Question

Which of the following will increase the fund balance of a governmental unit at the end of a fiscal year?

a. Estimated revenues are less than expenditures and reserve for encumbrances.
b. Appropriations are less than expenditures and encumbrances.
c. Revenues are greater than expenditures and encumbrances.
d. Appropriations are greater than estimated revenues.

Answer 1

An increase in the fund balance of a governmental unit at the end of a fiscal year occurs when revenues are greater than expenditures and encumbrances. This surplus contributes positively to the government's financial position.

Step-by-step explanation:

Which of the following will increase the fund balance of a governmental unit at the end of a fiscal year? The answer is: Revenues are greater than expenditures and encumbrances. This means that the government has collected more money than it has spent or earmarked for future spending within the fiscal year. When actual revenues exceed both expenditures and encumbrances (commitments to spend), the result is an increase in the fund balance. For example, if a local government takes in $1 million in taxes and other revenues and has expenditures of $900,000, along with $50,000 in encumbrances, it would have a surplus of $50,000, which boosts the fund balance.