Purposes of Fund Accounting
- The purpose of fund accounting is to segregate those financial resources that have
- constraints or limitations on their use, so that the government may demonstrate
- compliance with those limitations
When to use the government fund account and how many are there
- Used to account for and report all financial resources not accounted for and
- reported in another fund.
When to use and when not to use Special Revenue Fund Accounts
- Used to account for and report the proceeds of specific revenue sources that are restricted or committed (does not include assigned)
- to expenditure for specified purpose (other than debt service or capital projects)
- Special revenue funds are not used if the resources are required to be
- a. To acquire capital assets (capital projects
- funds), or
- b. For the payment of interest and principal on long-term debt (debt service funds)
When does the modified accrual revenue cycle recognize revenues?
when measurable and available
What happens with uncollectible amounts when levying taxes?
- Since uncollectible amounts will not be available to finance current expenditures, revenues are effectively reduced by the
- amount of the estimate
How to record tax levies when uncollectible
- DR Taxes receivable x
- CR Allowance for unc taxes X
- CR Revenue (net of uncollectibles) X
In accordance with Modified Accrual revenue recognition rules,Revenues are considered "available to pay" this year's bills
when (for example) property taxes are received within 60 days of the government’s fiscal year-end
How does the write-off of an uncollectible amount (bad debt) affect revenues and expenditures?
It doesn't affect them, and is effectively a balance sheet only reclassification entry
How to write off uncollectible amounts
- DR Allowance for uncollectible taxes X
- CR Taxes Receivable x
Recognize expenditures when ...
... the liability is incurred
what do you match the expenditures to?
period of occurrence only, no need to match to revenues.
What are the entries to record placing an order for supplies?
- DR Encumbrances xx
- Cr Budgetary FBRE xx
What are the entries to record receiving goods?
- 1. If they have been encumbered then reverse encumbrance with the amount that was actually filled
- DR BFBRE xx
- CR Encumbrances xx
- 2. If not yet encumbered then just do the following. Also do this after reversing encumbrances when they have been encumbered
- DR Expenditures xx
- CR Vouchers Payable xx
How do you record a payment of a purchase order?
- DR Vouchers Payable
- CR Cash
Since governmental funds recognize obligations requiring current financial resources to settle, current borrows (i.e. short-term notes payable, due within 12 months or less) are recorded ........................
....in the same manner as commercial businesses
How do you record short-term tax anticipation notes?
- DR Cash xx
- CR Tax Anticipation Notes Payable xx
How do you record the repayment of principal of short-term obligations
- DR Tax AN Payable xx
- DR Interest Expenditure xx
- CR Cash xx
Local banks customarily meet the working capital needs of governmental units by...
...accepting a "tax anticipation note".
Failure to properly report interfund transactions results in ...
2 funds being misstated.
Interfund services are recorded in what manner?
They are recorded in the same manner as they would be if the transactions were from outside organizations
What are 2 examples of Interfund Services?
- Water Service
- Receipt of Supplies or Services from an Internal Service Fund
What are interfund transfers?
They represent any assignment of resources from one fund to another where there is NO expectation that the amounts will be repaid.
Transfers into a fund are considered ....
Other Financing Sources
Transfers out of a fund are considered...
Other Financing Uses
Special Items are ...
Significant transactions that are either unusual or infrequent but within the control of management
What is an example of a special item and how do you account for it?
- Sale of a capital asset
- DR GF-Cash
- CR GF-Special Item-Proceeds of Sale of Capital Assets
What type of accounts should be closed?
Budgetary accounts, Revenues, Expenditures, Encumbrances, and related other financing sources or uses to Fund Balance
The budgetary accounts (considering any budget revisions) are closed to ....
Budgetary Fund Balance
Dealing with the closing of Encumbrance Accounts, they are ....
closed at year-end and re-established in the next year
What are the 2 different methods for handling encumbrances in the closing process? Which states use which? What kind do we do in this class?
- 1. Nonlapsing Encumbrances (Mississippi)
- 2. Lapsing Appropriations Method (Louisiana)
- The Lapsing Appropriations Method
Activity Accounts are closed to ...
Fund Balance is presented within five categories on which statement? What are the 5 categories?
- The Governmental Type Funds Balance Sheet.
- Unassigned (General Fund residual)