Which of the Following Should Be Accounted for in a Permanent

question 1

Multiple Choice

Which of the following should be accounted for in a permanent fund?

• A) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to maintain the city war memorials.
• B) A gift of $100,000 to a school board, to be given out $10,000 a year to the class valedictorian as a college scholarship.
• C) A gift of $100,000 to a city, to be expended next year to purchase books for the city library.
• D) A gift of $1,000,000 to a city, to be invested permanently, with the proceeds to be used to distribute to one or more nonprofit groups.

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Definitions:

Expense Recognition Principle

An accounting principle that expenses should be recognized and recorded when they are incurred, not necessarily when they are paid.

Expenses Recorded

The process of documenting and recognizing incurred expenses in the financial records during a specific accounting period.

Journal Entries

A record of financial transactions in accounting that includes details like the date of the transaction, amounts involved, accounts affected, and a brief description.