Area I C. state and local gov

Question 1

FAR3C10004
How is the transaction price allocated to performance obligations in a contract?
A. Based on the relative fair value of each performance obligation
B. Equally among all performance obligations
C. According to the specific costs incurred for each obligation
D. Based on the standalone selling prices of the goods or services

Answer 1

D. Based on the standalone selling prices of the goods or services

The transaction price is allocated to each performance obligation based on their standalone selling prices, which is the fourth step in the model.

Question 2

FAR1E10024
In modified cash basis accounting, how are long-term assets typically treated?
A) Expensed when purchased.
B) Capitalized and depreciated over time.
C) Recognized when they are fully paid off.
D) Not recorded until they are sold

Answer 2

B) Capitalized and depreciated over time.

Modified cash basis accounting blends elements of both cash and accrual accounting. Long-
term assets are capitalized and depreciated, similar to accrual accounting.

Question 3

FAR2C011n
Which of the following is correct regarding the lower of cost or market rule?

A. In LCM, “market” is defined as the cost to replace the item in an active market
B. In LCM, “market” is defined as the cost to replace the item subject to a max and minimum
C. In LCM, “cost” is defined as the cost to replace the item subject to a max and minimum
D. In LCM, “cost” is defined as the cost to replace the item at market value

Answer 3

B. In LCM, “market” is defined as the cost to replace the item subject to a max and minimum

In LCM, “market” is defined as the cost to replace the item subject to a max and minimum. The maximum is net realizable value (NRV), and the minimum is NRV minus a normal profit margin. The “cost” in LCM simply means the historical cost of the inventory.

Question 4

FAR1A60008

In the consolidation process, what happens to the carrying amount of the parent’s investment in the subsidiary?

A. It is maintained as a separate line item
B. It is eliminated against the subsidiary’s equity
C. It is revalued to fair market value
D. It is classified as a long-term liability

Answer 4

B. It is eliminated against the subsidiary’s equity

During consolidation, the carrying amount of the parent’s investment in the subsidiary is eliminated against the equity of the subsidiary. This elimination is crucial to avoid double counting of the investment and the subsidiary’s assets and liabilities in the consolidated statements.

Question 5

FAR1A40030
A company’s statement of changes in equity showed a beginning common stock balance of $100,000 and an ending balance of $120,000. However, it was later found that new stock issuance worth $15,000 was mistakenly omitted. What should be the corrected ending balance of common stock?
A) $135,000
B) $105,000
C) $120,000
D) $115,000

Answer 5

A) $135,000

The corrected ending balance of common stock is found by adding the omitted new stock issuance to the initial ending balance. The calculation is:
Corrected ending balance = Initial ending balance + Omitted issuance
Corrected ending balance = $120,000 + $15,000 = $135,000

Question 6

FAR2E30019

An investor owns 50% of an investee and records its investment using the equity method. If the investee earns a net income of $20,000 and declares no dividends, what is the journal entry to record the investor’s share of income?

A. Debit Investment $10,000; Credit Income from Investment $10,000
B. Debit Income from Investment $10,000; Credit Investment $10,000
C. Debit Investment $20,000; Credit Income from Investment $20,000
D. Debit Cash $10,000; Credit Investment $10,000

Answer 6

B. Debit Income from Investment $10,000; Credit Investment $10,000

The investor’s share of income (50% of $20,000 = $10,000) increases the investment’s carrying value (credit) and is recognized as income (debit).

Question 7

FAR2H10035
A company issues a $50,000 bond payable at a discount of 8% for five years. What is the annual amortization of the bond discount using the straight-line method?

A. $400
B. $800
C. $4,000
D. $10,000

Answer 7

B. $800

The total discount is 8% of $50,000, which is $4,000. Using the straight-line method, the annual amortization is $4,000 / 5 years = $800.

Question 8

What is the purpose of reporting comprehensive income?
A. To summarize all changes in equity from non-owner sources.
B. To reconcile the difference between net income and cash flows provided from operating activities.
C. To provide a consolidation of the income of the firm’s segments.
D. To provide information for each segment of the business.

Answer 8

A. To summarize all changes in equity from non-owner sources.

This is the whole point of reporting comprehensive income.

Question 9

FAR2F10008
Which of the following best exemplifies an intangible asset with an indefinite life?

A. A patent with a 20-year legal life.
B. A trademark with no legal expiry date.
C. A software with a 5-year technology cycle.
D. A customer contract lasting 10 years.

