Question

1. Describe the attributes of the Proprietary Fund Category. Discuss the purposes of the two funds within this category. Explain why accrual accounting and the economic resources measurement focus are the appropriate methods for the proprietary funds

2.Describe the attributes of the Fiduciary Fund Category Discuss the purposes of the four funds within this category. Explain why accrual accounting and the economic resources measurement focus are the appropriate methods for the proprietary funds

Answer 1

Proprietary Fund Category

A proprietary fund is utilized in administrative accounting to represent exercises that include professional connections, either within the government or outside of it. The two sorts of proprietary funds are enterprise funds and internal service funds. An enterprise fund is utilized to represent any movement for which external users are charged an expense for products and services. A movement must be accounted for in an enterprise fund under any of the accompanying conditions:

a)The movement is supported with debt that is only secured by a pledge of the net proceeds from the action.

b)The activity’s service provision costs costs must be recovered with charges, as specified by laws and guidelines.

An internal service fund is utilized to represent exercises that give goods or services to different funds, just as divisions or organizations of the primary government, or to other government enterprises on a cost-repayment basis. This fund should possibly be utilized when the reporting government is the primary member in the action. At the point when this isn't the situation, a enterprise fund should be utilized.

The necessary budget summaries for a proprietary fund are as per the following:

a) Statement of net position

b) Statement of incomes, costs, and changes in fund net position.

Accrual accounting endeavors to record an exchange's budgetary impacts in the period that the transaction happened — as opposed to when the cash was received or paid the organization. Incomes are recorded when earned or when the organization has a privilege to get the incomes. Costs are reported when incurred. The date related cash was received or paid is of no result.

Three fundamental components of Accrual accounting:

a) Acknowledgment of expenditures when caused and the subsequent amortization of the deferred

b) Acknowledgment of incomes when earned.

c) Capitalization of specific costs and the subsequent depreciation of the capitalized costs

d) Accrual of incomes earned and costs incurred

Fiduciary Fund Category

A fiduciary fund is utilized in governmental accounting to give an account of assets held in trust for other people. At the point when financial statements are set up for fiduciary fund, they are introduced utilizing the economic resources measurement focus and the accrual basis of accounting. The necessary financial reports for a fiduciary fund are as per the following:

a)Report of fiduciary net position

b)Report of changes in fiduciary net position

The fiduciary funds mainly comprises of the following funds:-

a) Agency Funds- Used to give an resources of assets held in a custodial capacity, where funds are gotten, invested on temporary basis, and transmitted to different parties.

b) Investment trust funds- Used to report the outer segment of a investment pool that is accounted for by the sponsoring government.

c) Pension and employee benefit trust funds- Used to report resources held in trust for annuity plans, other post-employment advantage plans, and employee advantage plans.

d) Private-purpose trust funds- Used to report on  trust courses of action where the individuals, private associations, and different governments are the beneficiaries.