Governmental Entities: Introduction and General Fund Accounting

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

Chapter 12Chapter 12

Governmental Governmental Entities:Entities:

Introduction andIntroduction andGeneral FundGeneral Fund

AccountingAccounting

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Learning Objective 1Learning Objective 1

Understand and explain the basic differences between governmental and private

sector accounting.

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OverviewOverview

Governmental entities have operating objectives different from those of commercial entities.

As a result, governmental accounting is different from accounting for commercial enterprises.

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OverviewOverview

Nature of governmental entities1. Collect resources and make expenditures to fulfil

societal needs

2. Absence of profit motive except for some activities

3. Have legal authorization for their existence, conduct revenue-raising through the power of taxation, and have mandated expenditures they must make to provide their services

4. Control mechanism – Use of comprehensive budgetary accounting

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OverviewOverview

Nature of governmental entities5. Accountability for the flow of financial resources

is a chief objective

6. Typically are required to establish separate funds to carry out various missions; each fund is an independent accounting and fiscal entity

7. Many fund entities do not record fixed assets or long-term debt in their funds

8. An important objective of governmental financial reporting is accountability

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History of Governmental AccountingHistory of Governmental Accounting

History Before 1984, directed by the Municipal Finance

Officers Association (MFOA) In 1934, the first statement on local

governmental accounting published In 1968, Governmental Accounting, Auditing,

and Financial Reporting (GAAFR) was published The GAAFR is periodically updated to include the

most recent governmental reporting standards

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History 1974 –The American Institute of Certified Public

Accountants (AICPA) published an industry audit guide, in which it stated that “except as modified in this guide, they [GAAFR] constitute generally accepted accounting principles”

March 1979 – The National Council on Governmental Accounting (NCGA) issued its Statement No. 1, “Governmental Accounting and Financial Reporting Principles” (NCGA 1)

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History 1984 – Governmental Accounting Standards

Board (GASB) established GASB Statement No. 1

The GASB stated that all NCGA statements and interpretations issued and in effect on that date were accepted as generally accepted accounting principles for governmental accounting

GASB Statement No. 34 Established government-wide financial statements to

be prepared on the accrual basis of accounting and an array of fund-based financial statements

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History The GASB continues to issue new standards to

meet the information needs of users of the financial reports of governmental units.

Accounting for governmental entities is given the general name of fund accounting.

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The Governmental Accounting Standards Board The Governmental Accounting Standards Board (GASB)(GASB)

GASB Created in 1984 A sister organization to the FASB Establishes GAAP for state and local units No authority to establish GAAP for the federal

government Seven members—simple majority vote needed

(4 votes)

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GAAFR: “The Blue Book”GAAFR: “The Blue Book”

“Governmental Accounting, Auditing, and Financial Reporting”

Published by the Government Finance Officers Association (GFOA).

Neither prescribes nor authoritatively interprets GAAP for governmental units.

Provides detailed guidance (many examples) for applying governmental GAAP.

Widely used by governmental units.

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Practice Quiz Question #1Practice Quiz Question #1

Which of the following statements is correct?a. The GASB is responsible to set standards

for governmental units and not-for-profit entities.

b. The FASB was created in 1972 and sets standards for governmental units.

c. The Blue Book contains financial accounting standards for privately held governmental agencies and companies.

d. The GASB is responsible for setting standards for state and local governments but not the federal government.

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Understand and explain major concepts of

governmental accounting.

