Which describes restricted fund balance?

Which describes restricted fund balance?

• A. Restricted by law or donor
• B. Not audited
• C. Unrestricted by any law
• D. Available for general use

Answer: (A)

Restricted fund balance means resources that have constraints placed on their use by external sources, such as donors or laws. This external control is what sets these funds apart from unrestricted amounts, guiding exactly how they can be spent. The best description is that they are restricted by law or donor because it captures these externally imposed limitations. The other options don’t fit: being not audited has nothing to do with how funds are constrained; funds that are unrestricted by any law can be used for a wide range of purposes; and funds described as available for general use imply they are not restricted.

Restricted fund balance means resources that have constraints placed on their use by external sources, such as donors or laws. This external control is what sets these funds apart from unrestricted amounts, guiding exactly how they can be spent.

The best description is that they are restricted by law or donor because it captures these externally imposed limitations. The other options don’t fit: being not audited has nothing to do with how funds are constrained; funds that are unrestricted by any law can be used for a wide range of purposes; and funds described as available for general use imply they are not restricted.