After studying this chapter you should understand:
In the previous chapter, we addressed the question of when revenue should be recognized in governmental funds. We turn now to the other side of the ledger and consider how expenditures should be accounted for.
Like revenues, expenditures can be of two types: exchange and nonexchange. Our discussion of revenues centered mainly upon nonexchange revenues, as most governmental fund revenues are of that type. By contrast, our discussion of expenditures focuses primarily on exchange expenditures. Most governmental fund expenditures result from exchanges—the acquisition of goods and services for cash or other assets. This is not to say that governments do not engage also in nonexchange transactions. Just as governments receive ...