Answer 9

B. A trademark with no legal expiry date.

A trademark with no legal expiry date exemplifies an intangible asset with an indefinite life, as it does not have a foreseeable limit on the period over which it is expected to generate net cash inflows.

Question 10

FAR2E30001

When should a company use the equity method for accounting for an investment in another company?

A. When it holds less than 20% of the voting stock.
B. When it has significant influence over the investee.
C. When it has no influence over the investee.
D. When it owns more than 50% of the voting stock.

Answer 10

B. When it has significant influence over the investee.

The equity method is used when an investor has significant influence over the investee but does not have control. This is typically indicated by owning 20% to 50% of the voting stock. Owning less than 20% (A) usually suggests a lack of significant influence, and owning more than 50% (D) suggests control, leading to consolidation, not the equity method. Option C is incorrect as the equity method requires influence.

Question 11

FAR2A10018

A deposit recorded by the bank but not yet by the company is:
A. An outstanding check
B. A deposit in transit
C. An error
D. An unrecorded deposit

Answer 11

D. An unrecorded deposit

A deposit that the bank has recorded but the company has not is an unrecorded deposit. It should be added to the company’s general ledger balance during reconciliation. An outstanding check (A) and a deposit in transit (B) represent different concepts. An error (C) could be a possible explanation, but it’s more accurate to identify it specifically as an unrecorded deposit.

Question 12

FAR1F10005
To assess a company’s profitability relative to its shareholders’ equity, which ratio should be used?
A. Return on Equity
B. Return on Assets
C. Earnings per Share
D. Operating Margin

Answer 12

A. Return on Equity

Return on Equity (A) directly measures a company’s profitability relative to the equity held by its shareholders. Return on Assets (B) assesses profitability relative to total assets, Earnings per Share (C) reflects the company’s profit allocated to each share of stock, and Operating Margin (D) shows profitability from core business operations.

Question 13

As of December 1, year 2 a company obtained a $1,000,000 line of credit maturing in one year on which it has drawn $250,000, a $750,000 secured note due in five annual installments, and a $300,000 three-year balloon note. The company has no other liabilities. How should the company’s debt be presented in its classified balance sheet on December 31, year 2 if no debt repayments were made in December?

Current liabilities of $1,000,000; long-term liabilities of $1,050,000.
Current liabilities of $500,000; long-term liabilities of $1,550,000.
Current liabilities of $400,000; long-term liabilities of $900,000.
Current liabilities of $500,000; long-term liabilities of $800,000.

Answer 13

Current liabilities of $400,000; long-term liabilities of $900,000.

The current liabilities include:

The $250,000 drawn on the line of credit
of the $750,000/5years installment note, so $150,000
Total of $400,000
The long-term liabilities include:

The $600,000 of the installment note
The $300,000 balloon note
These total $900,000

Question 14

FAR2B10002

If a company decides to write off a bad debt of $2,000, which of the following journal entries correctly records this transaction?

A) Debit Allowance for Doubtful Accounts $2,000; Credit Trade Receivables $2,000
B) Debit Trade Receivables $2,000; Credit Allowance for Doubtful Accounts $2,000
C) Debit Bad Debt Expense $2,000; Credit Trade Receivables $2,000
D) Debit Trade Receivables $2,000; Credit Bad Debt Expense $2,000

Answer 14

A) Debit Allowance for Doubtful Accounts $2,000; Credit Trade Receivables $2,000

The correct entry for writing off a bad debt involves decreasing both the allowance for doubtful accounts (a contra asset account) and the trade receivables (an asset account). This entry does not affect the income statement as the expense was recognized earlier when the allowance was created.

Question 15

FAR2F10018
A finite-lived intangible asset is purchased for $200,000 and is expected to generate benefits for 8 years. If the asset is impaired and its recoverable amount is determined to be $150,000 at the end of year 4, what is the impairment loss?

A. $50,000
B. $25,000
C. $150,000
D. $12,500

Answer 15

A. $50,000

At the end of year 4, the carrying amount is $200,000 – ($200,000 / 8 years * 4 years) = $100,000. The impairment loss is the difference between the carrying amount and the recoverable amount: $150,000 – $100,000 = $50,000.

Question 16

FAR1F10025
The Accounts Payable Turnover Ratio is calculated using which formula?

