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Question 1
What are the three categories of funds used in governmental accounting?
Answer: Governmental funds, proprietary funds, and fiduciary funds. These categories organize a government's financial activities by purpose and measurement focus.
Question 2
Which fund is used to account for a government's general operating activities not required to be reported in another fund?
Answer: The General Fund. Every government has only one General Fund, and it is always a major fund.
Question 3
What type of governmental fund accounts for proceeds of specific revenue sources that are legally restricted to expenditure for specified purposes?
Answer: Special Revenue Funds. These funds capture dedicated revenue streams such as grants or earmarked taxes restricted by law or external parties.
Question 4
Which proprietary fund type accounts for activities that provide services to the general public on a user-charge basis, similar to a private business?
Answer: Enterprise Funds. They use full accrual accounting and the economic resources measurement focus, mirroring private-sector accounting.
Question 5
What is the key difference between an Internal Service Fund and an Enterprise Fund?
Answer: Internal Service Funds provide goods or services primarily to other departments or agencies within the same government, while Enterprise Funds serve the general public or external users.