In a governmental fund’s operating statement, which item is typically shown as revenue deferred from prior periods?

• A. Revenue deferred from prior periods
• B. Net income from operations
• C. Depreciation expense
• D. Unrealized gains on investments

Answer: (A)

In governmental funds, revenues are recognized on a modified accrual basis—when they are both measurable and available to finance current period expenditures. If revenue is earned but not yet available, it is not recorded as revenue right away; instead it is deferred to a future period and shown as revenue deferred from prior periods. This reflects the fund’s focus on current financial resources and the timing of when those resources become available to spend.

The other options don’t fit because this type of fund statement doesn’t present net income from operations (funds report changes in the fund balance, not net income), depreciation expense (assets are expensed when purchased in the fund and depreciation is handled in government-wide statements), or unrealized gains on investments (not typically recognized on the governmental fund operating statement under modified accrual).