Question: (Explanation of basis of accounting and fixed assets for different funds) The accounting system of the municipality of Kemp is organized and operated on a fund basis. Among the types of funds used are a General Fund, a Special Revenue Fund, and an Enterprise Fund.
1. Explain the basic differences in revenue recognition between the accrual basis of accounting and the modified accrual basis of accounting, as it relates to governmental accounting.
2. What basis of accounting should be used in fund-level accounting for each of the following funds and why?
• General Fund
• Special Revenue Funds
• Enterprise Funds
3. How should fixed assets and long-term liabilities related to the General Fund and to the Enterprise Fund be accounted for in the funds? (AICPA adapted)