Question

Under GASB guidelines, a(n) _____ ____ plan on recognizes a liability when depositors request a withdraw to plan for college expenses.

Answer 1

Under GASB guidelines, a prepaid tuition plan recognizes a liability when depositors request a withdrawal for college expenses, similar to how banks view deposits as liabilities.

Step-by-step explanation:

Under GASB (Governmental Accounting Standards Board) guidelines, a prepaid tuition plan (which appears to be the topic in question despite the omissions) recognizes a liability when depositors request a withdrawal to plan for college expenses.

This is because, like a bank that views deposits into accounts such as checking, savings, or certificates of deposit as liabilities, a prepaid tuition plan must acknowledge the funds it owes to its participants. For example, if the Safe and Secure Bank holds $10 million in deposits, this means that it owes this amount to its customers and must honor withdrawals.