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Major Concepts of Governmental AccountingMajor Concepts of Governmental Accounting

Elements of a Statement of Financial Condition

1. Assets are resources with present service capacity that the entity presently controls.

2. Liabilities are present obligations to sacrifice resources that the entity has little or no discretion to avoid.

3. A deferred outflow of resources is a consumption of net assets that is applicable to a future reporting period.

4. A deferred inflow of resources is an acquisition of net assets that is applicable to a future reporting period.

5. Net position is the residual of all other elements presented in a statement of financial condition.

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Elements of a the resource flows statements

1. An outflow of resources is a consumption of net assets that is applicable to the current reporting period

2. An inflow of resources is an acquisition of net assets that is applicable to the current reporting period

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Expendability of resources versus capital maintenance objectives

Commercial Enterprises Government Entities

Measurement focusThe flow of all economic resources

Changes in current financial resources available to provide services to the public in accordance with the budget

Method of accounting

Accrual method Modified accrual method

Balance sheet

Contains both current and noncurrent assets and liabilities, and the change in retained earnings reflects the company’s ability to maintain its capital investment

Reports only current assets, current liabilities, and a fund balance

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Which of the following statements is true?a.Governmental units use the modified accrual basis of accounting and focus on the flow of all economic resources.b.Commercial enterprises use the modified accrual basis of accounting and focus on the flow of all economic resources.c.The balance sheets of governmental units contain long-term assets and liabilities.d.The balance sheets of commercial entities contain a fund balance.

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Understand and explain the differences between the

various governmental fundtypes.

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The Nature & Diversity of Governmental ActivitiesThe Nature & Diversity of Governmental Activities

The operations of governmental entities are classified into three categories: Governmental—these activities do not

resemble commercial activities. Proprietary—these activities resemble

commercial activities. Can measure profitability or capital maintenance.

Fiduciary—holding and managing assets owned by others (e.g., pension assets).

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Fund Accounting Accounting for certain activities separately from

all other operations. Fund definition: A fiscal and accounting entity

with a self-balancing set of accounts (like a branch or a division of a commercial entity).

The General Fund: The main and largest fund—records most routine transactions.

The difference between a fund’s assets and liabilities is called:

Use of Fund AccountingUse of Fund Accounting

Government and Fiduciary-type Funds

Proprietary Funds

Fund Balance Net Assets

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Three Types of Funds Governmental Funds

Used to provide basic governmental services to the public

Each entity creates only one general fund, but it may create more than one of each of the other types of funds

Proprietary Funds The objective is to recover the unit’s costs through

user charges Fiduciary Funds


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Major Concepts Major Concepts : Types of Funds: Types of Funds

Governmental Funds General Fund: Accounts for all activities not

required to be accounted for in another fund. Special Revenue Fund: A clone of the General

Fund. Capital Projects Funds Debt Service Funds Permanent Funds

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Proprietary Funds Enterprise Funds:

Provides services primarily to nongovernmental users

Examples: City-owned utilities or recreational facilities

Internal Service Funds: Provides services solely to governmental

departments.

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Fiduciary Funds Trust Funds

Pension (and similar) Trust Funds

Investment Trust Funds

Private-Purpose Trust Funds (these activities do not benefit the government unit)

Agency Funds


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Governmental Fund Types

General fund

Accounts for all financial resources except for those accounted for in another fund. Includes transactions for general governmental services provided by the executive, legislative, and judicial operations of the governmental entity.

Special revenue fund

Accounts for the proceeds of specific revenue sources that are restricted for specified purposes.

Capital projects fund

Accounts for financial resources for the acquisition or construction of major capital facilities that benefit many citizens, such as parks and municipal buildings.

Debt service fundAccounts for the accumulation of resources for, and the payment of, general long-term debt principal and interest.

Permanent fund

Accounts for resources that are restricted such that only earnings, but not principal, may be used in support of governmental programs that benefit the government or its citizenry.

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Proprietary Fund Types

Enterprise fundAccounts for operations of governmental units that charge for services provided to the general public.

Internal service fund

Accounts for the financing of goods or services provided by one department or agency to other departments or agencies of the governmental unit. Services are offered only to governmental agencies.

Fiduciary Fund Types and Similar Component UnitsPension (and other employee benefit)

trust fund

Accounts for resources required to be held in trust for the members and beneficiaries of pension plans, other post-employment benefit plans, or other EBPs.

