Which of the following is presented as a nonspendable fund balance category?

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

Answer: (C)

Nonspendable fund balance is for resources that cannot be spent in the current period because they are not in spendable form or must be maintained intact. Inventory fits this category because it represents goods held for sale or use that have not yet been consumed or converted into cash or other expenditures; until they are used or sold, they aren’t available for appropriation. Investments, while they may be restricted, are still spendable resources that can be converted to cash for use, so they aren’t nonspendable. Restricted for debt service is a restricted fund balance, not nonspendable. Prepaid insurance is a prepaid asset that will be expensed in the future, but the classic example typically emphasized as nonspendable is inventory.