A municipality incurs liabilities in its operations (such as vacation leave and expected claim settlements)that could be classified as "long-term" because cash payouts will not occur for more than one year.The liabilities result from both governmental and proprietary activities.Where are these long-term liabilities reported in the fund-level balance sheets?
A)as noncurrent liabilities,in the appropriate fund column,on both fund level balance sheets
B)as noncurrent liabilities on both fund level balance sheets,but the long-term liabilities for governmental funds are reported only in the "total" column and not in any fund column
C)as noncurrent liabilities in the proprietary funds balance sheet;but long-term liabilities are not reported in the governmental funds balance sheet
D)long-term liabilities are not reported in the fund level balance sheets of either governmental or proprietary funds

Question

Quizplus · Accepted Answer

Long-term liabilities are reported as noncurrent liabilities in the proprietary funds balance sheet because these funds use the accrual basis of accounting, which recognizes liabilities when they occur, regardless of when they are paid. However, governmental funds use the modified accrual basis of accounting and do not report long-term liabilities on the fund level balance sheets; instead, such liabilities are reported in the government-wide financial statements.

A Municipality Incurs Liabilities in Its Operations (Such as Vacation