Chapter 4. Accounting for Governmental Operating Activities---- Illustrative Transactions & Financial Statements

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Chapter 4 Accounting for Governmental Operating Activities---- Illustrative Transactions & Financial Statements 1

Govt l Funds Review! Spending Focus! Current Financial Resources! Modified Accrual! Revenues & Expenditures! No Fixed Assets! No Long Term (LT) Debt 2

Budgetary Accounting! Journal Entries: Estimated Revenues Est. Other Financing Source Appropriations Est. Other Financing Use Fund Balance 3

Revisions to Budget! Evaluate Inflows & Outflows! Adjust Budget through Journal Entry 4

Encumbrance Accounting! Additional Appropriation Control! Issuance of Purchase Order Key Event! Journal Entry: Encumbrance (Est.) Reserve for Encumbrance 5

Encumbrance Accounting! Goods Received / Payment Approved! Journal Entries: Res. For Encumb. (Est.) Encumb. (Est.) Expenditure (Actual) Vouchers Payable (Actual) GA: Expense-Program 6

Encumbrance Accounting! Payroll Accounting! Encumbrances closed! Reserved Encumbrances 7

Encumbrance Accounting! Order Received in Ensuing Fiscal Period " Journal Entry: Expenditure (x1) Expenditure (x2) Vouchers Payable GA: Expense-Program 8

Encumbrance Accounting! Closing Journal Entry: Reserved for Encumbrances Expenditure (x1) 9

Alternate Encumbrance Treatment! Close Encumbrances & Reserve for Encumbrances! Re-Appropriate! Continue with Usual Journal Entries 10

Property Tax Accounting! Journal Entry: Taxes Receivable-Current Estimated Uncoll.-Current Property Tax Revenue GA: Property Tax revenue - General 11

Property Tax Accounting! Short-Term Cash Disbursement Needs! Tax Anticipation Notes! Journal Entries: Cash Tax Anticipation N / P N / P Expenditure Cash GA: Expense-Interest 12

Property Tax Accounting! Delinquent Taxes " Journal Entries: Taxes Receivable-Delinquent Taxes Receivable-Current Est. Uncoll.-Current Est. Uncoll.-Delinquent GA: Same 13

Property Tax Accounting! Penalties & Interest May be Accrued! Write-off Uncollectibles " Journal Entry: Est. Uncoll.. Taxes - Delinquent GA: Same Taxes Rec. Delinquent 14

Additional General Fund Entries! Cash Basis Revenues Cash " Journal Entry: Revenue GA: Allocate revenue between programs and general 15

General Concept! General Fund Expenditures become Expense for governmental activities " Allocated between programs 16

Additional General Fund Entries! Interfund Transactions " Internal Exchange Transaction " Journal Entry: Due from Fund Revenue GA: Due from Business Activities General Revenues 17

Additional General Fund Entries! Supplies Inventory " Two Methods #Consumption Method $Purchases Method 18

Consumption Method! Purchase of Supplies " Journal Entry: Supplies Inventory V/P! Use of Inventory " Journal Entry: Expenditure GA: Expenses Supplies Inventory 19

Consumption Method! Year-End Inventory " Journal Entry: F.B. - Unreserved F.B. - Reserved Inventory GA: Not Applicable 20

Purchase Method! Purchase of Supplies " Journal Entry: Expenditure V/P GA: Expense 21

Purchase Method cont d! Physical Count Year-End " Journal Entry: Supplies Inventory F.B.-Reserved Inventory GA: Inventory Expenses 22

Closing Entries! Reverse Nominal Accounts! Reverse Budgetary Accounts! Fund Balance Available for Appropriation 23

Financial Statements! Interim Financial Statements! Annual Financial Statements! Reconciliation Between Budget Basis & GAAP 24

Special Revenue Funds! Legal Compliance! GF Accounting and Reporting Applicable! Operating Grants! Reimbursement 25

Special Revenue Funds! Granted Award (Reimbursement Grant): " No Entry 26

Special Revenue Funds! Expenditure Made: " Journal Entries: Expenditure Vouchers Payable Cash Revenues GA: Expenses & Program Revenue 27

Special Revenue Funds! No Reimbursement-Recognize Recognize Receivable & Revenue! No Reimbursement & Granted for Future Period-Recognize Receivable & Deferred Revenue 28

Interfund Transactions! Interfund Exchange Transactions " DueTo/DueFrom DueFrom! Interfund Loans " Recble/Pble (Noncurrent Reserve Fund balance " None in Gov t-wide if both gov t activities 29

Interfund Transfers Cont d Interfund Transfers Other Financing Source/Use Recurring/Nonrecurring Reimbursements Reduction of Expenditures/Expense 30

General Concept-Gov t Gov t-wide F/S s! Eliminate if between same activity " Internal Service is Governmental! Report if between Governmental & Business 31

Permanent Funds! Public Purpose Trusts " Principal Nonexpendable- Permanent Fund " Earnings Expendable-Special Revenue Fund 32

Permanent Funds cont d! Receipt of Assets-recognize as revenue! Interfund Transfers for earnings! End of Period Fair Value Adjustments " Increase or Decrease asset Account " Recognize Revenue-Changes in Fair Value 33