Question

The following are GASB’s fund balance classifications. Define and give an example of each: Non-spendable, Restricted, Committed, Assigned, and Unassigned.

Answer 1

Solution:-

1. Non-spendable:-

Non-spendable fund balances are those that are used in operations not converted into cash, such as inventories and prepaid items. Additionally, if it is a fund where the government is required to maintain a permanent fund and cannot spend the principal, this would be considered a non-spendable fund balance.

2. Restricted:-

Restricted fund balances have requirements from external parties or mandated by law that require the fund balances to be used for a specific purpose. An example of this would be if a state permits a city or county to impose a tax on the sale of prepared food and beverages, commonly these types of tax proceeds are restricted to capital projects.

3. Committed:-

Committed fund balances are the resources that are specified by a government for a specific use. The resources have to be committed by an ordinance or from a level of authority such as the state legislature. An example of this would be if the state legislature approves large construction contracts.

4. Assigned:-

Assigned funds are governmental funds that the government intends to use for a specific purpose. Constraints on assigned resources are more easily changed than committed funds. An example would be a debt service fund.

5. Unassigned:-

Unassigned funds are in the residual category for the General Fund. This is the only category of Fund balance that can be reported as a negative number.