Chapter 5Governmental Funds: Revenues and Expenditures

Learning objectives

  • Recognize how governmental fund revenues are reported.
  • Determine how to measure and report revenue from nonexchange transactions.
  • Determine how to measure and report governmental fund expenditures.
  • Identify which liabilities are excluded from governmental funds.

Refer to appendix A of this course for a statement of revenues, expenditures, and changes in fund balance.

The exception to the exception

No, governmental fund revenues and expenditures are not as complex as the income tax code. The general rules for recognizing revenue and expenditures work most of the time. There are a few exceptions to the rules and, in a few rare cases, exceptions to the exceptions.

Governmental funds use a flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when they meet two conditions: measurable and available. Expenditures are recorded when incurred only if the transaction will require the use of current financial resources. This chapter further explains how revenues and expenditures are recognized and recorded. We also will discuss certain exceptions to normal recognition rules.


Governmental funds receive revenues from a variety of sources. Typical sources of revenue for a local government include various types of taxes, fees, and fines; licenses and permits; intergovernmental charges for ...

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