Question

If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP, then the budgetary comparison schedule or statements should

a. Be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis.
b. Be included as part of management's discussion and analysis (MD&A)
c. Not be included as part of the basic financial statements.
d. Be included with budget figures and actual figures adjusted to the GAAP basis.

Answer 1

When local governments prepare budgets that differ from GAAP requirements, the budgetary comparison must include actual figures on the budget basis and a reconciliation to the GAAP basis to ensure transparency and comparability.

Step-by-step explanation:

If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP, then the budgetary comparison schedule or statements should be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis. This approach ensures transparency and comparability for users of the financial statements. It allows stakeholders to understand the differences between the budget figures and the actual results as per GAAP.

Both the budgetary figures and the actual figures presented on the budget basis are important for accountability and performance evaluation. Meanwhile, GAAP figures provide a standard format for reporting financial information, making it easier to compare financial data across different entities. Therefore, including a reconciliation between these two sets of figures is critical in governmental financial reporting to provide a complete and accurate picture of financial performance.