The governmental funds operating statement presents all of the following except

• A. Revenues
• B. Expenditures
• C. Other Financing Sources
• D. Encumbrances

Answer: (D)

In governmental funds reporting, the operating statement shows actual inflows and outflows of current financial resources—revenues, expenditures, and other financing sources or uses—during the period. It does not record commitments that haven’t yet become expenditures.

Encumbrances represent purchase commitments outstanding at period end. They are not actual expenditures; they simply reserve part of the fund balance for obligations that will be incurred when the goods or services are received. Because of that, they are shown as reservations of fund balance (or disclosed in notes) rather than as part of the expenditures on the operating statement. This is why encumbrances do not appear on the governmental funds operating statement.

Revenues appear because they are the inflows from taxes, grants, and other sources; expenditures appear because they reflect the spending of resources; and other financing sources (like transfers in or borrowed funds) appear because they affect the current financial resources. Encumbrances do not fit into these presentational categories, since they are not yet actual outflows.