Which fund type uses the current financial resources measurement focus and modified accrual basis of accounting?

• A. Special Revenue Fund
• B. Debt Service Fund
• C. Capital Projects Fund
• D. Permanent Fund

Answer: (D)

The key idea is that governmental funds operate on the current financial resources measurement focus using the modified accrual basis of accounting. This means the statements focus on resources that are available to spend in the near term, with revenues recognized when they are measurable and available and expenditures recorded when the related liability is incurred (often with encumbrance accounting).

The Permanent Fund fits this approach because it is a governmental fund type that reports resources intended to be held and used for future generations, but within the fund statements it still follows the current financial resources focus and modified accrual. Revenues (such as investment earnings available for spending) are recognized when measurable and available, and expenditures are recognized when the liability is incurred.

The other listed fund types are also governmental funds and share this same reporting approach, since they’re all designed to track near-term spendable resources rather than full economic resources. But the Permanent Fund is a clear fit for illustrating the current financial resources measurement focus and modified accrual basis within the governmental fund framework.