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Chapter 9 LECTURE. BASIS of accounting for various funds. Governmental. GOVERNMENT- WIDE. Proprietary. Fiduciary. 1. General 2. SRF 3. CPF 4. DSF 5. PERMANENT. 1. Agency 2. Trust. 1. Enterprise 2. Internal Service. New GAS 34 requirement (Chapter 14) Worksheets to

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Presentation Transcript
slide1

Chapter 9

LECTURE

slide2

BASIS of accounting for various funds

Governmental

GOVERNMENT-

WIDE

Proprietary

Fiduciary

1. General

2. SRF

3. CPF

4. DSF

5. PERMANENT

1. Agency

2. Trust

1. Enterprise

2. Internal Service

New GAS 34

requirement

(Chapter 14)

Worksheets to

convert GOVTL

to GOV-Wide

"modified-accrual"

"full-accrual"

"full-accrual"

"full-accrual"

requires non-funds:

1. GCA

2. GLTL

which basically are

full-accrual.

Liabilities are set-up in GLTL and reported in Govt-Wide

Assets are capitalized in the GCA, and reported in Govt-Wide

Information from non-funds is used extensively in Govt-Wide

slide3

General Capital Assets (GCA)

General Capital Assets

Cost of GCA

acquired

Cost of GCA

disposed of

Dr. Cr.

Increase Decrease

slide4

General Capital Assets

RECORDED AT: Historic Cost.

ESTIMATE OF acc/dep ACCEPTABLE for GASB.

$160,000 (assume)

1. Calculate current REPLACEMENT COST.

2. DEFLATE current cost using price indexes to

acquisition year. Suppose prices have risen 60%

in last 5 years since asset was purchased.

$160,000/1.60 = $100K

3. If asset is a 10-year asset, then retroactive

accumulated depreciation is:

$100,000/10 = $10,000 per yr

$10,000 x 5 yrs = $50,000 acc/dep

slide5

General Capital Assets

ESTIMATE OF COST ACCEPTABLE for GASB.

4. If the asset's value is estimated before closing entries in year 5

then this entry would catch things up:

Asset...................$100,000

Net Assets-Invested in GCA.....$100,000

Net Assets-Invested in GCA….. $50,000

Accumulated Depreciation………$50,000

This is done in the GCA non-fund, and NOT the GL.

slide6

General Capital Assets

CLASSIFICATIONS

$ paid for land, and costs incidental to its acquisition,

and expenditures to prepare land for its use.

LAND

$ paid for permanent structures used to house persons/

property AND fixtures that are permanently attached.

BUILDINGS/

IMPROVEMENTS

Long-lived improvements (other than buildings) that

add value to land. (bridges, sidewalks, streets, dams,

tunnels).

INFRASTRUCTURE

MACHINERY/

EQUIPMENT

Moveable machinery and equipment.

expenditures for construction work undertaken but incomplete

at balance sheet date.

CONSTRUCTION IN

PROGRESS

slide7

General Capital Assets

INFRASTRUCTURE

INFRASTRUCTURE

Are long-lived assets that normally are stationary in nature and normally can be

preserved for significantly greater number of years than most capital assets.

OLD RULE: Did NOT have to capitalize.

OLD RULES

NEW (GAS 34) RULES

Did not require capitalization.

NEW RULES: DO have to capitalize major infrastructure.

1. Requires that SLGs capitalize

MAJOR infrastructure NETWORKS

(e.g., highways) and SUBSYSTEMS

(e.g., interstate highways).

Definition

Exemption:

If infrastructure asset is

obtained earlier than June 30,

1980.

subsystem cost at least 5% of total GCA.

Smallest of SLG not required to do retro-

active capitalization either.

network cost at least 10% of total GCA.

slide8

INFRASTRUCTURE

Modified Approach

Infrastructure assets (IA) that are part of a network/subsystem ARE NOT required to

be depreciated provided (2) requirements are met:

1. Asset management program in place to oversee IA.

2. Documentation that IA are being preserved at/or above given

condition level.

If modified approach is used, expenditures made for IA are EXPENDED

Additions/improvements to IA that increase capacity/efficiency (rather than

just extend useful life) should be capitalized.

slide9

WORKS OF ART AND HISTORICAL TREASURES

RULE:Capitalize at their historical costorFMV at date of donation whether

individual items or held as a collection.

