The basis of accounting that should be used in preparing fund financial statements is:
A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question

The basis of accounting that should be used in preparing fund financial statements is: 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D

Quizplus · Accepted Answer

The basis of accounting that should be used in preparing fund financial statements is the modified accrual basis of accounting. This is because fund financial statements are prepared for governmental entities, and the modified accrual basis is the appropriate basis for governmental accounting. The modified accrual basis differs from the accrual basis in that it recognizes revenue when it is measurable and available to finance current-year expenditures, and recognizes expenditures when the fund has a legal claim to the resources and the liability can be liquidated with current financial resources. Choice A, B, and D are not relevant to the question.

The Basis of Accounting That Should Be Used in Preparing