Investment trust fundAccounts for the external portion of investment pools reported by the sponsoring government.

Private-purpose trust fund

Accounts for all other trust arrangements under which the fund’s resources are to be used to benefit specific individuals, private organizations, or other governments.

Agency fundAccounts for assets held by a governmental unit in an agency capacity for employees or for other governmental units.

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The three major categories of governmental funds are: a.Governmental, commercial, and proprietary.b.Governmental, trust, and fiduciary.c.Enterprise, proprietary, and fiduciary .d.Governmental, proprietary, and fiduciary.e.Governmental Service, proprietary, and commercial

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Understand and explain basic concepts for financial reporting

in governmentalaccounting.

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Financial Reporting of Governmental EntitiesFinancial Reporting of Governmental Entities

Governmental funds – financial statements Balance sheet Statement of revenues, expenditures and

changes in fund balance

The five governmental funds use the current financial resources measurement focus

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Specific General Ledger Accounts Used defined by GASB 54:

Fund AccountingFund Accounting

Government and Fiduciary-type

FundsProprietary Funds

Fund Balance Net Assets

Non-spendable Restricted

Spendable:• Restricted• Limited• Assigned• Unassigned

Unrestricted

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Balance Sheet for Governmental FundsAssets (financial resources available for current use; presented in order of liquidity)

$X,XXX

Total Assets $X,XXX

Liabilities and Fund Balances: Liabilities (due and expected to be paid from current financial resources; presented in order of due date)

$ XXX

Fund Balances Nonspendable $ XX

Spendable: Restricted XX Limited XX Assigned XX Unassigned XX XX

Total Liabilities and Fund Balances $X,XXX

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Statement of revenues, expenditures, and changes in fund balance Often called the operating statement of the

governmental fundsStatement of Revenues, Expenditures, and Changes in Fund Balance

Revenues (recognized when both measurable and available; presented by source of revenue) $XX,XXXExpenditures (approved decreases in net financial resources; presented by function and character) X,XXX

Excess of Revenues over Expenditures $ XXXOther Financing Sources or Uses (other increases or decreases in net financial resources available, such as bond issue proceeds and interfund transfers) XX

Special Items and Extraordinary Items (X)Net Change in Fund Balance $ XXFund Balance—Beginning XXXFund Balance—Ending (reconciles to total fund balance on balance sheet) $ XXX

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Which of the following is true?a. The operating statements of governmental

entities focus on revenues and expenses.b. The balance sheets of governmental entities

focus on the normal accounting equation: Assets – Liabilities = Owner’s Equity.

c. The operating statements of governmental entities focus on revenues and liabilities.

d. The balance sheets of governmental entities focus a modified accounting equation: Assets – Liabilities = Fund Balance.

e. All governmental fund balances are spendable.

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Understand and explain the basic differences in the

measurement focus and basisof accounting between

governmental and private sector accounting.

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Measurement Focus And Basis Of Accounting Measurement Focus And Basis Of Accounting (MFBA)(MFBA)

Measurement Focus What flows to measure for operations.

Basis of Accounting When should transactions and events be recognized

in the financial statements.

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MFBA: Governmental ActivitiesMFBA: Governmental Activities

Measure flow: Current financial resources

Basis of Accounting: Modified accrual basis of accounting

• Present a Statement of Revenues and Expenditures and Changes in Fund Balance

- shows financial resources received and spent. - shows change in net financial resources available for spending in the near future.

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MFBA: Current Financial ResourcesMFBA: Current Financial Resources

Current financial resources: Cash, property tax receivables, prepaids, and

supplies inventories.

Claims against current financial resources: Wages, payroll taxes, payables to vendors, and

liabilities expected to be paid in the near future (typically within 60 days after the year-end).

