Question

Governmental fund-basis statements are prepared using the________, and must be converted to the ________ to be incorporated in the government-wide statements.

A. accrual basis, modified accrual basis
B. accrual basis, tax basis
C. cash basis, accrual basis
D. modified accrual basis, accrual basis

Answer 1

The correct answer is D. Governmental fund-basis statements are prepared using the modified accrual basis and converted to the accrual basis for government-wide statements.

Step-by-step explanation:

Governmental fund-basis statements are prepared using the modified accrual basis and must be converted to the accrual basis to be incorporated in the government-wide statements. Therefore, the correct answer is D. Modified accrual basis, accrual basis. In the modified accrual basis, revenues are recognized when they are both measurable and available, and expenditures are recognized in the period in which the fund liability is incurred, if measurable. On the other hand, the accrual basis, used in government-wide statements, records revenues when they are earned and expenses when they are incurred, regardless of when the cash transactions occur.