When accounting for inventory items in a governmental fund, a reclassification of the appropriate portion of fund balance as nonspendable is always required when the consumption method is used.

Question

Quizplus · Accepted Answer

Under the consumption method, inventory is recorded as an asset when purchased and expensed as used, requiring a reclassification of fund balance to nonspendable to reflect the portion of inventory not yet consumed.

When Accounting for Inventory Items in a Governmental Fund, a Reclassification