In the government-wide statement, program revenues are subtracted from expenses to determine the net position change. Which option expresses this relationship?

• A. They are subtracted from expenses
• B. They are added to expenses
• C. They are ignored
• D. They are reported as general revenues

Answer: (A)

In the government-wide statement of activities, program revenues are shown as offsets to the costs of each program. Subtracting program revenues from expenses reveals the net cost of providing that program to the public, which is the change in the government’s net position for that program in the period. For example, if a program has expenses of 100 and program revenues of 60, the net program cost is 40, representing the portion of the program’s cost that must be funded from general resources. General revenues are reported separately and do not offset program expenses, so they aren’t added to expenses. This treatment highlights how much of a program’s cost is covered by program-specific revenues versus what must come from the government’s broader resources.