The nature of a transaction gives a clue as to the type of fund in which it should be recorded. (80 points)
Kendal County engaged in the following transactions:
P. 5-4: Generally accepted modified accrual accounting practices pertaining to inventories may not fulfill the objectives of financial reporting. (80 points)
The following is an excerpt from a note to the financial statements of the city of Dallas (dates changed):
The city prepares its annual appropriated general fund, debt service fund, and proprietary operating funds budgets on a basis (budget basis) which differs from generally accepted accounting principles (GAAP basis). The major differences between the budget and GAAP bases are that encumbrances are recorded as the equivalent of expenditures (budget) rather than a commitment of fund balance (GAAP) in the governmental funds.
The city accounts for inventories on the purchases basis. One of the city’s departments, which is accounted for in the general fund, budgeted $195,000 in supplies expenditures for fiscal 2015. It began the 2015 fiscal year with $30,000 of supplies on hand. It also had $12,000 of supplies on order. During the year it ordered an additional $180,000 of supplies, received (and paid for in cash) $185,000 of supplies, and consumed $178,000 of supplies.
EX. 10-4: Investment gains and losses may have to be accounted for differently in nonexpendable than in expendable funds. (70 points)
The McCracken County Humane Society (MCHS), which is part of a county’s reporting entity, established a permanent fund to provide support for its pet neutering program. As of the start of the year, the fund had a balance of $600,000, composed of both cash and marketable securities.
The program itself, which is accounted for in a special revenue fund, is funded by both direct contributions and the income from the permanent fund. At the start of the year, the special revenue fund had assets (all investments) of $26,000.
The following transactions and events occurred in a recent year.