Which Statement Is Incorrect with Respect to Proprietary Funds

question 55

Multiple Choice

Which statement is incorrect with respect to proprietary funds?

• A) The required financial statements of proprietary funds include a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in Fund Net Position, and a Statement of Cash Flows.
• B) The net position i.e., fund equity) section of the Statement of Net Position is displayed within three categories: 1) Net Investment in Capital Assets, 2) Restricted, and 3) Unrestricted Net Position.
• C) The Statement of Cash Flows must be prepared using the direct method and includes cash flows from operating activities, investing activities, capital and related financing activities, and noncapital-related financing activities.
• D) Proprietary funds follow FASB rules and may follow GASB rules if not addressed by FASAB

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Definitions:

Variable Costs

Expenses that change in proportion to the level of activity or production volume.

Static Budget

A budget that does not change or adapt over time, based on the assumption of a fixed level of activity.

Activity Index

The activity that causes changes in the behavior of costs.

Variable Costs

Costs that vary directly with the level of production or service output, such as materials and labor.