Question

1. What is fund balance
2.What are the various fund balance classification used in the different sets of financial statements issued
3. What is a major fund
4. What is the relevance of identifying a fund as “major”
5.. What conditions are necessary to classify a fund as major?
6. What the revenue and expenditure recognition principles for state and local governments
7.What are the major non-exchange revenue transactions in state and local governments

Answer 1

Part- 1.

Fund balance is the difference between assets and liabilities in a governmental fund. A positive fund balance means there are more assets than liabilities, and a negative fund balance means there are more liabilities than assets.

Part- 2.

Various fund balance classification used in the different sets of financial statements issued are Non spendable fund balance, Restricted fund balance, Committed fund balance, Assigned fund balance and Unassigned fund balance.

Part- 3.

The concept of major fund is introduced and defined by GASB to simplify the presentation of fund information and to focus attention on the major activities of the entity. Major fund are fund whose revenues, expenditure/expenses, assets, or liabilities (including extraordinary items) are at least 10 percent of corresponding totals for all governmental or enterprise fund and at least 5 percent of the aggregate amount for all governmental and enterprise funds.

Part- 4.

The relevance of identifying major fund is to focus attention on the major activities and significant funds of the entity.

Part- 5.

Following two conditions are necessary to classify a fund as major:

1. Total assets , liabilities, revenue, or expenditure/expenses of the individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category (governmental fund) or type (enterprise fund).
2. Total assets , liabilities, revenue, or expenditure/expenses of the individual governmental or enterprise fund are at least 5 percent of the corresponding total for all governmental fund and enterprise fund combined.

Part- 6.

Revenue recognition principles are modified accrual basis under which revenue recognizes when they become measurable and available and accrual basis under which revenue recognizes when earned.

Expenditure recognition principle are modified accrual basis under which expenditure recognizes in the period in which a liability has incurred (when goods or services have been received).

Part- 7.

Major nonexchange revenue transactions are Derived tax, Imposed nonexchange, government mandated and voluntary nonexchange.