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MFBA: Proprietary and Fiduciary ActivitiesMFBA: Proprietary and Fiduciary Activities

Measure flow: All economic resources

Basis of Accounting: Accrual basis of accounting

• Present a Statement of Revenues and Expenses

- shows the change in the economic condition• Also present a Statement of Cash Flows

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Measurement Focus and Basis of AccountingMeasurement Focus and Basis of Accounting

The modified accrual basis is used in funds that have a flow of current financial resources measurement focus The five governmental funds have this focus

The accrual basis is used in funds that have a flow of economic resources measurement focus Proprietary funds and fiduciary funds have this

focus The government-wide financial statements

are based on the accrual basis

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Modified Accrual Basis Funds Governmental funds

General Fund

Special Revenues Fund

Capital Projects Funds

Debt Service Funds

Permanent Funds


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Accrual Basis Funds Proprietary funds

Enterprise Funds

Internal Service Funds

Fiduciary funds (3 Trust & 1 Agency)

The two propriety funds and the three trust funds have either a profitability or capital maintenance orientation.

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Modified Accrual Basis Revenues: Recognize in period in which they

become available and measurable. Available means: Collectible within the current period or

soon enough thereafter to be used to pay current period liabilities.

Expenditures: Recognize in the accounting period in which the liabilities are both measurable and incurred and are payable out of current financial resources. One exception exists for interest on general long-term

liabilities.


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Recognition of revenue: how revenues are recognized depends on the category1. Derived tax revenues, resulting from assessments on exchange

transactions The asset is recognized when the underlying transaction occurs or

resources are received, whichever comes first. Revenue recognition depends on the accounting basis used to measure

the transaction.

2. Imposed nonexchange revenues, resulting from assessments on nongovernmental entities, including individuals The asset is recognized when the government has an enforceable legal

claim to the resources or the resources are received, whichever comes first.

Revenue recognition is made in the period when use of the resources for current expenditures is first permitted or required, or at the time the asset is recorded if no time restriction on the fund’s use of the resources exists.

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Recognition of revenue: how revenues are recognized depends on the category3. Imposed nonexchange revenues, resulting from assessments on

nongovernmental entities, including individuals The asset is recognized when the government has an enforceable legal

claim to the resources or the resources are received, whichever comes first.

Revenue recognition is made in the period when use of the resources for current expenditures is first permitted or required, or at the time the asset is recorded if no time restriction on the fund’s use of the resources exists.

4. Government-mandated nonexchange transactions, resulting from one governmental unit’s provision of resources to a governmental unit at another level and the requirement that the recipient use the resources for a specific purpose

5. Voluntary nonexchange transactions, resulting from legislative or contractual agreements, other than exchanges

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The modified accrual basis of accounting:a. recognizes revenues when earned and

expenditures when incurred.b. recognizes revenues when they become

available and measureable and expenditures when liabilities become measurable and incurred.

c. recognizes revenues when earned and expenses when incurred

d. recognizes revenues when they become available and measureable and expenditures when they become available and spendable.

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Understand and explain basic budgeting concepts in

governmental accounting.

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Budgetary Aspects of Governmental OperationsBudgetary Aspects of Governmental Operations

Budgets Used in governmental accounting to assist in

management control and to provide the legal authority to levy taxes, collect revenue, and make expenditures in accordance with the budget

Types of budgets: Operating budgets

Capital budgets

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Appropriation: The statutory authorization for spending a budgeted amount during a coming year.

Annual Budgets for the General Fund and the Special Revenue Funds are always recorded in the general ledger for control purposes. Also done for Capital Projects Funds and Debt Service Funds if

useful.

Encumbrances: Commitments related to unperformed (executory) contracts for goods or services.

Special general ledger accounts are used to record encumbrances—the purpose is to prevent spending more than has been appropriated.

Budget entries have no effect on reported operations.

