What Basis of Accounting Is Used to Account for the Transactions

question 32

Multiple Choice

What basis of accounting is used to account for the transactions of a government's permanent fund?

• A) Full accrual basis of accounting.
• B) Modified accrual basis of accounting.
• C) Cash basis of accounting.
• D) Budgetary basis of accounting.

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Definitions:

Economic Efficiency

A state where resources are allocated in a way that maximizes the production of goods and services without wasting any resources.

External Benefit

A benefit that results from an activity but affects uninvolved third parties who did not choose to incur that effect, often leading to market inefficiencies.

Inefficient Equilibrium

A state in a market where resources are not allocated optimally, leading to wastage or loss of potential gain.