ExpertHard1 markMultiple Choice
CPA · Question 46 · Area III: State & Local Governments
A City receives a state grant of $100,000 that must be used for 'Public Safety Training'. At year-end, the funds have not been spent. How should this amount be classified in the General Fund Balance?
A City receives a state grant of $100,000 that must be used for 'Public Safety Training'. At year-end, the funds have not been spent. How should this amount be classified in the General Fund Balance?
Answer options:
A.
Committed
B.
Restricted
C.
Assigned
D.
Unassigned
How to approach this question
Hierarchy: Nonspendable -> Restricted (External) -> Committed (Internal Highest Level) -> Assigned (Internal Intent) -> Unassigned.
Full Answer
B.Restricted✓ Correct
B
Restricted fund balance includes amounts constrained by external parties (creditors, grantors, laws). Since the State (grantor) imposed the restriction, it is Restricted.
Common mistakes
Confusing Restricted (External) with Committed (Internal).
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