In terms of financial reporting, how do Proprietary Funds mainly differ from Governmental Funds?

Proprietary Funds primarily differ from Governmental Funds in their use of accrual accounting. This approach allows Proprietary Funds to account for revenues and expenses when they are earned or incurred, regardless of when cash is exchanged. This reflects a more comprehensive picture of the financial activities and resource usage of the fund, as it captures economic events as they occur.

In contrast, Governmental Funds generally utilize modified accrual accounting, which recognizes revenues when they are both measurable and available and recognizes expenditures when the related liability is incurred. This difference in accounting methods enables Proprietary Funds to present financial statements that align more closely with private sector practices, providing a clearer insight into the fund’s profitability and operational efficiency.

The emphasis on accrual accounting in Proprietary Funds contributes to better decision-making regarding the management of those funds and enhances the financial reporting accuracy regarding the fund's long-term sustainability and performance.