When the proceeds of general long-term debt are received by a governmental fund, rather than reporting a liability on the balance sheet, the inflow of resources is treated as an other financing source on the operating statement.

Question

Quizplus · Accepted Answer

When a governmental fund receives proceeds from long-term debt, it is reported as an other financing source on the operating statement rather than as a liability on the balance sheet. This is because governmental funds use the current financial resources measurement focus, which only records inflows and outflows of current resources, rather than the economic resources measurement focus used by businesses and some other funds.

When the Proceeds of General Long-Term Debt Are Received by a Governmental