A. Total Purchases / Average Accounts Payable
B. Average Accounts Payable / Total Purchases
C. Cost of Goods Sold / Accounts Payable
D. Accounts Payable / Total Purchases

Answer 16

A. Total Purchases / Average Accounts Payable

The Accounts Payable Turnover Ratio is determined by dividing Total Purchases by Average Accounts Payable. It measures how fast a company pays off its suppliers.

Question 17

FAR1F10039
A company with a Debt-to-Equity Ratio of 0.5 indicates what about the company’s financing structure?

A. It has twice as much equity as debt.
B. It has more debt than equity.
C. It has equal amounts of debt and equity.
D. It has half as much debt as equity.

Answer 17

A. It has twice as much equity as debt.

A Debt-to-Equity Ratio of 0.5 indicates that the company has twice as much equity as debt. This ratio shows a lower level of debt financing relative to equity. It does not suggest more debt than equity (B), equal amounts of debt and equity (C), or half as much debt as equity (D).

Question 18

FAR1D10010
What is the primary difference in the financial statements found in Form 10-K and Form 10-Q?

A. The financial statements in Form 10-K are less detailed than those in Form 10-Q.
B. The financial statements in Form 10-K are unaudited, while those in Form 10-Q are audited.
C. The financial statements in Form 10-K are audited, while those in Form 10-Q are unaudited.
D. There is no difference in the financial statements; they are identical in both forms.

Answer 18

C. The financial statements in Form 10-K are audited, while those in Form 10-Q are unaudited.

The primary difference is in the level of scrutiny the financial statements undergo. The financial statements in Form 10-K are audited, providing a higher level of assurance about their accuracy, while those in Form 10-Q are unaudited.

Question 19

FAR1A30017
In what section of the financial statements is Other Comprehensive Income typically reported?

A. In the Balance Sheet.
B. In the Cash Flow Statement.
C. In the Statement of Changes in Equity.
D. In the Statement of Comprehensive Income.

Answer 19

D. In the Statement of Comprehensive Income.

Other Comprehensive Income is reported in the Statement of Comprehensive Income, which shows all changes in equity during a period except those resulting from investments by and distributions to shareholders.
A is incorrect as the Balance Sheet shows the financial position at a point in time. B is incorrect as the Cash Flow Statement shows cash inflows and outflows. C is incorrect as the Statement of Changes in Equity focuses on changes due to transactions with shareholders.

Question 20

FAR2A10011

When reconciling the cash balance per the bank statement to the general ledger, which of the following would be added to the general ledger balance?

A. Bank service charges
B. Outstanding checks
C. Deposits in transit
D. NSF (Non-Sufficient Funds) checks

Answer 20

C. Deposits in transit

Deposits in transit are amounts that have been recorded by the company but not yet reflected on the bank statement. Therefore, they should be added to the general ledger balance.
Bank service charges (A) and NSF checks (D) are deducted from the general ledger balance. Outstanding checks (B) are deducted from the bank statement balance.

Question 21

FAR2H10011

When does a change to the terms of a debt instrument qualify as a troubled debt restructuring?

A. When the debtor is experiencing financial difficulties
B. When the creditor grants a concession to the debtor
C. When both A and B are true
D. When the interest rate of the debt is increased

Answer 21

C. When both A and B are true

Troubled debt restructuring occurs when the debtor is experiencing financial difficulties and the creditor grants a concession that it would not consider under normal circumstances. This includes reductions in the stated interest rate, extension of the maturity date, or a reduction in the face amount or market value of the debt.

Question 22

FAR3C10010

What role does a contract modification play in the five-step revenue recognition model?

A. It always leads to a separate contract
B. It is ignored unless it affects the transaction price significantly
C. It may create a new contract or be part of the existing contract, depending on specific criteria
D. It always requires a reassessment of the performance obligations

Answer 22

C. It may create a new contract or be part of the existing contract, depending on specific criteria

A contract modification can either create a new contract or be treated as part of the existing contract. This depends on whether the modification adds distinct goods or services and whether the price reflects the standalone selling price.

Question 23

King, Inc. owns 70% of Simmon Co.’s outstanding common stock. King’s liabilities total $450,000, and Simmon’s liabilities total $200,000. Included in Simmon’s financial statements is a $100,000 note payable to King. What amount of total liabilities should be reported in the consolidated financial statements?

