ACC-410-Review and Discussion Chapter 2

ACC-410-Review and Discussion Chapter 2 - Chapter 2 Fund...

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Chapter 2 Fund Accounting Questions for Review and Discussion 1. In governmental accounting, a fund is a fiscal and accounting entity with a self- balancing set of accounts used to account for an organization’s resources and claims against those resources. In business accounting, by contrast, funds generally refer either to working capital (current assets less current liabilities) or to selected components of working capital. 2. The accounting equation as applied in government accounting and not-for-profit accounting is essentially the same as that applied in business accounting. The primary difference is that in business, assets = liabilities + owner’s equity , whereas in government and not-for-profit entities, since there are no “owners” as the term is used in business, assets = liabilities + fund balance . 3. Governments establish funds neither to account for specific functions nor to divide evenly their resources. Instead, they create funds mainly to promote control and accountability over restricted resources. The general fund of the city is probably larger than all of the special revenue funds combined because most of the city’s assets are unrestricted and the unrestricted assets can be aggregated in a single fund.
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ACC-410-Review and Discussion Chapter 2 - Chapter 2 Fund...

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