Which of the Following Is a Key Reason for Using

question 57

Multiple Choice

Which of the following is a key reason for using business-type accounting to account for proprietary fund activities?

• A) The modified accrual basis of accounting captures all the resources and obligations associated with an activity.
• B) Depreciation is not recognized in business-type accounting in governments and surveys of statement users indicate that information on depreciation is not of high priority to government decision makers.
• C) The measurement focus on all economic resources is more consistent with the GASB's objectives that financial reporting should provide information to help determine whether current-year revenues were sufficient to pay for current-year services.
• D) Business-type accounting facilitates comparisons with governmental activities.

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Definitions:

Consumption Function

An economic formula representing the relationship between total consumption and gross national income, suggesting that people will spend more as their income increases.

Price Level

A metric that represents the median of present prices for all types of goods and services in the economy.

Future Expectations

The anticipations or outlook that consumers and businesses have about economic conditions that affect their spending and investment decisions.

Deferring Consumption

The act of postponing spending money on consumption goods to save or invest for future use.