A7 Twatt - to provide goods and services to the general...

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Chapter 7 Tiffany Watt Assignment: A7 March 23, 2011 AC 325 – E01   Questions 7-2. Only when authorized by legislative approval may a city establish an internal service fund. A city’s main purpose for establishing an internal service fund is to improve financial management of scarce resources as well as to provide goods and services to other governments or departments of the same government. Enterprise funds must be established when a city finances an activity with debt that is secured solely by a pledge of the revenues from fees and charges of an activity and when laws or regulations require that the activity’s costs of providing services, including capital costs, be recovered with fees and charges, rather than with taxes or similar revenues. In addition, the main purpose of enterprise funds is
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Unformatted text preview: to provide goods and services to the general public. 7-4. One of the more important considerations in establishing a pricing policy for an internal service fund is cost. For example, historical cost can present issues because it will not provide sufficient revenue to replace supplies issued if replacement prices have risen since the last purchase or to increase the inventory quantities if the scale of governmental operations is growing. Another issue to take into consideration is whether the fund has received a loan from another fund or another government. If it has, then the prices must be set at a level that will generate cash needed for debt retirement. Exercises & Problems 6-2. Multiple Choice. 1. B 2. D 3. B 4. C 5. B 6. A 7. A 8. D 9. D 10. C...
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