Which funds typically use accrual accounting in addition to government-wide statements?

Which funds typically use accrual accounting in addition to government-wide statements?

• A. None.
• B. General fund.
• C. Enterprise and fiduciary funds.
• D. All funds.

Answer: (C)

Accrual accounting recognizes revenues when earned and expenses when incurred, which aligns with the economic picture presented in government-wide financial statements. While many governmental fund statements use modified accrual focused on current resources, some funds maintain accrual accounting in their own reporting. Enterprise funds and fiduciary funds are the ones that typically use accrual accounting in addition to the government-wide statements. Enterprise funds operate like businesses (distance utilities, airports, utilities) and must show long-term assets, liabilities, depreciation, and operating results on an accrual basis. Fiduciary funds hold and manage assets for others (trusts, pension funds, and other investment pools), so they also report on an accrual basis to reflect net position and changes in it. In contrast, general and other governmental funds usually rely on modified accrual for their fund statements, with government-wide statements handling the accrual perspective.

Accrual accounting recognizes revenues when earned and expenses when incurred, which aligns with the economic picture presented in government-wide financial statements. While many governmental fund statements use modified accrual focused on current resources, some funds maintain accrual accounting in their own reporting. Enterprise funds and fiduciary funds are the ones that typically use accrual accounting in addition to the government-wide statements. Enterprise funds operate like businesses (distance utilities, airports, utilities) and must show long-term assets, liabilities, depreciation, and operating results on an accrual basis. Fiduciary funds hold and manage assets for others (trusts, pension funds, and other investment pools), so they also report on an accrual basis to reflect net position and changes in it. In contrast, general and other governmental funds usually rely on modified accrual for their fund statements, with government-wide statements handling the accrual perspective.