A state government receives a grant from the federal government that it disburses to local governments within the state.The state government disburses the cash received from the federal government to the local government,but the state government has no other administrative responsibilities regarding the grant.The state government should report the grant in:

Question

Quizplus · Accepted Answer

Agency funds are used to account for resources held by the reporting government in a purely custodial capacity (assets equal liabilities). Since the state government is only disbursing the federal grant to local governments without any administrative responsibilities, it acts as a custodian, making an agency fund the appropriate choice for reporting.

A State Government Receives a Grant from the Federal Government