Question

Neighborville enters into a lease agreement for new copiers in all its city hall offices. In the General Fund at the inception of the lease, it should record ________.

A. An expenditure.
B. A deferred outflow of resources.
C. A liability.
D. A prepaid expense.

Answer 1

At the inception of a lease agreement for new copiers, Neighborville should record an expenditure option a is answer

Step-by-step explanation:

When Neighborville enters into a lease agreement for new copiers for its city hall offices, the appropriate accounting treatment in the General Fund at the inception of the lease is to record an expenditure. According to governmental accounting standards, when assets are acquired through a lease agreement, an expenditure is recorded in the General Fund.

This is because the General Fund typically operates on a modified accrual basis, recognizing expenditures when they are incurred rather than when paid.

A liability would also be recorded to represent the obligation to make future lease payments. However, the question specifically asks about the inception of the lease, at which point the primary recording would be the expenditure. option a is answer