Question

If state law requires that local governments prepare General Fund and special revenue fund budgets on a basis that differs from the basis of accounting required by GAAP, then the budgetary comparison schedule or statements should

Multiple Choice

(A) Not be included as part of the basic financial statements.

(B) Be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis.

(C) Be included with budget figures and actual figures adjusted to the GAAP basis.

(D) Be included as part of management's discussion and analysis (MD&A).

Answer 1

SOLUTION:

Budgetary comparison schedule or statement should be included with the actual figures presented on the budget basis and then reconciled to the GAAP basis.

Explanation:

Budgets are legally binding on government administrators and lead to the formal recording of the budget, on the basis in which the budget is based, into the ledgers of the General Fund, special revenue funds, and any other funds that are required by law to record a budget. Reporting is on the budget basis. When the budget basis is different from GAAP, a separate schedule is required to reconcile the actual amounts in the budget to the GAAP amounts shown in the statement of revenues, expenditures, and changes in fund balances.

Therefore option B is correct.