$520,000
$550,000
$590,000
$650,000

Answer 23

$550,000

The intercompany note payable would be eliminated, lowering Simmon’s liabilities to $100,000. In addition to King’s $450,000 of liabilities, consolidated liabilities would be $550,000

Question 24

FAR2A10004
A company’s bank statement shows a balance of $50,000. The company’s ledger shows a cash balance of $48,500. The difference is due to a bank service charge of $100 and an outstanding check of $1,400. What is the adjusted cash balance?

A. $48,500
B. $49,800
C. $50,000
D. $51,400

Answer 24

B. $49,800

The adjusted cash balance is calculated by starting with the ledger balance and adjusting for items noted in the bank statement. The ledger balance is $48,500. You deduct the bank service charge of $100 and add back the outstanding check of $1,400. Thus, $48,500 – $100 + $1,400 = $49,800.

Question 25

FAR1B20014
How should ‘Unrestricted Net Assets’ from a trial balance be reflected in the statement of activities?

A) As a revenue component
B) As an asset category
C) As a change in net assets
D) As a liability

Answer 25

C) As a change in net assets

‘Unrestricted Net Assets’ should be reflected as a change in net assets in the statement of activities, showing how these assets have increased or decreased.

Question 26

FAR1B40001
When adjusting the notes to the financial statements, which of the following is the most important consideration?

A) Ensuring the changes reflect the current market trends.
B) Aligning the notes with the company’s internal policy.
C) Correcting inaccuracies and ensuring compliance with accounting standards.
D) Making the notes more comprehensible for general readers.

Answer 26

C) Correcting inaccuracies and ensuring compliance with accounting standards.

The primary objective of adjusting notes to the financial statements is to correct inaccuracies and ensure that the statements comply with relevant accounting standards (like GAAP or IFRS). This is critical for maintaining the accuracy, reliability, and comparability of financial information.

Question 27

FAR3C10063
When a not-for-profit entity receives a donation of land, how is it recognized?

A. At the historical cost to the previous owner
B. At the fair market value at the time of donation
C. At the assessed value for property tax purposes
D. At the estimated future selling price

Answer 27

B. At the fair market value at the time of donation

Donated land should be recognized at its fair market value at the time of donation

Question 28

Which of the following funds would be reported as a fiduciary fund in Pine City’s financial statements?

Special revenue
Permanent
Private-purpose trust
Internal service

Answer 28

Private-purpose trust

The word “trust” signifies a fiduciary fund. A private-purpose trust is one of the four types of fiduciary funds:

Pension trust funds
Investment trust funds
Private-purpose trust funds
Agency funds

Question 29

FAR2A10012
Outstanding checks refer to:

A. Checks received but not yet deposited
B. Checks issued by the company that have not been cleared by the bank
C. Checks cleared by the bank but not recorded in the general ledger
D. Post-dated checks issued by the company

Answer 29

B. Checks issued by the company that have not been cleared by the bank

Outstanding checks are checks that have been written and recorded in the general ledger but have not yet been cleared by the bank. This affects the bank reconciliation because the bank statement will show a higher balance until these checks clear.

Question 30

State and local governments in the United States use two distinct sets of accounting principles for their financial reporting:

Answer 30

one for fund accounting and another for government-wide financial statements
to reflect unique financial activities and accountability requirements of governmental entities

Question 31

Fund reporting measurement focus and basis of accounting

Answer 31

measurement focus is current financial resources measurement. This focus is used for governmental funds (like general, special revenue, debt service, and capital projects funds). It concentrates on short-term inflows, outflows, and balances of spendable resources. The emphasis is
on the liquidity and financial resources available in the near term.
● Basis of Accounting: Modified Accrual Basis of Accounting: Governmental funds use the modified accrual basis. Under this
approach, revenues are recognized when they become both measurable and available to finance expenditures of the current period. Expenditures are generally
recognized when the related fund liability is incurred, except for debt service and major acquisitions, which are recognized when due

Question 32

government-wide reporting measurement focus and basis of accounting

Answer 32

● Measurement Focus: Economic Resources Measurement Focus: This is used for government-wide financial statements, including the Statement of Net Position and the Statement of Activities. This approach reports all assets, liabilities, revenues, expenses, and other changes in net position, focusing on the total economic resources and obligations of the government.
● Basis of Accounting: Full Accrual Basis of Accounting: Under the full accrual basis, revenues are recognized when earned and
expenses are recognized when incurred, regardless of the timing of related cash flows. This method is similar to the accounting used in the private sector and
provides a comprehensive view of the government’s overall financial position and results of operations

