Which basis of accounting is used for the General Fund in this framework?

• A. Accrual
• B. Cash
• C. Modified accrual
• D. Full accrual

Answer: (C)

Modified accrual is used for the General Fund. This governmental-fund framework focuses on current financial resources, so revenues are recognized when they are measurable and available to finance the current period’s expenditures, and expenditures are recognized when the related liability is incurred. Long-term assets and liabilities aren’t recorded in the General Fund, so capital outlays are treated as expenditures in the period financed and debt is shown as an other financing source/uses. Accrual (used for government-wide statements or proprietary funds) recognizes revenues and expenses when earned or incurred, regardless of cash timing, while cash basis would record only cash receipts and payments. Therefore, the General Fund uses the modified accrual basis.