Which of the Following Is Not Correct Regarding Government Trust

question 29

Multiple Choice

Which of the following is not correct regarding Government Trust Accounting?

• A) If a trust is to benefit the government or its citizenry, it should be accounted for in a special revenue or permanent fund.
• B) If a trust is to benefit individuals, private organizations, or other governments, it should be accounted for in a private-purpose trust fund.
• C) The journal entry to establish a permanent fund would include a credit to Fund Balance - Nonspendable.
• D) Trust funds accounted for in a permanent fund use accrual accounting

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Definitions:

Average Tax Rate

The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), expressing the percentage of income that goes to taxes.

Depreciable Equipment

Tangible assets used in operations that lose value over time due to wear and tear, which can be written off as an expense for tax purposes over its useful life.

Net Income

The ultimate profit a company makes, determined by taking away all expenses, taxes, and costs from the total income generated.

Cash Outflow

The total amount of money being transferred out of a business, including expenses, investments, and other payments.