Which statement is not correct?
A) Governmental funds account for expenditures of financial resources rather than matching revenues and expenses.
B) The Fund Balance Reserved for Encumbrances account is not closed at the end of a fiscal year.
C) Revenues from licenses and permit fees are recognized when received in cash if using the modified accrual basis of accounting for governmental funds.
D) A fund is an independent accounting entity composed of cash and other financial resources, segregated for the purpose of carrying on specific activities and objectives.
E) Commitments for purchase orders are recorded as expenses.

Question

Quizplus · Accepted Answer

Commitments for purchase orders are not recorded as expenses in governmental accounting. Instead, they are recorded as encumbrances or appropriations, which are amounts reserved for future expenses. Expenses are recognized when goods or services are received or consumed, and obligations become actual expenditures.

Which Statement Is Not Correct