Question

Explain the various ways the GASB standards require governmental fund balances to be marked as classified.

Answer 1

The Government Accounting Standards Board (GASB) was created with a view to establish Generally Accepted Accounting Principles (GAAP) in the year of 1984.

The GASB is one of the two boards that establishes GAAP. The other one is Financial Accounting Standards Board (FASB).

It is a private non governmental organization that creates GAAP, for state and local governments in the United States.

GASB standards will require govenrmental fund balances to classify funds in the following ways:

RESTRICTED FUND BALANCE:

This fund balance is reported as restricted when constraints placed on the use of resources. Those are externally imposed by contributors, laws and regulations of other governments, creditors. Which is also imposed by law through constitutional provisions.

COMMITTED FUND BALANCE:

Funds that are constrained for a particular purpose but can change. These committed funds cannot be useful for any other purpose unless the legislature changes the specified use.

NONSPENDABLE FUND BALANCE:

Nonspendable fund balance includes assets that are not in a spendable form. The best example for nonspendable fund balance is inventory. Which is legally required to be maintained intact.

ASSIGNED FUND BALANCE:

Funds which are assigned to be used in a specific purposes. Which are neither restricted nor committed.

UNASSIGNED FUND BALANCE:

These are the funds which are available for general purpose. In all other governmental funds the excess of nonspendable, committed and restricted fund balances over total fund balance is classified as unassigned.