Title: Advanced%20Accounting%20by%20Hoyle%20et%20al,%206th%20Edition
1Accounting for State and Local Governments (Part
One)
2Governmental Accounting
- Focuses on financial reporting for non-profit
governmental agencies. - Many concepts are similar to financial
accounting, but terminology and procedures
differ. - Governmental Accounting Standards Board (GASB)
generates standards.
3Governmental AccountingUser Needs
- In Concepts Statement 1, GASB identified 3
basic groups of users of governmental accounting
information - Citizenry
- Legislative and oversight bodies
- Investors and creditors
4Accountability and Governmental Accounting
- Governmental Accounting Statements attempt to
answer 3 questions related to accountability
Where did the financial resources come from?
What amount of financial resources is presently
held?
Where did the financial resources go?
5GASB Statement No. 34
Requires the production of two sets of statements
Government-wide Financial Statements
Fund-Based Financial Statements
Reports all revenues and all costs of providing
services each year and all resources available to
the governmental unit.
Shows restrictions on the use of resources and
measures, in the short run, revenues and expenses
from certain activities.
6Reporting Diverse Governmental Activities - Fund
Accounting
- Governmental units have many different types of
activities. - No common motivation links these activities.
- Therefore, each activity operates
quasi-independent, self-balancing sets of
accounts called funds.
- Examples include
- Public Safety
- Sanitation
- Health Welfare
- Education
- Parks Recreation
- Judicial System
- Water and Sewer
- Employee Pensions
7Fund Accounting Classification
- All funds fall into one of three broad
classifications.
Governmental Funds
Proprietary Funds
Fiduciary Funds
Accounting for activities related to serving the
public.
Accounting for business-type activities.
Accounting for financial resources held for
others in a trustee capacity.
8Fund Accounting ClassificationGovernmental Funds
9Fund Accounting ClassificationProprietary Funds
10Fund Accounting ClassificationFiduciary Funds
11Understanding The Accounting Process
12(No Transcript)
13Fund-Based Financial Statements
Two separate statements are required Balance
Sheet Statement of Revenues, Expenditures, and
Changes in Fund Balance
Fund-Based statements include information on
fiduciary funds.
14Fund-Based Financial Statements
These statements will differ from the
Government-Wide financial statements for three
reasons.
- The proprietary funds are reported in a separate
statement. - The current financial resources measurement basis
is used. - The modified accrual accounting approach is used.
3
15Balance Sheet - Example
16Statement of Revenues, Expenditures, and Changes
in Fund Balances - Example
17Statement of Revenues, Expenditures, and Changes
in Fund Balances - Example
18Lets look at an overview of the Government-Wide
Statements.
19Government-Wide Financial Statements
Two separate statements are required Statement
of Net Assets Statement of Activities
The economic resources measurement focus requires
reporting of ALL assets and liabilities.
20Statement of Net Assets - Example
Note that we keep the Governmental Activities
separate from the Business-Type Activities.
21Statement of Net Assets - Example
Also note that this statement does not give
information about Fiduciary Funds
This is consistent with the economic resources
management focus which only includes assets and
liabilities that are available to use for
governmental purposes.
22Statement of Activities - Example
The net for a given function is determined
horizontally, while the totals for expenses and
revenues are determined vertically.
23Statement of Activities - Example
The general revenues are shown separately at the
bottom of the statement.
24Lets look at the accounting procedures for the
Governmental Accounts for both the Fund-Based and
Government-Wide Statements.
25Recording Budgetary Entries
- Purposes of the budget, per the GASB
- Expresses public policy.
- Serves as an expression of financial intent.
- Provides control by establishing spending limits.
- Offers a means of evaluating performance.
Budget information for the General Fund and for
each of the major Special Funds must be
presented.
26Recording Budgetary Entries
For example, assume a town enacts a motel excise
tax to promote tourism and conventions. For
2001, the tax is expected to generate 490,000
in Special Revenues. Of the total, 200,000 is
designated for salaries, 30,000 for utilities,
80,000 for advertising, and 90,000 for supplies.
Prepare the journal entry to record the Special
Revenue Fund budget.
