A governmental entity receives a gift of cash and investments with a fair value of $200,000.The donor specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be re-invested.The $200,000 gift should be accounted for in which of the following funds?

Question

Quizplus · Accepted Answer

According to governmental accounting standards, a permanent fund is used to account for resources that are legally restricted to the extent that only earnings, and not principal, may be used for the benefit of the government. In this case, the donor specified that the earnings from the gift must be used to beautify city-owned parks and the principal must be reinvested. Therefore, a permanent fund should be used to account for this gift.

A Governmental Entity Receives a Gift of Cash and Investments