Which asset would appropriately be reported on the governmental funds balance sheet?

Which asset would appropriately be reported on the governmental funds balance sheet?

• A. Inventories
• B. Receivables
• C. Capital assets
• D. Prepaid expenses

Answer: (A)

Inventories fit the governmental funds balance sheet because these statements focus on current financial resources. They show current assets that are expected to be converted to cash or used in the near term to support operations. Capital assets are long-term and appear on the government-wide statements, not the governmental funds balance sheet. Prepaid expenses and receivables are less central to the fund balance sheet in many common treatments of the fund focus, so the clearest example of an asset that would appear there is inventories.

Inventories fit the governmental funds balance sheet because these statements focus on current financial resources. They show current assets that are expected to be converted to cash or used in the near term to support operations. Capital assets are long-term and appear on the government-wide statements, not the governmental funds balance sheet. Prepaid expenses and receivables are less central to the fund balance sheet in many common treatments of the fund focus, so the clearest example of an asset that would appear there is inventories.