Under modified accrual accounting, revenues are recognized when

• A. Earned and Collectible
• B. When Budgeted
• C. Cash Basis
• D. Measurable and Available

Answer: (D)

In modified accrual accounting used by governmental funds, revenues are recognized when they are measurable and available to finance expenditures of the current period. Measurable means the amount can be reasonably determined, not left to guesswork. Available means the resources are collectible in time to be used to pay ordinary current-period obligations, typically within the near term (often defined as within the current year or within a short grace period after year-end, such as 60 days). This approach focuses on resources that can actually be used for the current period’s spending, rather than waiting for cash or for revenue to be earned in an accrual sense.

So, recognizing revenues only when they are measurable and available ensures the reported inflows reflect what the government can realistically spend in the near term. Earned and collectible would apply to full accrual, cash basis would wait for cash, and budgeted has nothing to do with the timing of revenue recognition.