Which reporting approach by function and nature is recommended for expenses?

• A. It should be classified only by function
• B. It should be classified only by nature
• C. It should be classified by both function and nature
• D. It should not be classified

Answer: (C)

Classifying expenses by both function and nature provides the most informative view of government costs. Function shows what program or service the expense supports (for example, public safety, education, or health), helping you see how resources are allocated across programs and how a program is performing financially. Nature reveals the type of resource consumed (such as salaries and benefits, supplies, depreciation), which clarifies the cost structure and drivers behind those program expenses.

Using both dimensions together lets you answer two essential questions at once: how much is a program costing and what mix of resources is making up those costs. This dual presentation improves accountability, comparability over time, and benchmarking against other governments. If you only use one dimension, you lose either the program context or the detail about resource composition; combining both gives a fuller, more actionable picture.