Nizwa municipality offers the following basic services to the citizens: Public safety, sanitation, public parks, health facilities and awareness programs for public etc. Apart from these it performs planning, cultural and economic development and the general administration activities.

a. Where do you think the government finds fund for carrying out these activities and programs?

b. In which category of funds will these activities be accounted for and why?

c. Explain the basis of accounting and the measurement focus for the category of fund here. Apart from these the municipality is engaged in providing certain other services to residents like water utility, parking facilities, long route public transportation bus services, public museum and Aquarium by charging nominal amount from the citizens who avail these services.

d. Explain the category of funds where these activities are accounted for. What is the basis of accounting used and the measurement focus?

e. Government is said to be the agent of the society. If so, give your own reasons on why you think the municipality engages in such type of activities with user charges?

Following information relating to Nizwa Municipality is given to you:

(i) Nizwa city collected taxes amounting to OMR 10.00 million. These taxes are unrestricted.

(ii) Nizwa city received a state grant of OMR 0.5 Million for the purchase of garbage carrier trucks. This state grant was restricted for this specific purpose. The city spent 0.3 million for purchase of trucks.

(iii)Nizwa city issued OMR 20.00 Million municipal bonds for a construction of water drainage system. In that OMR 15.00 Million was actually spent for that project.

(iv) Nizwa city incurred OMR 8.00 Million in general operating expenditure of which it actually paid OMR 7.2 Million.

(v) The municipality transferred OMR 1.5 million from the general fund to the debt service fund to make the first payments of both principal and interest that are due in the following year. You are required to:

(a) Give the accounting entries for each of the above transactions

(b) Prepare the Statement of Fund Revenues, Expenditures and Other Changes in Fund Balances and;

(c) The Fund Balance Sheet.