A municipality allows its employees to accumulate up to 45 days' vacation pay that may be "cashed in" by the employees on retirement.Many employees whose salaries are paid from General Fund appropriations avail themselves of this opportunity.Where does this liability appear on the governmental funds balance sheet when employees are not expected to retire in the near future?
A)General Fund column;Accrued vacation leave caption
B)This liability is not reported in the governmental funds balance sheet.
C)General Fund column;Noncurrent liabilities caption
D)General Fund column;Payable from restricted assets caption

Question

Quizplus · Accepted Answer

In governmental accounting, expenditures (and related liabilities) are recognized under the modified accrual basis. This means that long-term liabilities, such as accrued vacation leave that is not expected to be paid in the near future, do not appear on the balance sheet of governmental funds. Instead, such liabilities are reported in the government-wide financial statements, which are prepared using the accrual basis of accounting.

A Municipality Allows Its Employees to Accumulate Up to 45