Which item would be reported as a nonspendable fund balance?

• A. Inventory
• B. Investments
• C. Prepaid Insurance
• D. Restricted for Debt Service

Answer: (A)

Nonspendable fund balance includes resources that cannot be spent in their current form or must be kept intact. Inventory fits this because it represents physical goods held for future use or sale and cannot be spent as cash to cover current obligations. It remains nonspendable until it is converted into goods or cash through sale or consumption. Investments and restricted-for-debt-service resources are spendable or legally restricted for a specific purpose and would not be classified as nonspendable. A prepaid insurance item is a prepayment meant to be expended over time, so it is not treated as nonspendable in this context.