Question

Question 2: Discuss the basis of accounting and use of the following funds: (1)general fund, (2) debt service fund, (3) special revenue fund, (4) permanent fund, (5) internal service fund and (6) enterprise fund.

Answer 1

• General Fund - fund used to account for all assets and liabilities of a nonprofit entity except those particularly assigned for other purposes in another more specialized fund. It is the primary operating fund of a governmental unit. Much of the usual activities of a municipality are supported by the general fund.

Accounting - accrual basis. generally all funds are accounted on modern accrual basis.

• Debt Service fund - cash reserve that is used to pay for the interest and principal payments on certain types of debt. The existence of a debt service fund is intended to reduce the risk of a debt security for investors, which makes it more attractive to them and also reduces the effective interest rate needed to sell the offering.

Accounting - accrual basis. generally all funds are accounted on modern accrual basis.

• Special Revenue Fund - fund used within a government entity to record the proceeds from certain revenue sources for which fund usage is restricted. Examples of special revenue funds are those used for the funding of parks, libraries, schools, and wastewater management. The use of a special revenue fund makes it easier to track cash inflows and outflows related to special-purpose activities.

Accounting - accrual basis. generally all funds are accounted on modern accrual basis.

• Permanent Fund - permanent fund is used to report resources that are legally restricted to the extent that only earnings, and not principal, may be used for purposes that support the reporting government’s programs—that is, for the benefit of the government or its citizenry.

Accounting - accrual basis. generally all funds are accounted on modern accrual basis.

• Internal Service Fund - fund used in governmental accounting to track goods or services shifted between departments on a cost reimbursement basis. An example of an internal service fund is a maintenance department that provides equipment maintenance services to other departments. This type of fund is used to identify the cost of providing certain goods and services.

Accounting - generally all funds are accounted on modern accrual basis.

• Enterprise Fund - A government's general fund is a pool of cash raised from taxes and can be spent wherever the government needs it. An enterprise fund is more specific. Enterprise fund money can only be spent on a specific purpose, such as parks and recreation. Most of the funding comes from fees related to the fund's mission.

Accounting - accrual basis. generally all funds are accounted on modern accrual basis.