Final answer:
The modified accrual basis of accounting is required for governmental funds only in the context of state and local government accounting. Other funds, such as proprietary and fiduciary funds, use the full accrual basis. This basis is part of the broader framework of financial management and budgeting within these governments option (d).
Step-by-step explanation:
In the context of accounting for state and local government, the modified accrual basis of accounting is required specifically for governmental funds only. This accounting basis recognizes revenues when they become available and measurable and recognizes expenditures when the related fund liability is incurred.
On the other hand, proprietary and fiduciary funds use the full accrual basis of accounting, which recognizes revenues when earned and expenses when incurred, regardless of when cash transactions occur. Understanding these distinctions is crucial for accurate financial reporting and management within state and local governments.
State and local governments indeed need to approve spending before releasing revenues, which is part of the budgetary control. Additionally, the budget supplies money for many services and programs that benefit the community, and the taxes collected by these governments pay for these various services and programs.
Moreover, state and local budgets also receive benefits from federal expenditures, indicating the interconnected nature of government financing.
It is important to note that, while governmental funds use the modified accrual basis, all other types of funds within state and local governments must use the accounting method that is appropriate for their type of fund. Thus, the correct answer to the student's question is that the modified accrual basis is required for governmental funds only.