Why Is It Necessary to Reconcile Total Fund Balances Reported

question 7

Short Answer

Why is it necessary to reconcile total fund balances reported on the balance sheet-governmental funds to total net position reported for governmental activities on the government-wide statement of net position,and net changes in fund balances-total governmental funds to the change in net position reported for governmental activities on the government-wide statement of activities?

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Definitions:

Direct Method

A way of preparing a cash flow statement where actual cash inflows and outflows from operational activities are listed directly.

Operating Activities

Aspects of a business related to its core operations, including production, sales, and delivery of its products and services, as reflected in cash flows within the operating section of the cash flow statement.

Cash Dividends

Distributions of earnings from a company to its stockholders, typically in the form of profit sharing.

Direct Method

An approach to preparing the cash flow statement that involves reporting major classes of gross cash receipts and payments.