| Chapter: | Reading | Topic |
A city taxes merchants for various central district improvements. Which of the following accounting methods assist(s) in assuring that these revenues are expended legally?
| Fund accounting | Budgetary accounting | |
|---|---|---|
A government unit's principles of accounting are different from those of a private business. A private business prepares financial statements (F/S) for use in lending and investing decisions, but government F/S are used to provide accountability for the use of resources and to make social and political decisions. Because government F/S are prepared for distinct purposes, governments use unique required accounting methods (eg, fund accountingA government accounting method that segregates financial resources into sets of self-balancing accounts; each set is controlled by a government entity with a specific mission and legal restrictions on the use of the resources., budgetary accountingA government accounting method based on forecasts and estimates that enables the planning, preparation, and tracking of a balanced budget. Budgeting compares estimated expenditures with estimated revenues and ensures that legal restrictions on fund use are followed.) to help achieve those purposes.
In summary, both fund accounting and budgetary accounting assist in assuring that government revenues are expended legally.
Things to remember:
Fund accounting segregates financial resources into sets of self-balancing accounts. Budgetary accounting is based on forecasts and estimates that enable the planning, preparation, and tracking of a balanced budget. Both fund accounting and budgetary accounting assist in assuring that government revenues are expended legally.
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