In governmental accounting, the cost to purchase a good or service is defined as which term?

• A. Revenue
• B. Expenditure
• C. Asset
• D. Liability

Answer: (B)

Expenditure is the term used to describe the cost of resources a government uses to acquire goods or services. In governmental accounting, the spending of financial resources to obtain items is recorded as an expenditure because it represents the consumption of those resources in the period. Revenue relates to inflows, not the outflow, and assets or liabilities are used in other contexts (assets for capitalized items on government-wide statements, liabilities for amounts owed). The key idea is that purchasing goods or services reduces available financial resources and is shown as an expenditure in the governmental funds.