A state government receives a grant from the federal government that it disburses to local governments within the state.To meet federal grant requirements,the state government monitors the local governments to make sure that they comply with federal grant requirements.When the state government disburses the grant monies to the local governments,it should debit:

Question

Quizplus · Accepted Answer

When disbursing the grant monies to the local governments, the state government is making an expenditure related to the federal grant. Therefore, the state government should debit Expenditures - Federal Grant. This option accurately reflects the economic transaction of the state government's use of the grant funds. Options A and B are not correct because they do not reflect the nature of the transaction, and option D is not correct because an entry is required to record the expenditure.

A State Government Receives a Grant from the Federal Government