Question

How should a city's general fund report the acquisition of a new police car in its governmental fund statement of revenues, expenditures, and changes in fund balances? Group of answer choices Expenditure. Noncurrent asset. Expense. Property, plant, and equipment.

Answer 1

Answer: the correct option is A. Expenditure.

Explanation: From the scenario given above, we can see that this is a government expenditure.

Government expenditure include all the purchases of goods and services that are categorized as; public consumption and public investment, and transfer payments consisting of income transfers (pensions, social benefits) and capital transfer.

One thing to note is that governmental fund types make use of the modified accrual basis of accounting which focuses on the flow of financial resources.

Therefore, the use of financial resources by the government will be considered as an expenditure and not an expense.

Answer 2

Answer:

A. Expenditure

Explanation:

Expenditures are simply goods or services bought or paid for. It refers to the total amount of money that an individual or government spends. It is that amount of fund used up in the purchase of goods and services. From the question, it can bee seen that the goods and services paid for or acquired was the police cars. Thus, such acquisition is recorded as expenditure.