Which classification of fund balances indicates resources not available for spending?

The classification of fund balances known as nonspendable indicates resources that are not available for spending. This classification typically includes amounts that are either not in spendable form or are legally or contractually required to remain intact. For example, inventories, prepaid expenses, and certain permanent fund principal balances fall under this category since they represent assets that cannot be converted easily into liquid funds for current operations or discretionary spending.

Nonspendable fund balances highlight the resources that a government entity cannot or will not spend in the period, emphasizing their nature as inherently unavailable for immediate expenditure. This classification ensures that users of financial statements understand that certain pots of resources remain tied up in assets or obligations and, therefore, cannot be utilized for ongoing operational expenses.

In contrast, rest of the classifications such as restricted refer to resources that have constraints imposed upon them, typically by external sources, while assigned fund balances can be used for specific purposes indicated by the government. Unassigned balances are those that are available for any purpose and can be used at the discretion of the governing body.