Paragraph One: The general fund serves as the primary fund of a government, government agency or nonprofit entity. It is similar to a company's general ledger account and records all assets and liabilities of an entity that are not specifically allocated to a special purpose fund. In this module's discussion, we will discuss the general fund of a large city.
Upon examining the balance sheet of a large city, you notice that the total assets of the general fund far exceed those of the combined total of the city's ten separate special revenue funds. Moreover, you observe that there are no funds for public safety, sanitation, health and welfare, and general administration-all important functions of the government.
- Why do you suppose the city hasn't attempted to ''even out'' the assets in the funds?
- Why does it not maintain funds for each of its major functional areas? (150 - 200 words).
Paragraph Two: Under pressure to balance their budgets, governments at all levels have resorted to fiscal gimmicks, such as delaying the wages and salaries of government employees from the last day of the month to the first day of the following month. In the year of the change, they thereby had one fewer pay periods.
Respond to the following:
- How would the change affect the reported expenditures of a governmental fund under GAAP? (150 - 200 words).