Final answer:
The student's question concerns the appropriate accounting for restricted funds under specific conditions related to public and private use, with differences in the expendability of interest and principal amounts according to the purpose of the funds.
Step-by-step explanation:
The question is asking to identify the correct fund to account for restricted funds in various scenarios:
- Public use; spending: interest and principal (expendable)
- Public use; interest only (not expendable)
- Private use; interest and or principal (expendable)
Restricted funds are monies set aside for a particular purpose. In the context of government accounting, different types of funds are used to account for resources that are restricted or committed for specific purposes.
Mandatory spending
relates to federal spending required based on existing laws.
Discretionary spending
, on the other hand, is subject to annual budget processes and decisions by Congress. The areas this can cover include military, education, transportation, and more.
Interest on debt
is what the government pays on the amount it has borrowed.
Investments, another aspect tied to finances, are analyzed based on the expected rate of return, risk, and liquidity. For example, when a bank uses deposits to buy bonds, this is an investment expected to yield some return, with the level of risk depending on the type of bond. Government agencies, after receiving allocated funds, then use them to deliver services to the public. Understanding the complexities of these accounts and investments is essential for appropriately managing and accounting for restricted funds.