Final answer:
Items in governmental funds used in operations and not converted to cash are referred to as non-liquid assets. These include physical assets like infrastructure and equipment integral to government functions and recorded as such in financial statements.
Step-by-step explanation:
Items that appear in governmental funds that will be used in operations rather than converted to cash are typically referred to as non-liquid assets or sometimes as in-kind resources. These items are intended for use within the government's day-to-day functions and may include physical assets such as land, buildings, infrastructure (like roads and mass transit systems), and equipment. The value of these assets is accounted for in governmental financial statements, but they are not readily available to be exchanged for cash to cover immediate expenses. When governments budget for expenditures, they consider both liquid assets that can be readily converted to cash and these non-liquid assets that are crucial for ongoing operations.
For instance, when government agencies borrow money for specific projects like building infrastructure, they are creating assets that will serve a public function rather than generating immediate cash flow. Similarly, when there are interactions such as debt held by government trust funds rather than the public, it reflects internal transactions within different parts of the government, accounting for assets that are not intended to be liquidated but rather used to support government services and projects. This represents a broader financial strategy where governments manage a mix of liquid and non-liquid resources to meet their operational needs.