EXCEPTION:NOT required to capitalize (donated or purchased) if a collection

is INEXHAUSTIBLE.

slide10

WORKS OF ART AND HISTORICAL TREASURES

IF COLLECTIONS NOT CAPITALIZED

IF COLLECTIONS CAPITALIZED

in GCA accounts:

in GCA accounts:

ASSETS…….$XX.XX

DONATION REVENUE..$XX.XX

PROGRAM EXPENSE

(NET ASSETS)……..…….$XX.XX

DONATION REVENUE..$XX.XX

slide11

Sale

Retirement

Replacement

Disposition

slide12

Sale

Suppose that a vending machine with a cost of $5,000

and accumulated depreciation of $2,500 is sold for $850.

GAIN OR LOSS?

GENERAL FUND

Book

vs

Cash received

$2,500

Cash……….. $850

Other Financing Source-sale of equip…… $850

$850

LOSS……. $1,650

GENERAL CAPITAL ASSET NON-FUND

GOVT-WIDE

Net Assets…………………………. $2,500 (book removed)

Accumulated Depreciation………. $2,500 (remove it)

Vending Machine……………… $5,000 (CR for cost)

slide13

Replacement(Trade-in):

OUR TEXT IS SILENT ON

GAINS/LOSSES WITH REPLACE-

MENTS.

Suppose instead that the vending machine with a cost of $5,000

and accumulated depreciation of $2,500 is traded in on a new vending machine

costing $8,500. A trade-in allowance of $1,200 is given on the old vending machine.

Cost of new $8,500 - $1,200 trade-in = $7,300 cash paid.

GENERAL FUND

EXPENDITURES-VENDING MACHINE……$7,300

CASH………………………………………….$7,300

GENERAL CAPITAL ASSETS NON-FUND

NEW VENDING.. $8,500

NET ASSETS……$8,500

To record entry of new machine

at FULL COST

NET ASSETS……. $2,500

ACCUM. DEP….. $2,500

OLD VENDING MACHINE… $5,000

To remove old asset from non-fund records

slide14

Retirement:

Suppose instead that the vending machine with a cost of $5,000

and accumulated depreciation of $2,500 is retired and sold for salvage value of $500.

Costs to ship the vending machine to buyer were paid by seller and amounted to $150.

GENERAL FUND

EXPENDITURES (SHIPPING)…..$150

CASH…………………………….$150

To record shipping costs

LOSS equals:

CASH……. $500

EXPENDITURES (SHIPPING)……………….. $150

OTHER FINANCING SOURCES-SALVAGE..$350

To record net proceeds from salvage

BOOK.. $2,500

- SALV.. 500

--------------------

$2,000

+ ship.. 150

----------------------

LOSS $2,150

NET ASSETS………. $2,500

ACC/DEP………….. $2,500

VENDING MACHINE………$5,000

GCA-NONFUND

GOVT-WIDE

slide16

Intragovernmental Transfer of GCA

PROPRIETARY  GENERAL FUND

Cost Acc/Dep BOOK

$1,500 $500 $1,000

$10,000 $4,000 6,000

---------- -------- ---------

$11,500 $4,500 $7,000

* Suppose that the FMV of this equipment was $10,000.

Transfer at lower of

book vs fmv.

PROPRIETARY FUND

GCA-NONFUND

Capital Contributions……. $7,000

EQUIP…. $11,500

ACC-DEP…………...$4,500

NET ASSETS……… $7,000

Accumulated Depreciation.. $4,500

Equipment…………………$11,500

NOT called "transfer".

slide17

GENERAL FUND  PROPRIETARY

Cost Acc/Dep BOOK

$1,500 $500 $1,000

$10,000 $4,000 6,000

---------- -------- ---------

$11,500 $4,500 $7,000

* Suppose that the FMV of this equipment was $10,000.

Transfer at lower of

book or "use value"

to proprietary fund.

PROPRIETARY FUND

GCA-NONFUND

Equipment……… $7,000 (assume use value > or = book)

Capital Contrib… 7,000

ACC/DEP…. $4,500

NET ASSETS..7,000

EQUIP…….$11,500

NOT called "transfer".

slide19

Account for resources held in TRUST by the government

for the benefit of the government (or its citizenry).

PURPOSE?

Principal of the trust must be maintained

intact.

REQUIREMENTS?

STATEMENTS?

Same as other governmentals:

1) Balance Sheet, 2) Statement of Revenues,

Expenditures and Changes in Fund Balance

EXPENDABLE VS NONEXPENDABLE

gas 42 new
GAS 42 (NEW)

Impairments

As a SIGNIFICANT, UNEXPECTED, DECLINE

in the service utility of a capital asset.