ExpertMedium1 markMultiple Choice
CPA · Question 16 · Area III: State & Local Governments
When reconciling the governmental funds Balance Sheet to the government-wide Statement of Net Position, which of the following adjustments is typically required?
When reconciling the governmental funds Balance Sheet to the government-wide Statement of Net Position, which of the following adjustments is typically required?
Answer options:
A.
Add capital assets and deduct long-term liabilities.
B.
Deduct capital assets and add long-term liabilities.
C.
Add deferred inflows related to unavailable revenue.
D.
Add internal service fund net position to business-type activities.
How to approach this question
Think: What is missing from the Fund Balance Sheet? Capital Assets and Long-Term Debt. Add Assets (increases Net Position), Deduct Liabilities (decreases Net Position).
Full Answer
A.Add capital assets and deduct long-term liabilities.✓ Correct
A
Governmental funds use the current financial resources measurement focus (no capital assets or LTD). The government-wide statements use the economic resources measurement focus. To convert, you must ADD capital assets (net of depreciation) and DEDUCT long-term liabilities (bonds, pensions).
Common mistakes
Confusing the direction of the adjustment.
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