Question

Which of the following accounts neither increases nor decreases the fund balances reported on the governmental fund balance sheet for the fiscal year? Expenditures. Encumbrances. Revenues. Other financing sources.

Answer 1

Step-by-step explanation:

1. Expenditures: Expenditures represent the outflow of resources from the governmental fund, such as payments for goods and services. When expenditures occur, they decrease the fund balance because funds are being used.

2. Encumbrances: Encumbrances, on the other hand, represent commitments to purchase goods or services, but the actual payment has not yet been made. They are recorded as a reservation of funds for specific purposes. While encumbrances affect the budgetary accounts, they do not impact the fund balance reported on the balance sheet. Encumbrances will eventually be recorded as expenditures when the goods or services are received.

3. Revenues: Revenues represent the inflow of resources into the governmental fund, such as taxes, fees, and grants. When revenues are received, they increase the fund balance because funds are being added.

4. Other Financing Sources: Other financing sources include non-operating revenues, such as transfers in from other funds or proceeds from borrowing. These sources increase the fund balance because they provide additional resources.