Question

(CO C) Explain what the five governmental funds, two proprietary funds, and four fiduciary funds have in common with the funds in the same category. Why are the funds within each of the categories different from the funds in the other two categories?

Answer 1

All of these proprietary funds as well as fiduciary funds along with governmental funds will be segregated according to restrictions on use and there will be absence of profit motive and budgetary account will provide control over the expenditure.

Modification of revenue and expenditure recognition rule change the flow of transactions through the accounting record to reflect better the nature of non exchange transaction that will be reflecting the most of the resource for government expenditure. These non-exchange venues such taxes inter governmental revenues are governmental funds and they will be recorded in a group of funds.

Proprietary funds will be resulting in exchange transaction and they will be chargeable to users for goods and services and they will be recorded in group of funds called proprietary funds and this will be including public utilities convention centres, Motor pools, airports.

Proprietary fund will be reflecting that government entities are frequently managing on the behalf of other entities and this donot belong to the government entity and they have to be recorded separately.

So this will be having a common rule of being segregated on the basis of restrictions on the use and they will be mainly recorded in order to better reflection of management of government expenditure

The reason for their difference will be there recording in the books of accounts which has been listed above.