Accounting Questions
Accounting Questions California State University Northridge Accounting 475 Spring 2022 Homework 1 Question 6
6. Roy City received a gift, the principal of which is to be invested in perpetuity with the income to be used to support the local library. In which fund should this gift be recorded:
A. Permanent Fund
B. Investment trusts fund
C. Private-purpose trusts fund
D. Special revenue fund
Answer
A. Permanent fund
Explanation.
The gift will be accounted for in a permanent fund. Permanent funds are used to report resources that are legally restricted to the extent income, and not principal, may be used for purposes supporting the reporting government’s programs for the benefit of the public. The library is to be supported by a gift endowment and the library is intended to support the needs of the general community, not a specifically identified individual. accounting to achieve an economic resources measurement focus.