Which of the following activities of a government should be accounted for in a fiduciary fund?
A) Funds received from the federal government to support public transportation activities.
B) Funds received from an individual who specified that the principal must be kept intact but the income can be used to support families of police officers killed in the line of duty.
C) Funds received from the state government that must be used to purchase capital assets.
D) Funds received from a contractor to assist with the development of utility infrastructure.

Question

Quizplus · Accepted Answer

Fiduciary funds are used to account for assets that the government holds as a trustee or agent for individuals, private organizations, or other governmental units. The key characteristic of these funds is that they are not used to support the government's own programs. Choice B describes a situation where the government is holding funds in trust, with specific instructions that the principal is to be preserved and the income generated is to be used for a specific purpose (supporting families of police officers killed in the line of duty), which fits the definition of a fiduciary activity. Choices A, C, and D involve funds that are more likely to be accounted for in governmental or proprietary funds, as they support public transportation, capital asset acquisition, and utility infrastructure development, respectively, which are activities that benefit the government or its citizens directly.

Which of the Following Activities of a Government Should Be