Chapter 6, Problem 1Q

To determine

Explain the manner by which general long term liabilities are different from other long term liabilities and also explain the differences in financial reporting of general long term liabilities and other long term liabilities.

Explanation of Solution

The manner in which general long term liabilities are different from other long term liabilities is as follows: 

General long term liabilities are an obligation that arises from financing activities such as issuance of bonds and notes and leases and are not reported as fund liabilities of a proprietary or fiduciary fund.

The “fund” long-term liabilities are an obligation that are incurred by a proprietary or fiduciary fund and for which debt service would be paid from that fund.

The differences in financial reporting of general long term liabilities and other long term liabilities are as follows:

General long term liabilities are reported in the Governmental Activities column of the government-wide statement of net position (balance sheet) as liabilities. The other long term liabilities are reported in the fund based financial statement of the proprietary of fiduciary fund, and are also reported in the business-type activities column of the government-wide financial statement.