Question

When preparing the government-wide statements, an adjustment is required to eliminate the charge to expenditures for capital outlay and to record those expenditures as capital assets. T/F

Answer 1

It is true that in government-wide financial statements, expenditures for capital outlays are removed and instead recorded as capital assets.

Step-by-step explanation:

True, when preparing government-wide statements, an adjustment is necessary to eliminate the charge to expenditures for capital outlays and to instead record those expenditures as capital assets. This is because capital outlays represent the purchase of physical assets that will benefit the government and its constituents over multiple fiscal periods, unlike regular expenditures that are consumed within the fiscal year. Therefore, capital outlays need to be capitalized, which means they are recorded as assets on the balance sheet rather than expenses on the income statement.