What basis of accounting is used by proprietary funds?

Question

Quizplus · Accepted Answer

Proprietary funds are used by government entities to provide goods and services to the public on a user-charge basis. These funds are accounted for using the accrual accounting method. Under accrual accounting, revenue is recognized in the period it is earned, regardless of whether the payment for the goods or services is received in the same period or not. Similarly, expenses are recognized in the period they are incurred, irrespective of whether the payment is made for the same in that period or not. This method provides a more accurate picture of the financial status of the fund compared to cash or modified accrual accounting.

What Basis of Accounting Is Used by Proprietary Funds