Question

Describe in 2-3 pages the difference between general fund and enterprise funds, what are they used for, and why?

Answer 1

The government of the country require money for its operations. The money is raised from the general public through various forms of taxes. After the collection of money, the means of spending is decided by the government. The spending is performed from various funds depending upon the purpose of spending

General Fund

The income in the general fund is not designated specifically for any purpose. It is used for administrative and operating expenses of the government. The money in this fund is large as the majority of the money requirements of the government are fulfilled by the general fund. This fund is used for the general government revenues and expenditures. The expense made from this fund should be balanced with the revenues so that the fund balance is replenished timely. This fund is utilized by the government openly because of the need at the time of disasters, immediate capital requirement needs, etc. The funding of the general fund protects the taxpayers from the unanticipated changes in the financial conditions.

Enterprise fund

This fund operates similar to the private business enterprises. The fund is financed in a self funding manner. The example of enterprise fund is utilities fund. It is a pool of cash which can be spent for specific purposes. The funding of the specific purpose is gathered from the fund’s mission itself. The main advantage of the enterprise fund is that the general public is aware about the costs of the services used for accomplishing a particular mission. It informs the public that why the fees at a particular level.

The main benefit of the enterprise fund is that the total cost of particular service is identified and then related revenues for the service are ascertained. The enterprise funds provides useful information for making decisions for the user fees and other fees.

Both the funds are created by obligation of taxes and fees on the general public. These funds are maintained at federal level, state level and the local level.

The general fund is created by all the governments to finance their needs for expenses. Whereas, the enterprise fund creation is not necessary by all the governments as it is created for the special projects. There are limitations on the usage of the enterprise fund whereas there are no restrictions on the usage of general fund. Any bill can be paid from the general fund.

The general fund is the requirement of all the governments but the enterprise fund exists till the time government has the resources for the specific purpose.