Question

Lehi City has designated an internal service fund as the single fund to account for its self-insurance activities. Most of the insured activities such as the police department, fire department, and general government functions are accounted for in the General Fund. What is the maximum amount that can be charged to expenditure in the General Fund related to the self-insurance activities

Answer 1

Answer: c)The actuarially determined amount necessary to cover claims, expenditures, and catastrophic losses.

Explanation:

The Expenditure on the account related to self - insurance activities  refers to the amounts that will be deducted from the fund for anything insurance related.

The insurance is meant to cover the claims and unlikely events of catastrophies. Therefore when those things do occur it will be deducted from the service fund to cover those things.

Those along with expenses incurred to maintain the fund will be considered expenses and that is the maximum amounts that can be deducted from the fund.