ExpertEasy1 markMultiple Choice
CPA · Question 44 · Area III: State & Local Governments
Which of the following fund balance classifications represents amounts that can only be used for specific purposes pursuant to constraints imposed by external providers (creditors, grantors) or legislation?
Which of the following fund balance classifications represents amounts that can only be used for specific purposes pursuant to constraints imposed by external providers (creditors, grantors) or legislation?
Answer options:
A.
Committed
B.
Assigned
C.
Restricted
D.
Nonspendable
How to approach this question
Recall the hierarchy (NU CAR): Nonspendable, Restricted (External), Committed (Internal - Highest Level), Assigned (Internal - Intent), Unassigned.
Full Answer
C.Restricted✓ Correct
Restricted fund balance represents amounts constrained by external parties (creditors, grantors, laws) or constitutional provisions. Committed and Assigned are internal constraints.
Common mistakes
Confusing Restricted (External) with Committed (Internal).
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