Governmental Reporting - Fund Accounting Flashcards
What are the types of accounting in fund accounting?
Budgetary: ensure budget compliance
Activity: account for transactions
Encumbrance: account for purchase orders
What are the types fund balances?
Reserved or Unreserved
What are the types of reserved fund balances?
1) non-spendable: cannot be spent b/c not in spendable form (inventory, prepaids)
2) restricted: externally restricted for specific use
3) committed: reserved for specific purpose by formal action of the govt
4) assigned: intended for specific purpose
When are entries are made in budgetary accounting?
budgetary accting
Twice a year; beginning (to open) and ending (to close)
- only exception is if there is an amendment for add’l rev/exp
These are estimated accounts which serve as control accounts.
What are budget revenue sources?
budgetary accting
Estimated revenues: revenues expected to be available for spending in the period
Estimated other financing sources: proceeds from issuance of long-term debt & transfers from other govt funds
What are budget revenue uses?
budgetary accting
Appropriations: expenditures expected to occur in the period
Estimated other financing uses: transfers to other govt funds
What is a balanced budget?
budgetary accting
estimated revenues + estimated other financing sources
appropriations + estimated other financing uses
What is a budget surplus?
budgetary accting
reported as “Increase in Fund Balance - Unreserved”
estimated revenues + estimated other financing sources > appropriations + estimated other financing uses
What is a budget deficit?
budgetary accting
reported as “Dencrease in Fund Balance - Unreserved”
estimated revenues + estimated other financing sources < appropriations + estimated other financing uses
Budgetary accounting - example opening journal entries
Budgeted revenues DR 1600
Estimated other financing sources DR 600
Budgetary fund balance DR -0-
Appropriations CR 1400
Estimated other financing uses CR 500
Budgetary fund balance - unreserved CR 300
Budgetary accounting - example closing journal entries
Appropriations DR 1400
Estimated other fin uses DR 500
Budgetary fund bal - unreserved DR 300
Budgetary fund bal - unreserved CR -0-
Budget revenues CR 1600
Estimated other fin sources CR 600
What are items are accounted for in activity accounting?
activity accting
Revenue, expenses, assets, debts
What are the revenue types in activity accounting?
activity accting
Exchange revenue and non-exchange revenue
What is exchange revenue?
activity accting
Revenue from provision of goods & services; recognized when earned.
What is non-exchange revenue?
activity accting
Derived revenue
Imposed revenue
Grants
What are types of derived revenue?
activity accting
income taxes & sales taxes (the tax income is derived from the taxpayers income and the sales made)
revenue is recognized when received (b/c the govt doesn’t know in advance how much it will be)
What are the types of imposed revenue?
activity accting
property tax; recog when billed (govt knows how much it will be before rec’d)
fines/penalties; recog when billed
license fees; recog when received (govt doesn’t know how much in advance)
the revenue is imposed on the payer
What are the types of grant revenue?
activity accting
government mandated; recog when eligible
voluntary; recog when eligible
When are non-measurable revenues recognized?
activity accting
Treated as available to spend once collected
What is deferred revenue in activity accounting?
activity accting
Revenue billed or collected in advance is treated as deferred revenue (liability) until the future period to which it applies.
Gov’t can’t spend this revenue because it does not relate to this period.
Deferred revenue journal entries
activity accting
In the year received:
receivable DR
deferred rev CR
In the year earned:
deferred rev DR
revenue CR
Allowance for doubtful revenue - sample journal entries
activity accting
Create an allowance for the revenue not expected to be collected
In year billed/earned/eligible:
receivable DR 1000
allowance for uncollectible CR 100
revenue CR 900
Write off receivable:
allowance DR 100
receivable CR 100
Allowance is received:
allowance DR 100
revenue CR 100
Receivable delinquent & allowance increased:
revenue DR 150
allowance CR 150
Delinquent receivable - sample journal entries
activity accting
Receivable is classified as delinquent if it is overdue and not received
In year billed/earned/eligible:
receivable - current DR 1000
allowance for uncoll - current CR 100
revenue CR 900
In year delinquent: (900 cash rec’d)
receivable - delinquent DR 100
receivable - current CR 100
allowance - current DR 100
allowance - delinquent CR 100
If delinquent is less than allowance: (925 cash recd)
allowance - current DR 100
revenue CR 25
allowance - delinquent CR 75
If delinquent more than allowance: (800 cash recd)
allowance - current DR 100
revenue DR 100
allowance - delinquent CR 200
How are expenditures treated?
activity accting
All expenditures are current period expenses. No capitalization.
Inventory expenditures, purchase method - sample journal entries
activity accting
Purchase:
expenditure DR
vouchers payable CR
Use of inventory:
no entry
Year-end:
inventory DR
non-spendable fund balance CR
Inventory expenditures, consumption method - sample journal entries
activity accting
Purchase:
expenditure DR
vouchers payable CR
Use of inventory:
expenditure DR
inventory CR
Year-end:
no entry
How are expenditures classified/organized under activity accounting?
activity accting
While budgetary accounting reports expenditures by object class, activity accounting reports expenditures by their function within different classifications.
What are the expenditure character classifications in activity accounting?
activity accting
Function/program - classification based on the overall purpose/objective of the expenditure. E.g., public safety, health & welfare, education
Organizational unit - classification based on the govt’s organizational structure. E.g., police dept, fire dept
Activity - classification based on the activity it is used for within the org unit. E.g., administration in the police dept, crime control & investigation in the police dept
Object - classification of the expenditure based on nature. E.g., salaries, rent, utilities
Character - classification based on the fiscal period of expected benefits. E.g., expenditure, capital outlay
Fixed assets - journal entries
activity accting
expenditure DR
vouchers payable CR
Debt - journal entries
activity accting
cash DR
other financing sources CR
Closing entries (end of year) - journal entries
activity accting
Revenues DR
Other financing sources DR
fund balance unreserved CR
other financing use CR
expenditures CR
What is an encumbrance?
encumbrance accting
When an open purchase order is placed with a vendor. This creates a legal commitment and requires that a portion of the fund balance be reserved.
Purchase orders - sample journal entries
encumbrance accting
When order is placed:
encumbrances DR 5000
budgetary fd bal-reserved for encumbr CR 5000
When order is received:
budgetary fd bal-reserved for encumbr DR 5000
encumbrances CR 5000
What you actually receive may be different amounts. But that does not impact the encumbrance accting. You are simply placing and removing holds on the funds.
Year-end outstanding encumbrances
encumbrance accting
Close out all oustanding encumbrances at the end of the year. They will be reopened with the next year.
budgetary fd bal-reserved for encumbr DR
encumbrances CR
Funds available for use calculation
Appropriations (budget - target spending)
less; encumbrances (encumbrance - $ planned spend)
less: expenditures (activity - $ already spent)
= funds available for use
Which government funds use encumbrance accounting?
encumbrance accting
Encumbrance accounting only applies to general fund, special revenue fund, and capital fund.
It does not apply to debt service fund and permanent fund which do not issue purchase orders.
