A measure of whether the government lived within its means in the measurement year, or was required to use prior year resources to fund a portion of current year costs, or shifted the funding of some current year costs to future periods, is:
A) Business-type activities revenues/business-type activities expenses.
B) Unrestricted net position/total revenues.
C) Net revenues/total expenses.
D) Total net position (governmental activities and business-type activities) less total net position at the beginning of the year divided by beginning net position.

Question

Quizplus · Accepted Answer

Net revenues represent the excess of revenues over expenses, indicating whether a government entity was able to fund its current year costs through current year revenues or needed to use resources from previous years to do so. If a government shifts the funding of some current year costs to future periods, it will have lower net revenues or incur a net loss. Therefore, option C is the best choice as it directly measures the government's ability to live within its means. Options A and B do not provide enough information to determine the government's ability to fund its current year costs. Option D calculates the change in net position relative to the beginning net position, which may not necessarily reflect the government's ability to live within its means.

A Measure of Whether the Government Lived Within Its Means