Question 33

purpose of fund accounting

Answer 33

Fund accounting allows for compliance
with legal and contractual requirements, budgetary compliance, and financial control over individual funds

Question 34

purpose of government-wide accounting

Answer 34

Government-wide financial statements provide a broader perspective, useful for assessing the overall fiscal health of the government and long-term fiscal planning

Question 35

State and local governments in the United States use various types of funds to

Answer 35

organize and manage their financial activities. Each fund type is used for specific purposes, and the nature of transactions or activities varies accordingly

Question 36

governmental fund types

Answer 36

general, debt service, special revenue, and capital project funds.
All use modified accrual basis of accounting and current financial resources measurement focus

Question 37

proprietary funds

Answer 37

enterprise and internal service funds
both use full accrual method of accounting and economic resources measurement focus

Question 38

internal Service Funds:
Purpose: To account for the financing of goods or services provided by one department of the government to other departments on a

Answer 38

cost-reimbursement basis

Question 39

Fiduciary Funds types

Answer 39

Fiduciary Funds:
Pension (and Other Employee Benefit) Trust Funds, Investment Trust Funds, Private-Purpose Trust Funds, Custodial Funds

All use Full Accrual Basis of accounting. These funds also recognize revenues when earned and expenses when incurred.
Measurement Focus: Economic Resources. Like proprietary funds, fiduciary funds account for all assets and liabilities associated with the fund, providing a comprehensive view of the fund’s financial status.

Question 40

custodial fund is the same as

Answer 40

agency fund where custodial capacity means assets equal liabilities. for example, collecting taxes on behalf another governmental unit

Question 41

Green Co. was preparing its year-end financial statements. Green had a pending lawsuit against a competitor for $5,000,000 in damages. Green’s attorneys indicate that obtaining a favorable judgement was probable and the amount of damages is reasonably estimated. Green incurred $100,000 in legal fees. The income tax rate was 30%. What amount, if any, should Green recognize as a contingency gain in its financial statements?

$0
$3,430,000
$3,500,000
$4,900,000

Answer 41

$0

Contingent gains are never recorded until money is actually received. The answer is $0.

Question 42

FAR2H10037
A bond issued at a premium will have:

A. A decreasing carrying amount over time
B. An increasing carrying amount over time
C. A constant carrying amount
D. Fluctuations based on market interest rates

Answer 42

A. A decreasing carrying amount over time

A bond issued at a premium has a carrying amount that decreases over time as the premium is amortized. This decreases both the carrying value of the bond and the interest expense recognized each period.

Question 43

FAR3C10051
When should a not-for-profit entity recognize contributed services as revenue?

A. Only when the services create or enhance non-financial assets
B. When the services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not donated
C. For all volunteered services, regardless of the type
D. When the services are provided by board members or other volunteers

Answer 43

B. When the services require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not donated

Contributed services are recognized as revenue when they (1) require specialized skills, (2) are provided by individuals with those skills, and (3) would typically need to be purchased if not provided by donation. This recognizes the economic benefit received by the entity.

Question 44

FAR1E10025
Under cash basis accounting, how is inventory typically recorded?
A) As an asset when purchased.
B) As an expense when sold.
C) As an expense when purchased.
D) Not recorded until the year-end inventory count.

Answer 44

C) As an expense when purchased.

In cash basis accounting, inventory is expensed when purchased, not when sold. This is different from accrual accounting, where inventory is recorded as an asset when purchased and expensed as cost of goods sold when sold.

Question 45

FAR3C10057
When a not-for-profit entity receives donated legal services that would have been purchased, how should it record the transaction?

A. Debit Legal Expense; Credit Contributed Services Revenue
B. Debit Cash; Credit Legal Expense
C. Debit Contributed Services Revenue; Credit Legal Expense
D. Debit Legal Expense; Credit Cash

Answer 45

A. Debit Legal Expense; Credit Contributed Services Revenue

Donated legal services that meet the recognition criteria are recorded as Debit Legal Expense (reflecting the value of the service received) and Credit Contributed Services Revenue.

Question 46

FAR1A10029
A company accidentally recorded a $4,000 deposit in transit as $400. How should this error be corrected in the cash balance?

