Empire State collects personal income taxes both for its own activities and for cities in the state that have elected to "piggy-back" their own income taxes on top of the state taxes.As a fiduciary,the state temporarily invests all tax receipts pending determination of amounts to remit to the cities.The total investment income received by the state is $300,000,of which $100,000 will be sent to the cities.How much of the investment income should be recognized as revenue in the state's Agency Fund?

Question

Quizplus · Accepted Answer

Agency funds are used to account for resources held by a government in a trustee or agency capacity for others. Since the state is acting as an agent for the cities for the portion of the investment income that will be sent to the cities ($100,000), this amount is not recognized as revenue in the state's Agency Fund. The Agency Fund only recognizes the amounts it is responsible for, not the amounts it holds or passes on behalf of others.

Empire State Collects Personal Income Taxes Both for Its Own