The General Fund and Special Revenue FundsLearning ObjectivesMFBAAssumptions for this ChapterIllustrative ExamplesRecording the BudgetRecording the budgetRecording the Budget: Some comments about the entryRecording the Budget: Posting the “Out-of-Balance” amountMaking Adjustments to the BudgetAdjusting the BudgetProperty Tax LevySlide 13Slide 14Other RevenuesSlide 16Encumbrances & Related ExpendituresEncumbrances EntryEncumbrance / Expenditure EntriesSlide 20Unencumbered EntriesUnencumbered Entries: PayrollOther Transactions and EventsCollecting taxes, other receivables, and other revenuesReclassifying taxes as delinquentPaying amounts owedAn additional order has been madeCollecting delinquent taxesDelinquent Taxes: Trick QuestionTrick Question AnswerPurchase of InvestmentsInterfund transaction: Purchase of Supplies from an Internal Service FundCorrecting an errorCorrecting an error: the Other FundOrdering a transferOrdering a transfer – the Other FundStill another transferThis transfer was paid!Other ExpendituresOther PaymentsBorrowing some moneyPaying another fund (finally!)Making another collection (we need the money!)Writing off an accountRepaying the amount borrowed from the bank, plus interestSomebody made a mistakePaid it, then fixed itCombined entriesUsing the CPYE AccountYear-End AdjustmentsInterest & Penalties on Delinquent TaxesAccrued interest on investmentsAccrued interest on short-term debtClosing Entry ProcessClosing Entry Process (continued)Reverse the BudgetClose the ActualClose the Other Operating AccountsClose the Encumbrances AccountGeneral Fund Financial StatementsBalance SheetReserves of Fund BalanceUnreserved Fund BalanceStatement of Revenues, Expenditures, & Changes in Fund BalanceOperating Statement FormatStrange ThingsThe Budgetary Schedule / StatementAdditional Financial StatementsSample Financial StatementsEntries Early in Next Fiscal YearThe General Fund and Special Revenue FundsChapter 4Learning ObjectivesDiscuss similarities & differences between GF and SRFsExplain MFBA used for these fundsUnderstand and prepare budgetary entriesAnalyze common journal entries for transactions, including interfund activityUnderstand use & accounting for encumbrancesPrepare adjusting & closing entriesDefine special items and extraordinary itemsPrepare GF and SRF financial statementsMFBAMeasurement Focus (MF) is on current financial resources – what is expendableBasis of Accounting (BA) is modified accrual – recognition occurs forRevenues when measurable & availableExpenditures when underlying liability is incurred, except for long-term debt principal and interest payments (when due)Assumptions for this ChapterGAAP used as the budgetary basisAccounts maintained on GAAP basis during the yearBoth assumptions rarely hold in practice, but they make instruction easier and more uniformIllustrative ExamplesRecording budgetProperty tax levyOther revenuesEncumbrances & related expendituresOther transactions and eventsYear-end adjustments & closing entriesFinancial statementsRecording the BudgetGenerally, the first entry of the yearNext entry will be reversing of some closing entries done at the end of the previous year (more on those later)Budget entry marks the end of a long processShown here in summary form – could be in two entriesMay be modified later as circumstances warrantRecording the budgetEstimated RevenuesAppropriationsUnreserved Fund Balance427,000423,0004,000Recording the Budget:Some comments about the entryThe entries to Estimated Revenues and Appropriations are fairly standardThere is some dispute on where to put the difference when the budget doesn’t balanceRecording the Budget:Posting the “Out-of-Balance” amountThis textbook uses Unreserved Fund BalanceAdvantage – easierDisadvantage – implies there are spendable resources when, in fact, there aren’tAnother textbook uses Fund Balance – same problems as aboveThird textbook uses Budgetary Fund Balance – avoids disadvantage from above but adds another accountJust be aware that there are options in practiceMaking Adjustments to the BudgetAssuming balanced budget is maintained, increase in one functions appropriation requires decrease in anotherUnbalanced adjustmentsIncrease (decrease) in Appropriations (Estimated Revenues) requires Unreserved Fund Balance to decreaseDecrease (increase) in Appropriations (Estimated Revenues) requires Unreserved Fund Balance to increaseAdjusting the BudgetEstimated RevenuesAppropriationsAppropriationsUnreserved Fund Balance4,0003,0006,0001,000Some are bothered by having the Appropriations account being both a debit and a credit. However, you must consider the subsidiary ledger effects demonstrated in the textbook. Some appropriations were increased; others were decreased. That is why both the debit and credit are required.Property Tax LevyOften the major source of revenue for many governmentsEntry is recorded at time of levy – revenue earned at that pointProperty Tax LevyTaxes Receivable – CurrentAllowance for UncollectibleCurrent TaxesRevenues – Property Taxes200,0003,000197,000Property Tax LevyNotice use of allowance account in entryNo bad debts expense – remember, a governmental fund does not use expensesRecords revenue at the amount government expects to collectThis form of entry assumes net amount will be available – other options discussed in Chapter 5Other RevenuesSome revenues will be accrued when services are providedOther revenues may be recognized only when cash is received – no allowance necessary since all of revenue receivedOther RevenuesAccrued revenues:Accounts ReceivableAllowance for UncollectibleAccounts ReceivableRevenues36,0001,00035,000Cash revenues:CashRevenues500500Encumbrances & Related ExpendituresEncumbrancesUsed to assist in controlling expenditures until orders are receivedStrictly a budgetary accountCorresponding credit is to another budgetary account: Reserve for EncumbrancesAmount recorded may be actual or estimated amountEncumbrances EntryEncumbrancesReserve for Encumbrances30,00030,000When the supplies that were ordered are actually received, the amount may be different.Encumbrance / Expenditure EntriesReverse the estimate:Reserve for EncumbrancesEncumbrances30,00030,000Record the actual:ExpendituresVouchers Payable29,90029,900Encumbrance / Expenditure
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