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2. Governmental Entities in United States Include:. Federal GovernmentState GovernmentCountiesTownshipsMunicipalitiesSchool districtsSpecial districts. 3. Objectives of Financial Reporting (GASB issued Concept Statement No. 1):. Should enable users to assess Government\'s accountability Shou

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chapter 17

Chapter 17

Governmental Entities:

General Fund

governmental entities in united states include
Governmental Entities in United States Include:
  • Federal Government
  • State Government
  • Counties
  • Townships
  • Municipalities
  • School districts
  • Special districts
objectives of financial reporting gasb issued concept statement no 1
Objectives of Financial Reporting (GASB issued Concept Statement No. 1):
  • Should enable users to assess Government’s accountability
  • Should assist users in evaluating the operating result of Governmental Entity
  • Should assist users in assessing the level of service provided and Government’s ability to meet its obligation
the principal accounting unit is fund gasb has identified in three categories
Governmental Funds

Proprietary Funds

Fiduciary Funds

The principal accounting unit is fund. GASB has identified in three categories:
governmental funds
GOVERNMENTAL FUNDS
  • GENERAL FUNDS
  • SPECIAL REVENUE FUNDS
  • CAPTIAL PROJECT FUNDS
  • DEBT SERVICE
  • PERMANENT FUNDS
propertiary
PROPERTIARY
  • ENTERPRISE FUND
  • INTERNAL SERVICE FUND
fiduciary funds
FIDUCIARY FUNDS
  • PENSION
  • Investment Trust Fund
  • Private Purpose Fund
  • Agency Funds
general fund
General Fund
  • General fund accounts for the general activities of a government that are not accounted for by any other fund
  • Only one general fund per reporting entity
  • General fund is created at beginning of the “Unit” and it exists throughout the life of that unit.
governmental fund of governmental entities use modified accrual basis of accounting
Governmental Fund of Governmental Entities use Modified Accrual Basis of Accounting
  • Revenues are recognized only when they become both measurable and available
  • Expenditure are recognized when the related liabilities are incurred
  • Short term prepayments are not recognized as assets
budgets are legislative control over governmental entities
Annual Budget

(Include estimated revenue and appropriations for specific fiscal Year)

Capital Budget

(used to control expenditure for construction projects, appropriate for capital project fund)

Budgets are Legislative Control over Governmental Entities

Basic Classification of Budgets

slide11
Budgetary accounting is used to control expenditures and to account for the levy of taxes sufficient to cover estimated expenditures.
  • Budgetary accounts are “estimated accounts” that are the opposite (in terms of debit and credit) from real accounts.
  • Entry to record budgetary accounts are made twice during the year.
  • At the beginning of the year to record budget.
  • And at the end of the year to reverse and close budget.
journal entry at the beginning of the year to record budget
Journal Entry at the beginning of the year to Record Budget:

Dr Estimated Revenues

Dr Estimated Other Financing Sources

Cr Appropriations

Cr Estimated Other Financing Uses

Cr/Dr Budgetary Fund Balance

journal entry at the end of the year to reverse and close budget
Journal Entry at the end of the year to Reverse and close Budget:

Dr Appropriations

Cr Estimated Other Financing Uses

Dr/Cr Budgetary Fund Balance

Cr Estimated Revenues

Cr Estimated Other Financing Sources

entries for recording revenue
Entries for Recording Revenue:
  • Billed

Dr Taxes Receivable – Current

Cr Allowances for Uncollectible Taxes

Cr Revenue

  • Collections

Dr Cash

Cr Taxes Receivable – Current

  • Taxes Determined Uncollectible

Dr Allowances for Uncollectible Taxes

Cr Taxes Receivable - Current

journal entry to transfer uncollected taxes to a delinquent category
Journal Entry to transfer uncollected taxes to a delinquent category:
  • Journal entry to reclassify receivable to delinquent

Dr Taxes Receivable – delinquent

Cr Taxes Receivable – current

  • Journal entry to reclassify current allowance for uncollectible taxes to delinquent

Dr Allowance for uncollectible taxes – current

Cr Allowances for uncollectible taxes - delinquent

encumbrances
Encumbrances
  • It is necessary to reflect not only the expenditures, but also the obligations to spend (Purchase Order).
  • This is done to prevent overspending of appropriations.
  • Subsidiary Ledgers are used to record the details of budgetary accounts, encumbrances and other general ledger accounts
slide17
An encumbrance should not be viewed as an expenditure. Similarly the reserve for expenditure is not a liability.

Example :

1. Assume a purchase order is issued to purchase two sanitation trucks by the City of A.The estimated Cost is $45000 each.

2. The invoice is received for one to the trucks, at an actual cost of $44000.

slide18
Example for Encumbrance Accounting: 1. Assume a purchase order is issued to purchase two sanitation trucks by the City of A.The estimated Cost is $45000 each.2. The invoice is received for one to the trucks, at an actual cost of $44000. Assume that second truck is backordered.
  • Set up Encumbrance

Dr Encumbrance 90,000

Cr Reserve for Encumbrance 90,000

  • Record invoice and Reverse estimated encumbrance

(a) Dr Expenditure 44,000

Cr Vouchers Payable (or Cash) 44,000

(b) Dr Reserve for Encumbrance 45,000

Cr Encumbrance 45,000

  • At year end if encumbrance (Purchase Order) is still outstanding

(a) Dr Reserve for Encumbrance 45,000

Cr Encumbrance 45,000

(b) Dr Unreserved fund balance 45,000

Cr Fund Balance reserved for encumbrance 45,000

slide19
Inventory of Supplies(The Inventory of Supplies is evidence of the availability of resources to benefit future periods and the reserve for inventory of supplies account serves as a reservation of fund balance.)

Entry when invoice received

Dr Inventory of Supplies

Cr Vouchers Payable

Entry for Use of Supplies

Dr Expenditures

Cr Inventory of Supplies

transfers between funds
Transfers Between Funds
  • Types of transfers between funds can be grouped as under.
      • Quasi – External Transfers
      • Operating Transfers
      • Reimbursement Transfer
      • Routine fund transfer of Loan or Advance Nature (Cash needed by one fund may be obtained from other funds.)
entry to record routine transfer
Entry to Record Routine Transfer

Dr Due from other fund

Cr Cash

Or

Dr Cash

Cr Due to other fund

entry to record operating transfer
Entry to Record Operating Transfer

Dr Other Financing Uses

Cr Cash/Other Fund

Or

Dr Cash/Other Fund

Cr Other Financing Sources

financial statements for the general fund of a governmental entity
Financial Statements for the General Fund of a Governmental Entity
  • Balance Sheet

And

  • Statement of Revenues,Expenditures and Changes in Fund Balance. (Budgeted amounts, actual amounts and variances from budgeted amounts are included in this statement)
closing entries for a general fund at the end of a fiscal year
Closing entries for a general fund at the end of a fiscal year:
  • Journal entry to close the budget at year end (reverse for the same amount)
  • Journal entry to close Encumbrances ledger account to the Unreserved and Undesignated Fund balance account
  • Journal entry to close the Revenues, Other Financing Sources, Expenditures, and Other Financing Uses Ledger to the Unreserved and Undesignated Fund Balance account
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