Kế toán, kiểm toán - Chapter 4: Learning objectives

Essentials of Accounting for Governmental and Not-for-Profit OrganizationsChapter 4Accounting for the General and Special Revenue FundsCopyright © 2015 McGraw-Hill Education. All rights reserved.Chapter 4 – Learning objectivesApply the modified accrual basis of accounting in the recording of typical transactions of a General and special revenue fundPrepare closing entries and classify fund balancesPrepare the fund-basis financial statements of a General and special revenue fundReview: Fund AccountingThe purpose of fund accounting is to segregate those financial resources that have constraints or limitations on their use so that the government may demonstrate compliance with those limitations. The General Fund reports those resources not subject to such restrictions. The General Fund is used to account for and report all financial resources not accounted for and reported in another fund.GASB 54 – Fund DefinitionsGeneral FundPurpose: General fundMany resources have no limitations on their use and do not require segregation. The General Fund accounts for any resources not reported in one of the other (limited-use) funds. Every general purpose government will have one, and only one, General Fund. Account for and report the proceeds of specific revenue sources that are restricted or committed (does not include assigned) to expenditure for specified purpose other than debt service or capital projects.GASB – Fund Definitions Special Revenue FundsSpecial Revenue Funds - PurposeSpecial revenue funds are an example of a fund established because of constraints place on the use of government resources. Note, however, that special revenue funds are not used if the resources are required to be used to acquire capital assets (capital projects funds) or for the payment of interest and principal on long-term debt (debt service funds).Special revenue funds received particular guidance from GASB:Although other resources may supplement a special revenue fund, assignment of resources is not sufficient for the establishment of a special revenue fund. Further, if the government expects that a substantial portion of the resources supporting a special revenue fund’s activities will no longer be derived from restricted and committed revenue sources, the government should discontinue the use of a special revenue fund and report the fund’s remaining resources in the General Fund.Review: Modified Accrual vs. AccrualAccrualRecognize revenues when earnedMatch expenses against the revenues when resources or services are used.Modified AccrualRecognize revenues when measurable and available(available to pay this year’s bills— for example, property taxes received within 60 days of year end)Recognize expenditures when the liability is incurred — no attempt to match to revenues, match to period of occurrence onlyException — recognize interest and principal payments as expenditures when DUEModified Accrual Revenue CycleAssume Property tax for 2015 levied = $1,000,000; $800,000 is collected in calendar year 2015 $120,000 is collected in January and February 2016 $80,000 is collected in March and April 2016ENTRIES DURING 2015: Record levy: Taxes receivable 1,000,000 Revenue (tentative) 1,000,0002015 collections Cash 800,000 Taxes Receivable 800,000Year end adjustment: Revenue 80,000 Deferred Revenue 80,000(Property taxes expected to be collected more than 60 days after year end will be a 2016 revenue)Modified Accrual Revenue CycleAssume Property tax for 2015 levied = $1,000,000; $800,000 is collected in calendar year 2015 $120,000 is collected in January and February 2016 $80,000 is collected in March and April 2016ENTRIES DURING 2016: Beginning of Year Entry: Deferred Revenue 80,000 Revenue 80,000 2016 Collections: Cash 200,000 Taxes Receivable 200,000 (Property taxes expected to be collected more than 60 days after year end will be a 2016 revenue)Uncollectible amountsAn allowance for uncollectible taxes is recorded at the time of a tax levy.Since uncollectible amounts will not be available to finance current expenditures, revenues are effectively reduced by the amount of the estimateRecord levy: Taxes receivable 1,075,000 Allowance for uncollectible taxes 75,000 Revenue (net of uncollectibles) 1,000,000Write-offs of uncollectible amountsThe write-off of an uncollectible account does not affect revenues or expenditures.Allowance for uncollectible taxes 5,200 Taxes receivable 5,200 Modified Accrual Expenditure CycleSupplies