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Introduction: Budget / Expenditure ProcessIntroduction: Budget / Expenditure Process

1. Budget—Recorded in the books CAPITAL LETTERS (legally binding)

2. Expenditures Appropriation (authorization of the expenditure) Encumbrance (set aside or reserve part of the

budgetary appropriation) Expenditure Disbursement

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Recording the Operating BudgetAssume that at January 1, 20X1, the first day of the new fiscal period, the city council of Barb City approves the operating budget for the general fund, providing for $900,000 in revenue and $850,000 in expenditures. Approval of the budget provides the legal authority to levy the local property taxes and to appropriate resources for the expenditures. The entry made in the general fund’s accounting records on this date is as follows:


January 1, 20X1(1) ESTIMATED REVENUES CONTROL 900,000

APPROPRIATIONS CONTROL 850,000BUDGETARY FUND BALANCE—UNASSIGNED 50,000

Record general fund budget for year.

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The ESTIMATED REVENUES CONTROL account is an anticipatory asset.

The APPROPRIATIONS CONTROL account is an anticipatory liability.

The excess of estimated revenues over anticipated expenditures is the budget surplus and is recorded to BUDGETARY FUND BALANCE—UNASSIGNED.

Some approved budgets have budget deficits in which expected expenditures exceed anticipated revenue. These budgets are recorded with a debit to BUDGETARY

FUND BALANCE—UNASSIGNED.


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Example: Budget / Expenditure ProcessExample: Budget / Expenditure Process

Assume a municipality approves the following budged: $900,000 in Revenues $850,000 in Appropriations

An appropriation of $15,000 is approved, but the final voucher is paid for only $14,000.

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1. Budget

2. Expenditures Appropriation

Authorization of the expenditure (Annual Budget) Person with authority (each expenditure authorized)

Encumbrance

ESTIMATED REVENUES CONTROL 900,000APPROPRIATIONS CONTROL 850,000BUDGETARY FUND BALANCE—UNASSIGNED 50,000

ENCUMBRANCES 15,000BUDGETARY FUND BALANCE—ASSIGNED FOR ENC. 15,000

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2. Expenditures Expenditure

Disbursement

BUDGETARY FUND BALANCE—ASSIGNED FOR ENC. 15,000ENCUMBRANCES 15,000

Expenditures 14,000Vouchers Payable 14,000

Vouchers Payable 14,000Cash 14,000

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Text Page 837Text Page 837

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Why to state and local governments record encumbrances?

a. To ensure that the entity earns sufficient revenues to achieve profitability.

b. To ensure that the entity does not spend more than has been appropriated.

c. To ensure that all sub-entities within the organization are not encumbered.

d. To ensure that the entity spends at least as much as has been appropriated.

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Make calculations and record journal entries for the general

fund.

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Accounting for ExpendituresAccounting for Expenditures

The Expenditure Process Step 1. Appropriation

The budget provides the appropriating authority to make future expenditures.

Step 2. Encumbrance An encumbrance is a reservation of part of the budgetary

appropriation and is recognized at the time an order is placed for goods or services.

Step 3. Expenditure An expenditure and a corresponding liability are recorded when

the governmental entity receives the goods or services ordered in Step 2.

Step 4. Disbursement A disbursement is the payment of cash for expenditures.

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Comparison of Accounting for Lapsing and Comparison of Accounting for Lapsing and Nonlapsing Encumbrances at Year-EndNonlapsing Encumbrances at Year-End

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Two Ways to Account for Supplies InventoriesTwo Ways to Account for Supplies Inventories

Consumption Method The preferred method—it parallels business practice. The acquisition of inventory is treated as the conversion

of resources (debit Inventory). The use of inventory is treated as an outflow of

resources (credit Inventory and debit Expenditures or Expenses).

Purchases Method The acquisition of inventory is treated as an outflow of

resources (debit Expenditures or Expenses).

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Two Ways to Account for Supplies InventoriesTwo Ways to Account for Supplies Inventories

The specific method to follow depends on the governing unit’s policy and how inventory expenditures are included in the budget.

