantee occurs when the government assumes responsibility for payment if the original borrower defaults. The private bank makes the initial loan, but the government stands behind it. This is different from a direct loan made by the government itself or a loan subsidy. Guarantees represent a contingent liability until default occurs.
Study Guide

What the AGA GAFRB Exam Covers

Exam domains verified against the Official AGA GAFRB exam guide, last checked November 2026.

Domain 1 Governmental Financial Accounting, Reporting and Budgeting: General Knowledge

40%

This section covers the unique financial aspects of government versus the private sector, the concept of interperiod equity, and the objectives of governmental financial reporting such as financial accountability and budgetary accountability. You need to understand the roles of the FASB, GASB, and FASAB in setting standards, plus how to apply managerial cost accounting concepts and budgeting processes including revenue forecasting and budgetary control methods.

Sample question from this domain above Q7

Domain 2 State and Local Financial Accounting and Reporting

30%

This domain focuses on applying GASB standards to determine the reporting entity and fund types, understanding the structure of the Annual Comprehensive Financial Report and basic financial statements, and measuring and recording transactions under modified accrual and accrual bases of accounting. You must be able to handle common transactions like property tax revenue, grants, capital outlays, and long-term debt, plus reconcile fund-level statements to government-wide statements.

Sample questions from this domain above Q2Q4

Domain 3 Federal Financial Accounting and Reporting

30%

This section covers the roles of FASAB, OMB, the Treasury, and GAO in federal accounting, key budgetary terms and the federal budgetary equation, and differences between budgetary and proprietary accounting. You need to understand fund types, the U.S. Standard General Ledger, common budgetary transactions like appropriations and obligations, and how to prepare agency financial reports and performance and accountability reports.

Sample questions from this domain above Q1Q3Q5Q6

FAQ

GAFRB Exam FAQ

Common questions about the exam itself

How much harder is GAFRB compared to the other two CGFM exams?
GAFRB is often considered the most technical exam, especially for candidates without an accounting background, because it requires you to apply accounting standards, measurement methods, and transaction recording across both government and private accounting frameworks. The other two exams are more conceptual and environmental in focus.
What work experience do I need before I can sit GAFRB?
You must have at least two years of professional-level experience in U.S. government financial management before you can apply for the CGFM program and take any exam including GAFRB. You also need a bachelor's degree from an accredited college or university in any subject area.
Which objective area of GAFRB is usually the hardest for candidates?
The State and Local Financial Accounting and Reporting domain typically challenges candidates most because it combines fund-level and government-wide accounting, requires understanding of multiple measurement bases and fund types, and involves complex reconciliations between different financial statement levels. Strong preparation on GASB standards and transaction recording is essential.
How long should I realistically spend preparing for GAFRB?
Most candidates spend 80 to 120 hours preparing for GAFRB because it is technically dense, though the exact time depends on your accounting background and familiarity with government standards. Many people tackle GAFRB as their second or third exam after building foundational knowledge from Exam 1.
What happens on exam day when I take GAFRB?
You will have 120 minutes to answer 115 multiple-choice questions either at a Pearson VUE testing center or through OnVUE online proctoring from your home or office. You must arrive 15 to 30 minutes early if testing at a center, present photo ID, and leave personal items like phones and wallets outside the testing room.
What are the rules for retaking GAFRB if I do not pass?
You can retake GAFRB as many times as you need, but you must reschedule and pay the exam fee of USD 150 each time. Your eligibility to take any CGFM exam expires 18 months from the date your application was approved, so plan your retakes within that window.
How long does the CGFM certification stay valid after I pass GAFRB and the other exams?
The CGFM certification does not expire once you have passed all three exams and met any other requirements. You hold the credential indefinitely, though AGA may require continuing professional education or renewal activities in the future.
What job role does GAFRB prepare me for?
GAFRB is designed for accountants, financial managers, auditors, and financial analysts working in government entities at federal, state, and local levels who need to understand accounting standards, financial reporting requirements, and budgeting practices specific to the public sector. It is narrower and more government-focused than the CPA.
Should I take GAFRB before or after the other two CGFM exams?
Many candidates take Exam 1 (Governmental Environment) first because it is the most conceptual and provides foundational context. GAFRB is often taken second or third because it is the most technical and benefits from the groundwork laid by Exam 1. There is no official required order.
How is the GAFRB exam different from accounting exams like the CPA?
GAFRB focuses exclusively on accounting standards and practices for the government sector using GASB and FASAB frameworks, whereas the CPA covers general accounting for both private and public entities. GAFRB also emphasizes budgeting and financial management specific to government, making it more specialized but less broad than the CPA.

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