27Recording Budgetary Entries
A city estimates all General Fund revenues for
2001 at 1,640,000. The budget calls for
spending of 1,180,000. Transfers to other funds
of 400,000 have also been approved.
Prepare the journal entry to record the General
Fund budget.
28Encumbrances
- In a governmental unit, purchase commitments and
contracts are recorded, even though they may not
yet represent liabilities. - A recorded commitment or contract is called an
encumbrance.
Budget
Encumbrance
Actual
29Encumbrances
- For Fund-Based Financial Statements
- An entry is required to record the encumbrance.
- An entry is required when the bill is received.
- For Government-Wide Financial Statements
- No entry is required to record the encumbrance.
- An entry is required when the bill is received.
30EncumbrancesExample
- Drye Township has budgeted office supplies for
180,000 for 2002. On May 15, Drye Township
places an order for 16,000 office supplies with
Ye Olde Office Supplies.
Remember, this entry is only recorded for
Fund-Based Financial Statements.
Record the order in Drye Townships books.
31EncumbrancesExample
On May 17, the supplies are received with a bill
for 15,680 (some of the items went on sale on
May 16, and the city was given the sale price).
Record the receipt of the supplies in Drye
Townships books for the Fund-Based Statements.
This is the account title typically used in
governmental accounting in place of Accounts
Payable.
32EncumbrancesExample
On May 17, the supplies are received with a bill
for 15,680 (some of the items went on sale on
May 16, and the city was given the sale price).
Record the receipt of the supplies in Drye
Townships books for the Government-Wide
Statements.
Note that with the Government-Wide Financial
Statements, no entry is necessary for the
encumbrances used with the Fund-Based Statements.
33Fund-Based StatementsFixed Assets
- While the expenditure for a fixed asset is
usually recorded in the General Fund . . . - . . . the fixed asset itself is recorded in
the General Fixed Assets Account Group. - Depreciation is not recorded in the
governmental fund, since net income is not a
concept relevant to governmental units.
34Government-Wide StatementsFixed Assets
- Historically, recording of fixed assets in the
General Fixed Assets Account Group was optional. - GASB Statement No. 34 requires a record of ALL
capital assets in the Statement of Net Assets in
the government-wide statements. - Depreciation expense is recorded.
- Governments have 4 years to capitalize previously
acquired assets.
35Recognition of RevenuesNonexchange Transactions
- Classifications
- Derived Tax Revenues
- Imposed Nonexchange Revenues
- Government-mandated Nonexchange Transactions
- Voluntary Nonexchange Transactions
For Government-Wide Statements, record the
revenues at the time of eligibility.
For Fund-Based Statements, record the revenues
when they become available for recognition.
36Issuance of Bonds
- Government-Wide Financial Statements
- Increase the Cash and the Debt.
- Fund-Based Financial Statements
- Increase Cash and Other Financing Sources.
Drye Township issues 50,000 in bonds for new
sidewalks.
Prepare the journal entry to record the bonds for
government-wide statements.
37Issuance of Bonds
- Government-Wide Financial Statements
- Increase the Cash and the Debt.
- Fund-Based Financial Statements
- Increase Cash and Other Financing Sources.
Drye Township issues 50,000 in bonds for new
sidewalks.
Prepare the journal entry to record the bonds for
fund-based statements.
38Payment of Long-Term Liabilities
- Government-Wide Financial Statements
- Record principle and interest as with GAAP.
- Fund-Based Financial Statements
- Record expenditures in the Debt Service Fund.
Drye Township makes a 10,000 payment on a loan
that includes 1,000 in interest.
Prepare the journal entry to record the loan
payment for government-wide statements.
39Payment of Long-Term Liabilities
- Government-Wide Financial Statements
- Record principle and interest as with GAAP.
- Fund-Based Financial Statements
- Record expenditures in the Debt Service Fund.
Drye Township makes a 10,000 payment on a loan
that includes 1,000 in interest.
Prepare the journal entry to record the loan
payment for fund-based statements.
40End of Chapter 16
Ms. Chairperson, what fund should we charge your
Paris trip to?
Since I voted for a balanced budget, lets charge
it to the Debt Service Fund.