What is the distinction between expenses and expenses as the terms are used in government accounting?

Expenses relate to government funds, while expenses relate to property funds. Expenses are decreases in net financial resources and expenses are decreases in net economic resources. When an asset is acquired, it is generally accepted as an expense. When an asset is consumed, it is generally accepted as an expense.

A government expects to pay its electricity bill related to its current fiscal year sometime in the following year. A government official seeks your advice on whether the advance payment should be charged as an expense for the current year or the next. How would you respond?

The government must record your electricity bill as a lien payable in the following year. When the lien is recorded, the amount budgeted for expenses is reduced, while a portion of the unreserved fund balance is set aside for the lien.

Although many governments prepare budgets for both capital projects and debt service funds and integrate them into their accounts, budgetary control over these funds is not as essential as it is for other government funds. Do you agree? explain. If budgets are prepared for capital project funds, in what significant ways might they differ from those prepared for other funds?

I disagree that budget control over capital projects and debt service funds is not as essential as it is for other government funds. Although budget entries for projects and service funds are intended as an internal control mechanism and do not affect year-end financial statements, it is still important to maintain budget control to prevent expenditures from exceeding authorizations. The budgets prepared for these project funds are significantly different from those prepared for other funds in that capital project funds are stationary in nature and can often be held for a significantly longer number of years.

How should governments report their capital projects and debt service activities in their government filings?

Governments are required to report their capital projects and debt service activities on their government returns as long-term obligations as pooled funds that include all other government funds in the government activities column.