Immaterial inventories need not be shown on the balance sheet

If the inventory is material, it is presented as an asset on the balance sheet. An amount equal to the inventory also should be shown as a

reservation of the fund balance, indicating that that amount is no longer expendable.

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Accounting for fixed assets Governmental funds: Recognized as an expenditure in

the year the asset is acquired Proprietary funds: Account for acquisitions of capital

assets in the same manner as commercial entities

Works of art and historical treasures For the purposes of government-wide financial

statements, governments should capitalize these assets at their historical costs at acquisition or at their fair values at the date of the contribution

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Long-term debt and capital leases The governmental funds record the proceeds from a

bond issue as a debit to Cash and a credit to Bond Issue Proceeds, an other-financing source.

Bond issue proceeds are not revenue because the bonds must be repaid.

Bonds are not reported on the governmental funds’ balance sheets but only on the government-wide financial statements.

Capital leases are accounted for in a manner similar to long-term debt.

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Investments GASB 31 established a general rule of fair market

valuation for investments held by a government entity. Changes in the fair value of investments should be

recognized as an element of investment income in the operating statement (or statement of activities) of each fund.

GASB 40 requires footnote disclosures of the policies and the profiles of the government’s investment portfolios.

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Group Exercise: Group Exercise: Comprehensive General Fund Entries Comprehensive General Fund Entries

The City of Cottersen, Texas is a small town with a population of approximately 15,000. The city noted the following transactions during fiscal 20X8.

REQUIRED1.Prepare General Fund journal entries only for these items.

2.Prepare closing entries at 6/30/X8.

3.Prepare a Statement of Revenues, Expenditures, and Changes in Fund Balance as of 6/30/X8.

4.Provide a summary of the fund balance by category as of 6/30/X8.

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Group Exercise: Group Exercise: Requirement 1 (Journal Entries)Requirement 1 (Journal Entries)

1. The Cottersen city council approved the following budget:Estimated revenues $820,000Authorized expenditures (including $65,000 reappropriated for encumbrances outstanding at 6/30/X7 that had lapsed) 720,000Authorized transfers out to other funds($35,000 and $20,000) 55,000Estimated inflow from the discontinuance ofthe Auto Repair Internal Service Fund 25,000

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2. The city levied property taxes totaling $570,000. Of this amount, $10,000 was estimated to be uncollectible. Collections during the year totaled $525,000, of which $12,000 were associated with property taxes levied in the prior year that had been declared delinquent at the end of the prior year. All of the remaining property taxes receivable at the beginning of the current year, totaling $5,000, were written off as uncollectible. The net realizable amount at 6/30/X8 ($11,000) is expected to be collected within 60 days.

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Allowance for Uncollectibles—Delinquent

Property Taxes Receivable—Delinquent



12,000 Collected

Given 5,000

BB 17,000 6,000 BB

5,000 5,000Writeoff 1,000 Left over

NRV = 11,000

Close out

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3. The estimated revenues for the year include a $44,000 entitlement from the federal government. During the year, the city received $50,000.

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4. The City’s income taxes, sales taxes, permits, licenses, and other miscellaneous revenues totaled 225,000.

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5. Encumbrances outstanding at the beginning of the year totaled $60,000. The goods and services related to these encumbrances were received along with invoices for $58,000.


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5. Encumbrances outstanding at the beginning of the year totaled $60,000. The goods and services related to these encumbrances were received along with invoices for $58,000.


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6. Purchase orders and contracts totaling $380,000 were entered into during the year. For $340,000 of this amount, invoices that totaled $336,000 for services and goods were received. The city generally allows encumbrances outstanding at year-end to laps but reappropriates the amounts in the following year to honor the encumbrances. Of the $336,000 invoiced, $75,000 relates to the acquisition of supplies inventory. The city uses the consumption method for accounting for supplies.

