Fund Balances: Restricted, Committed, Assigned and Unassigned. CPA Exam BAR

In this video, I discuss the 5 fund balance categories: Non-spendable, restricted, comminated, assigned, unassigned.
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he five categories of fund balance in governmental accounting, as defined by the Governmental Accounting Standards Board (GASB), are designed to provide a clearer understanding of the constraints placed on how specific amounts can be spent. Here's an overview of each category:
Nonspendable Fund Balance: This category includes funds that cannot be spent because they are not in a spendable form or are legally or contractually required to remain intact. Examples include inventories, prepaids, long-term loans and advances, and non-matured interest on investments. Essentially, these are amounts that are not available for appropriation.
Restricted Fund Balance: This represents amounts that are restricted to specific purposes by external parties, constitutional provision, or enabling legislation. These restrictions are externally imposed by creditors, grantors, contributors, or laws and regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. It's the most constrained category.
Committed Fund Balance: This category includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority. These constraints can be removed or changed only by the same formal action. For example, a city council might commit funds for a new community center.
Assigned Fund Balance: This consists of amounts intended to be used by the government for specific purposes but do not meet the criteria to be classified as restricted or committed. Intent should be expressed by the government’s highest level of decision-making authority, or by a body or official to which the highest level has delegated the authority. For example, a budgetary assignment for contingencies or anticipated projects.
Unassigned Fund Balance: The residual classification of the general fund. It represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. Essentially, this is the portion of fund balance that is available for any purpose.
Understanding these categories is crucial for proper financial reporting and management in governmental accounting, ensuring that funds are allocated and used according to their intended purposes and legal constraints.
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