Final answer:
Fiduciary funds are not included in government-wide financial statements, use the economic resources measurement focus, and record additions and deductions rather than revenues and expenses. They do not use the modified accrual basis of accounting but the accrual basis.
Step-by-step explanation:
Fiduciary funds are used by governmental entities to account for resources held in a trustee or agency capacity for others. When it comes to their financial reporting, there are a few key characteristics of fiduciary funds:
- Fiduciary funds are not included in government-wide financial statements because they do not benefit the government itself.
- They use the economic resources measurement focus which means that they account for all assets and liabilities, current and long-term, similar to businesses.
- These funds record additions and deductions instead of revenues and expenses. Additions can be thought of as inflows of resources, and deductions are outflows.
- Fiduciary funds do not use the modified accrual basis of accounting. Instead, they use the accrual basis of accounting which is consistent with the economic resources measurement focus.
As such, the correct selections that apply to fiduciary funds are that they are not included in government-wide financial statements, they use the economic resources measurement focus, and they record additions and deductions instead of revenues and expenses.