Which Statement Is Not Correct

question 1

Multiple Choice

Which statement is not correct?

• A) Governmental funds account for expenditures of financial resources rather than matching revenues and expenses.
• B) The Encumbrances Outstanding account should be reversed and closed at the end of a fiscal year.
• C) Revenues from licenses and permit fees are recognized when received in cash if using the modified accrual basis of accounting for governmental funds.
• D) A fund is an independent accounting entity composed of cash and other financial resources, segregated for the purpose of carrying on specific activities and objectives.
• E) Commitments for purchase orders are recorded as expenses.

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Definitions:

Income Tax Expense

The amount of money a company or individual owes to the government based on earned income, reflecting the tax rate and taxable earnings for a fiscal period.

Income Tax Rate Change

A modification in the percentage that individuals or corporations are required to pay to the government from their income.

Future Liability

A financial obligation or debt that a company is required to pay at a future date.

Income Tax Expense

The total amount of income tax a company is required to pay to the government, reflected as an expense in its income statement.