Question

1. Describe in your own words the difference between governmental funds and enterprise funds.

2.Discuss the pros and cons of requiring a "Balanced Budget". How can public budgets be manipulated in order to give them the appearance of being "in balance"?

Answer 1

Answer(1)- Difference between governmental funds and enterprise funds-

1. Government fund is the amount of cash that is raised through taxation.
2. Government fund is a general fund and used for public wellbeing while Enterprise fund is used for special purpose only.
3. Government fund provides free service to public while Enterprise fund charges fee for providing services.
4. Special revenue fund, debt service fund are the examples of Government fund and State's workers' compensation fund is the example of Enterprise fund.

Answer(2): A balance budget is a Government budget in which Revenues and Expenditures are equal so there is no deficit or surplus. Sometimes it could have a surplus but it will never have a deficit.

Pros of Balanced budget-

1. This budget can give the insight of increasing public spending or reducing taxes.
2. If there is budget deficit, it can be reduced by reducing debt.
3. With the help of balanced budget, Government can make future strategies.

Cons of Balanced budget- A balanced budget can check the production and money spent on infrastructure in the country, economic growth may be slower down because for maintaining the surplus, Government will not have more debt so it will have less funds for spending.