are ordered at an estimated cost of $ 3,500Supplies are received with an actual cost of $ 3,000 plus shipping of $ 250Invoice from the supplies is paidJournal EntriesPlace Order Encumbrances 3,500 Budgetary Fund Balance - Reserve for Encumbrances 3,500 Receive Goods Expenditures 3,250 Accounts Payable 3,250 Budgetary Fund Balance - Reserve for Encumbrances 3,500 Encumbrances 3,500 Payment Accounts Payable 3,250 Cash 3,250 Short-term BorrowingSince governmental funds recognize obligations requiring current financial resources to settle, current borrowings are recorded in the same manner as commercial businesses.e.g. Short-term Tax anticipation notes Cash 250,000 Tax Anticipation Note Payable 250,000Repayment of Short-term BorrowingRepayment of principal of short-term oblgations is not an expenditure, but the associated interest is recorded as an expendituree.g. Short-term Tax anticipation notes Tax Anticipation Note Payable 250,000 Interest Expenditure (6% for 3 months) 3,750 Cash 253,750Interfund TransactionsTransactions between funds are of particular interest to financial statement preparers and users since failure to properly report these transactions results in two funds being misstated. Additionally, since most of these transactions are eliminated in the government-wide statements, it is particularly important that they be identified in the accounts of the affected funds. Interfund Transactions - TypesInterfund Transactions may beInterfund Services (Quasi-external) transactionsReimubursementsTransfersInterfund Services Sometimes called quasi-external transactions, these are transactions (typically sales of services) between funds and are exchange-like transactionsThey are treated as revenue and expense or expenditure of the affected fundsExample, sale of electricity by the Electricity Enterprise fund to the General FundThe sale would be treated as revenue for Enterprise Fund and expenditure for General FundReimbursements Initially, one fund pays for a good or service for another fund.When the reimburse-ment is made, the expense or expenditure is recorded in the correct fund and the initial (incorrect) expense or expenditure is reversedReimbursementsAssume the government receives a bill for engineering services in the amount of $10,000; and it is initially recorded in the General Fund as follows: GF: Expenditures 10,000 Accounts Payable 10,000Later, it is discovered that $2,000 of these services were for the Electricity Enterprise fund. The following would be recorded: GF: Due from Electricity 2,000 Expenditures 2,000 EF: Expenditures 2,000 Due to General Fund 2,000TransfersAny assignment of resources from one fund to another where there is no expectation that the amounts will be repaid. Transfers Into a Fund are considered Other Financing SourcesTransfers Out are considered Other Financing UsesRecurring Transfers (such as for debt service) are commonly built into the General Fund budgetSpecial ItemsSpecial items are significant transactions that are either unusual or infrequent but within the control of management.Example: sale of a capital assetThe proceeds of capital assets are designated as special items: Cash 77,000 Special Item – Proceeds of sale of capital assets 77,000The Closing Process Closing process for government type funds needs to accomplish the following: Close budgetary accounts Close Revenues, expenditures, encumbrances, and related other financing sources or uses to Fund BalanceClosing the budgetThe budgetary accounts (considering any budget revisions) are closed to budgetary fund balance Appropriations 11,700,000 Estimated Other Financing Uses 250,000 Budgetary Fund Balance 550,000 Estimated Revenues 12,000,000 Estimated Other Financing Sources 500,000Closing encumbrance accountsEncumbrance accounts are closed at year end and re-established in the next year.December 31, 2015 Budgetary Fund Balance – Reserve for Encumbrances 500,000 Encumbrances 500,000 To close encumbrances at the end of 2015 .January 1, 2016 Encumbrances 500,000 Budgetary Fund Balance -- Reserve for Encumbrances 500,000 To re-establish encumbrances at the beginning of 2016 Closing activity accountsActivity accounts are closed to fund balance: Revenues 11,900,000 Other Financing Sources 223,000 Special Item: Sale of capital assets 77,000 Fund Balance 1,200,000 Expenditures 11,000,000 Fund balance - presentationFund Balance is presented within the five categories of fund balance:NonspendableRestrictedCommittedAssignedUnassigned (General Fund residual)