Park City uses encumbrance accounting and formally integrates its budget into the general fund’s accounting records.  For the year ending July 31, year 1, the following budget was adopted:
A. Operating Funds.
B. Expenditures.
C. Salaries and Wages Expense.
D. Encumbrances.
Answer:B
B is corrent. Per GASB Codification Section 1600, the measurement focus of governmental fund accounting is on expenditures rather than expenses. Expenditures are defined as decreases in fund financial resources from activities other than interfund transactions. Salaries and wages are recorded by a debit to Expenditures control and a credit to Vouchers Payable.
A is incorrect because there is no operating fund.
C is incorrect because an expense account is not used.
D is incorrect because encumbrances are not required for regular periodic expenditures such as salaries and wages.