A) Increase cash by $3,600
B) Decrease cash by $3,600
C) Increase cash by $4,000
D) Decrease cash by $4,000

Answer 46

A) Increase cash by $3,600

The deposit was understated by $3,600 ($4,000 – $400). To correct this, increase the cash balance by $3,600.

Question 47

FAR2H10017
Which factor is not considered when determining if a troubled debt restructuring has occurred?

A. The debtor’s likelihood of bankruptcy
B. The current market value of the debt
C. The interest rate environment
D. The creditor’s recovery prospects if the debtor were to default

Answer 47

C. The interest rate environment

The interest rate environment (C) is generally not a direct factor in determining whether a troubled debt restructuring has occurred. Factors like the debtor’s likelihood of bankruptcy (A), the current market value of the debt (B), and the creditor’s recovery prospects in the event of default (D) are more directly relevant in assessing whether a debt restructuring is troubled.

Question 48

FAR3A10009
A change in the estimated residual value of a fixed asset is treated as:

A) A change in accounting principle, applied retrospectively.
B) An error, requiring restatement of prior periods.
C) A change in accounting estimate, applied prospectively.
D) A change that does not require any adjustment to financial statements.

Answer 48

C) A change in accounting estimate, applied prospectively.

Revising the estimated residual value of a fixed asset is a change in accounting estimate. Such changes are applied prospectively, meaning they affect the depreciation calculations from the date of change onwards. Prior periods’ financial statements are not restated.

Question 49

Rowe Inc. owns 80% of Cowan Co.’s outstanding capital stock. On November 1, Rowe advanced $100,000 in cash to Cowan. What amount should be reported related to the advance in the consolidated balance sheet by Rowe as of December 31?
$0
$20,000
$80,000
$100,000

Answer 49

$0

All intercompany payables and receivables are eliminated in consolidated statements.

Question 50

FAR1A20031
A U.S. company purchases goods from a British supplier for £10,000 when the exchange rate is $1.50/£. If the exchange rate changes to $1.60/£ when payment is made, what is the transaction gain or loss?

A) Gain of $1,000.
B) Loss of $1,000.
C) Gain of $100.
D) Loss of $100.

Answer 50

A) Loss of $1,000.

The original transaction cost $15,000 (10,000 x 1.50). At the new exchange rate, the cost is $16,000 (10,000 x 1.60), resulting in a gain of $1,000 ($16,000 – $15,000).

Question 51

FAR2D10059
What is the first step in preparing a rollforward analysis for PPE?

A. Identifying any new purchases of assets
B. Calculating depreciation for the period
C. Starting with the opening balance of PPE
D. Assessing the fair value of PPE

Answer 51

C. Starting with the opening balance of PPE

The first step in preparing a rollforward analysis for PPE is to start with the opening balance of PPE at the beginning of the period.

Question 52

FAR1B30019
In preparing a cash flow statement using the indirect method, what is the treatment of a loss on the sale of an asset?

A. It is added to net income.
B. It is subtracted from net income.
C. It is listed in the operating activities section.
D. It is not adjusted in the cash flow statement.

Answer 52

A. It is added to net income.

A loss on the sale of an asset is added back to net income in the indirect method, as it is a non-cash charge that reduced net income.

Question 53

FAR2E10037
A financial asset is impaired when:

A) Its fair value exceeds its carrying amount.
B) Its carrying amount exceeds its recoverable amount.
C) It has been held for more than one year.
D) It is reclassified from held-to-maturity to available-for-sale.

Answer 53

B) Its carrying amount exceeds its recoverable amount.

An impairment occurs when the carrying amount of an asset exceeds its recoverable amount (fair value).

Question 54

FAR4A009n

Which of the following funds would use the flow of economic resources measurement focus?

A. Permanent fund
B. Special revenue fund
C. Enterprise fund
D. Debt service fund

Answer 54

C. Enterprise fund

The enterprise fund is a proprietary fund, which uses accrual accounting, which uses the flow of economic resources measurement focus.
The governmental funds use modified accrual accounting, which uses the current financial resources measurement focus – what current financial resources do we have available or will be available within the current period to cover the current period’s obligations? The 5 types of governmental funds are 1) General fund, 2) Special revenue funds, 3) Debt service funds, 4) Capital projects funds, 5) Permanent funds
Proprietary funds and fiduciary funds use accrual accounting, which focuses on the flow of economic resources – what are all of our cash and non-cash assets and obligations both in the short-term and long-term?