Which of the following will increase the fund balance of a government at the end of the fiscal year?

• A. The sum of revenues and other financing sources is greater than the sum of expenditures and other financing uses.
• B. The sum of expenditures and other financing uses exceeds revenues and other financing sources.
• C. The budgetary surplus is zero.
• D. Depreciation expense for the period.

Answer: (A)

Fund balance grows when the resources coming into the governmental fund during the year exceed the resources used. In government funds, revenues and other financing sources are recognized when available, and expenditures and other financing uses are recognized when resources are consumed. So when revenues plus other financing sources exceed expenditures plus other financing uses, the difference increases the fund balance by year end. The other options don’t fit: when expenditures and other financing uses exceed revenues and sources, fund balance falls; a zero budgetary surplus implies no planned net change rather than an actual increase; and depreciation expense is a non-cash charge that does not affect the governmental fund balance.