Which of the following correctly describes the measurement focus and basis of accounting for the governmental fund financial statements?

Answer options:

Economic resources measurement focus and accrual basis of accounting.

Current financial resources measurement focus and modified accrual basis of accounting.

Economic resources measurement focus and modified accrual basis of accounting.

Current financial resources measurement focus and accrual basis of accounting.

How to approach this question

Recall the 'GRaSPP' mnemonic for governmental funds (General, Revenue (Special), Service (Debt), Projects (Capital), Permanent). These use Modified Accrual and Current Financial Resources focus.

Full Answer

B.Current financial resources measurement focus and modified accrual basis of accounting.✓ Correct

Governmental funds (General, Special Revenue, Debt Service, Capital Projects, Permanent) report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when measurable and available.

Common mistakes

Confusing governmental funds with proprietary funds (Enterprise/Internal Service) which use full accrual.

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