Question

GASB requires enterprise funds to be used under which of the following circumstances? A) When the legal requirement exists that the cost of providing services for an activity, including capital costs, be recovered through fees or charges. B) When debt is backed solely by fees and charges. C) When a government has a policy to establish fees and charges to cover the cost of providing services for an activity. D) All of the

Answer 1

Answer:

D) All of the above.

• A) When the legal requirement exists that the cost of providing services for an activity, including capital costs, be recovered through fees or charges.
• B) When debt is backed solely by fees and charges.
• C) When a government has a policy to establish fees and charges to cover the cost of providing services for an activity.

Explanation:

The Governmental Accounting Standards Board (GASB) was established to set accounting standards for state and local governments. It basically adapted GAAP rules into public entities. GASB statement 34 requires state and local governments to provide two sets of financial statements and places special emphasis on reporting infrastructure assets.

One set of financial statements is based on accrual accounting and reports items as expenses, while the other set of financial statements reports items as expenditures. The difference is that expenses refer to the resources consumed during the accounting period, while expenditures refer to the resources purchased during the period.