Joshua County bought a new backhoe using general fund cash. When the asset was acquired, what was the appropriate entry in the general fund, assuming that the entity maintains its books and records in a manner to facilitate the preparation of fund financial statements?

Question

Quizplus · Accepted Answer

In governmental accounting, when a capital asset such as a backhoe is purchased using general fund cash, the transaction is recorded as an expenditure rather than capitalizing the asset. This is because the general fund operates on a modified accrual basis, focusing on current financial resources and expenditures rather than full accrual accounting which would capitalize long-term assets. Therefore, the correct entry is to debit Expenditures and credit Cash, reflecting the outflow of financial resources.

Joshua County Bought a New Backhoe Using General Fund Cash