Upload
lamkiet
View
244
Download
8
Embed Size (px)
Citation preview
© The McGraw-Hill Companies, Inc., 2001
Slide 16-1
McGraw-Hill/Irwin
16
C H A P T E R
Accounting for State and Local Governments
(Part One)
© The McGraw-Hill Companies, Inc., 2001
Slide 16-2
McGraw-Hill/Irwin
Governmental 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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-3
McGraw-Hill/Irwin
Governmental 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
© The McGraw-Hill Companies, Inc., 2001
Slide 16-4
McGraw-Hill/Irwin
Accountability and Governmental Accounting
Governmental Accounting Statements attempt to answer 3 questions related to
accountability:
Where did the financial resources
come from?
Where did the financial
resources go?
What amount of financial resources is presently held?
© The McGraw-Hill Companies, Inc., 2001
Slide 16-5
McGraw-Hill/Irwin
Government-wide Financial Statements
GASB Statement No. 34
Requires the production of two sets of 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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-6
McGraw-Hill/Irwin
Reporting 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
© The McGraw-Hill Companies, Inc., 2001
Slide 16-7
McGraw-Hill/Irwin
Governmental Funds
Accounting for activities related
to serving the public.
Proprietary Funds
Accounting for business-type
activities.
Fiduciary Funds
Accounting for financial
resources held for others in a
trustee capacity.
Fund Accounting Classification
All funds fall into one of three broad classifications.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-8
McGraw-Hill/Irwin
Fund Accounting ClassificationGovernmental Funds
G en eralF und
SpecialReven ue
F un d
Cap italPro jects
F und
DebtService
F un d
Perm anen tF un d
(En d ow m en ts)
G overnm enta l F unds
© The McGraw-Hill Companies, Inc., 2001
Slide 16-9
McGraw-Hill/Irwin
Fund Accounting ClassificationProprietary Funds
Enterprise Fund Internal ServiceFund
Proprie ta ry F unds
© The McGraw-Hill Companies, Inc., 2001
Slide 16-10
McGraw-Hill/Irwin
Fund Accounting ClassificationFiduciary Funds
Investm entT rust Funds
Private PurposeT rust Funds
PensionT rust Funds
AgencyFunds
Fiducia ry Funds(O nly used for funds
held for external parties)
© The McGraw-Hill Companies, Inc., 2001
Slide 16-11
McGraw-Hill/Irwin
Understanding The Accounting Process
Fund-Based Financial Statements
Government-Wide Financial Statements
Governmental Funds
Use the current financial resources measurement focus and modified accrual accounting for the timing of revenue and expenditure recognition.
Use the economic resources measurement focus and accrual accounting for the timing of revenue and expense recognition.
Proprietary Funds
Use the economic resources measurement focus and accrual accounting for the timing of revenue and expense recognition.
Use the economic resources measurement focus and accrual accounting for the timing of revenue and expense recognition.
Fiduciary Funds
Use the economic resources measurement focus and accrual for the timing of revenue and expense recognition.
Not applicable
© The McGraw-Hill Companies, Inc., 2001
Slide 16-12
McGraw-Hill/Irwin
Now, let’s look
at an overview
of the Fund-
Based
Statements.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-13
McGraw-Hill/Irwin
Fund-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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-14
McGraw-Hill/Irwin
Fund-Based Financial Statements
These statements will differ from the Government-Wide financial statements for three reasons.
3
The proprietary funds are reported in a separate statement.
The current financial resources measurement basis is used.
The modified accrual accounting approach is used.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-16
McGraw-Hill/Irwin
Statement of Revenues, Expenditures, and Changes in Fund Balances - Example
ContinueContinue
© The McGraw-Hill Companies, Inc., 2001
Slide 16-17
McGraw-Hill/Irwin
Statement of Revenues, Expenditures, and Changes in Fund Balances - Example
© The McGraw-Hill Companies, Inc., 2001
Slide 16-18
McGraw-Hill/Irwin
Let’s look at an overview of
the Government-
Wide Statements.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-19
McGraw-Hill/Irwin
Government-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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-20
McGraw-Hill/Irwin
Statement of Net Assets - Example
Note that we keep the
Governmental Activities
separate from the Business-
Type Activities.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-21
McGraw-Hill/Irwin
Statement 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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-22
McGraw-Hill/Irwin
Statement of Activities - Example
The net for a given function is determined horizontally, while the
totals for expenses and revenues are
determined vertically.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-23
McGraw-Hill/Irwin
Statement of Activities - Example
The general revenues are
shown separately at the bottom of
the statement.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-24
McGraw-Hill/Irwin
Let’s look at the accounting
procedures for the Governmental
Accounts for both the Fund-Based and Government-Wide
Statements.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-25
McGraw-Hill/Irwin
Recording 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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-26
McGraw-Hill/Irwin
Prepare the journal entry to record the Special Revenue
Fund budget.
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.
Recording Budgetary Entries
© The McGraw-Hill Companies, Inc., 2001
Slide 16-27
McGraw-Hill/Irwin
Prepare the journal entry to record the General Fund budget.
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.
Recording Budgetary Entries
© The McGraw-Hill Companies, Inc., 2001
Slide 16-28
McGraw-Hill/Irwin
Budget Encumbrance Actual
Encumbrances
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”.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-29
McGraw-Hill/Irwin
Encumbrances
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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-30
McGraw-Hill/Irwin
Record the order in Drye Township’s books.
EncumbrancesExample
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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-31
McGraw-Hill/Irwin
Record the receipt of the supplies in Drye Township’s books for the Fund-
Based Statements.
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).
EncumbrancesExample
This is the account title typically used in governmental accounting in
place of Accounts Payable.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-32
McGraw-Hill/Irwin
Record the receipt of the supplies in Drye Township’s books for the Government-Wide Statements.
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).
EncumbrancesExample
Note that with the Government-Wide Financial Statements, no entry is
necessary for the encumbrances used with the Fund-Based Statements.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-33
McGraw-Hill/Irwin
Fund-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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-34
McGraw-Hill/Irwin
Government-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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-35
McGraw-Hill/Irwin
Classifications Derived Tax Revenues Imposed Nonexchange
Revenues Government-mandated
Nonexchange Transactions
Voluntary Nonexchange Transactions
Recognition of RevenuesNonexchange 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”.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-36
McGraw-Hill/Irwin
Prepare the journal entry to record the bonds for government-wide statements.
Issuance 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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-37
McGraw-Hill/Irwin
Prepare the journal entry to record the bonds for fund-based statements.
Issuance 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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-38
McGraw-Hill/Irwin
Prepare the journal entry to record the loan payment for government-wide statements.
Payment 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.
© The McGraw-Hill Companies, Inc., 2001
Slide 16-39
McGraw-Hill/Irwin
Prepare the journal entry to record the loan payment for fund-based statements.
Payment 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.