Governmental fund financial statements are prepared using the modified accrual basis of accounting.

Question

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Governmental fund financial statements are indeed prepared using the modified accrual basis of accounting, which focuses on recording transactions when they result in measurable changes in the financial resources of the government and recognizing revenue when it becomes available and measurable. This differs from the full accrual basis of accounting, which is used in the financial statements of proprietary funds and focuses on recognizing revenues when earned and expenses when incurred.

Governmental Fund Financial Statements Are Prepared Using the Modified Accrual