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6. Purchase orders and contracts totaling $380,000 were entered into during the year. For $340,000 of this amount, invoices that totaled $336,000 for services and goods were received. The city generally allows encumbrances outstanding at year-end to laps but reappropriates the amounts in the following year to honor the encumbrances. Of the $336,000 invoiced, $75,000 relates to the acquisition of supplies inventory. The city uses the consumption method for accounting for supplies.

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7. Payroll and other items not involving the use of purchase orders and contracts totaled $270,000. This amount does not include interfund billings.

8. Cash disbursements (not including payments to other funds) totaled $750,000.

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9. The Auto Repair internal service fund was discontinued as determined by the city council at the beginning of the year. The actual amount disbursed to the General Fund when the fund was discontinued was $22,000.

10. A payment was made for $30,000 to the Electric Utility Enterprise Fund to make up its operating deficit, which had originally been estimated to be $35,000.

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11. A $20,000 payment was made to a Capital Projects fund to cover a portion of street improvements (which was exactly the amount budgeted).

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12. The Electric Utility Enterprise fund billed the city for a total of $28,000 for electricity used by the city and supplied by the Electric Utility. The cash disbursements throughout the year for periodic billings totaled $24,000.

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13. The City disbursed $79,000 to the City Center for the Performing Arts Enterprise Fund as a loan. The repayment is expected in three years.

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14. A physical count of the supplies inventory at year-end indicates that the balance decreased from $44,000 to $41,000 during the year.

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Group Exercise: Group Exercise: Requirement 2 (Closing Entries)Requirement 2 (Closing Entries)

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Group Exercise: Group Exercise: Requirement 2 (Closing Entries)Requirement 2 (Closing Entries)

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Group Exercise: Group Exercise: Requirement 2 (Requirement 2 (Statement of Revenues, Statement of Revenues, Expenditures, and Changes in Fund Balance)Expenditures, and Changes in Fund Balance)

Variance FavorableBudget Actual (Unfavorable)

Revenues:Property taxes ($560,000 + $1,000)$570,000)

$561,000) $(9,000))Intergovernmental entitlement 44,000) 50,000)

6,000)Miscellaneous 206,000) 225,000) 19,000)

Total Revenues $820,000) $836,000) $16,000)

Expenditures: 720,000) 715,000) 5,000)Excess of Revenues over Expenditures $100,000) $121,000) $21,000)

Other Financing Sources (Uses):Transfer in from Auto RepairInternal Service Fund $25,000)

$22,000) $(3,000)Transfers Out—

to Electric Utility Enterprise Fund (35,000) (30,000)5,000)

to Capital Projects Fund (20,000) (20,000) 0)Total Other Financing Sources (Uses)

$(30,000) $(28,000) $2,000)

Excess of Revenues over Expenditures and Other Financing Uses: $70,000) $93,000) $(7,000)

Fund Balance – 7/1/X7 100,000) 100,000) 0)

Fund Balance – 6/30/X8 $170,000) $193,000) $23,000)

)Note:The large favorable variance is attributable primarily to encumbrances of $40,000 outstanding at year-end that will be reflected as expenditures in the following year.

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Group Exercise: Group Exercise: Requirement 4 (Fund Balance Summary)Requirement 4 (Fund Balance Summary)

Fund Balance:Nonspendable:

Supplies Inventory $ 41,000

Spendable:Assigned forGovernmental

Services 40,000Unassigned 112,000

Total Fund Balance $193,000

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Make calculations and record journal entries for basic

interfund activities.

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Interfund ActivitiesInterfund Activities

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Overview of Accounting and Financial Reporting for Overview of Accounting and Financial Reporting for the General Fundthe General Fund

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Overview of Accounting and Financial Reporting for Overview of Accounting and Financial Reporting for the General Fundthe General Fund

Documents

Governmental Entities: Introduction and General Fund Accounting