Question

Governmental funds are further classified as governmental or business-type.

A. True
B. False

Answer 1

The statement that governmental funds are classified as governmental or business-type is false. Governmental funds include various specific funds such as general funds and capital projects funds, which are distinct from business-type activities that resemble private-sector operations.

Step-by-step explanation:

The statement "Governmental funds are further classified as governmental or business-type." is false. Governmental funds are indeed classified into various types, but they are distinct from business-type activities. Governmental funds include general funds, special revenue funds, capital projects funds, debt service funds, and permanent funds. These funds are used for specific government services and are supported primarily by taxes and intergovernmental revenues. Business-type activities, on the other hand, are those that government engage in that are similar to private-sector business operations. They are funded in a way similar to the private sector, where the costs of providing goods or services to the public on a cost-reimbursement basis are financed or recovered primarily through user charges.

When discussing federal spending and government expenditures, it is important to recognize the following:

• a. Federal spending has indeed grown substantially in recent decades in nominal dollars.
• b. The U.S. government does not control a relatively large share of the U.S. economy by world standards; this is false.
• c. A majority of the federal government's revenue is collected through personal income taxes; this is true.
• d. Education spending is much higher at the state level, contrary to the false claim that it is larger at the federal level.

Answer 2

The statement regarding the classification of governmental funds as governmental or business-type is false. Governmental funds involve activities funded by tax revenues, while business-type activities are more like private business operations and are funded by fees for services.

Step-by-step explanation:

The statement that governmental funds are further classified as governmental or business-type is False. Governmental funds and business-type activities are two distinct categories of activities reported in governmental accounting. Governmental funds include activities primarily supported by taxes and intergovernmental revenues and are associated with providing governmental services. These are reported under the governmental funds financial statements and include general, special revenue, capital projects, debt service, and permanent funds. On the other hand, business-type activities are those that operate in a manner similar to private businesses where fees are charged for goods or services. This category typically includes utilities and public transport systems, among others, and these activities are reported separately in proprietary fund financial statements.

Understanding these different categories is crucial for grasping the overall financial structure and reporting mechanisms of state and local governments, which have specific rules and principles governing how they report their financial health and operations.