Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

CHAPTER 3:

GOVERNMENTAL OPERATING STATEMENT ACCOUNTS; BUDGETARY ACCOUNTING

OUTLINE

Number +ue$&io,$: 3-1 3-% 3-3 3-' 3-) 3-+ 3-3-/ 3-1 3-10 C#$e$: 3-1 3-% 3-3

Topi Distinguishing characteristics o und-!ased and government-"ide inancial statements Distinguishing direct and indirect e&penses Statement o activities ormat (rogram and general revenue *&traordinary compared "ith special items *&penditure classi ications,e&amples .emporary and permanent accounts 0evenue classi ications Budgetary comparison schedules2statements (u!lic school systems 0evenue and e&pense2e&penditure classi ication Budgetary comparison schedule

T!pe"T#$% #denti y and descri!e De ine and descri!e Descri!e Distinguish De ine and compare Classi y Distinguish Classi y *&plain *&plain #nternet3 e&amine3 descri!e #nternet3 e&amine3 descri!e Analy5e3 calculate3 and e&plain #nternet3 e&amine3 descri!e *&amine 8ultiple Choice

S&#&u$ 're: ()"e* $e" $e" 3-% revised Same 3-) e&panded Same 3-- revised Same Same Same Same Same $e" $e"

*stimating the re4uired property ta& rate; economic and political considerations 3-' Standardi5ed accounting and reporting or .e&as pu!lic schools E-er i$e$"Prob.em$: 3-1 CA60 3-% 7arious 3-3 3-' 3-) 3-+ 3-3-/ 3-1 3-10 .o"n o .ruesdale,!eginning and ending spenda!le und !alances Budgetary control over e&penditures 0ecording !udget 0ecording encum!rances 0ecording !udgetary and operating transactions Su!sidiary ledgers Computeri5ed accounting system,departmental !udgetary comparison report Government-"ide statement o activities
3-1

0evised ) items are ne"; rest are same2revised *&plain and calculate 3-3 revised *&amine3 e&plain3 9ournal entries :ournal entries :ournal entries :ournal entries3 calculate Calculate Analy5e and e&plain (repare $e" 3-' revised 3-) revised 3-1 3-+ Same 3-10 revised

Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

CHAPTER 3: GOVERNMENTAL OPERATING STATEMENT ACCOUNTS; BUDGETARY ACCOUNTING

Ans"ers to ;uestions 3-1< .he governmental und inancial statements report detailed current inancial resources in ormation intended to help users assess current period fiscal accountability,"hether revenues "ere raised only rom authori5ed sources and e&pended or authori5ed purposes< Government-"ide inancial statements3 on the other hand3 are intended to provide a !road overvie" o the governmental and !usiness-type activities or the government as a "hole< .he government-"ide statements ocus on economic resources recogni5ed on the accrual !asis o accounting,similar to the ocus and !asis o accounting used in !usiness entity reporting< .he governmental operating statement =statement o revenues3 e&penditures and changes in und !alances> reports the in lo"s and out lo"s o current inancial resources and changes in und !alances during the iscal period< .he government-"ide operating statement =statement o activities> reports net unction2program in lo"s2out lo"s o economic resources =i<e<3 unction2program revenues and e&penses> and the in lo" o general =non- unction2program> revenues< .he !ottom line is the change in net position or the period< ?sing the net =e&pense> or revenue ormat recommended !y GASB standards re4uires reporting o e&penses that are directly related to a unction or program on the same line as that unction or program< #ndirect e&penses3 those that are not directly related to a unction or program3 such as interest on long-term de!t3 should !e reported on a separate line< #t is important to correctly identi y the nature o the e&penses so they "ill !e reported on the line o the right unction or program3 or as a separate line item< Other"ise3 incorrect amounts "ill !e reported or particular unctions2program costs< GASB recommends using a @cost o programsA ormat or the statement o activities< ?sing this ormat3 the direct e&penses o each unction or program are reported on the same line as revenues related to that unction or program; the di erence is reported as net =e&pense> revenue< General revenues are added at the !ottom o the statement to report the change in net position or the period< ?sing the net =e&pense> or revenue ormat reports the e&tent to "hich each unction or program is sel -supporting rom ees and intergovernmental aid3 or must !e su!sidi5ed !y general revenues o the government< .his is important in ormation or assessing cost o services and evaluating "hether to continue to provide services or outsource them< a. b< c. d< e< f. g. General revenues< (rogram revenues. (rogram revenues< (rogram revenues< (rogram revenues< General revenues< General revenues<

3<%<

3<3<

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Ans"ers =ContBd>

3-)<

Extraordinary items are those items =gains or losses> that are !oth unusual in nature and in re4uent in occurrence< Special items are either unusual in nature or in re4uent in occurrence3 !ut not !oth< Special items also di er rom e&traordinary items in that they are "ithin the control o management< Both types o items are reported as separate line items !elo" General 0evenues in the statement o activities< Such items that also a ect governmental unds should !e reported in a @special and e&traordinary itemsA section immediately !elo" the @Other inancing sources and usesA section o the governmental unds statement o revenues3 e&penditures3 and changes in und !alances< a< b< c< d< e< Organi5ation unit 6unction Activity Activity O!9ect f< g< h. i. j. Both character and o!9ect (rogram 6unction Organi5ation unit O!9ect

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De initions o these terms are given in the Glossary o the te&t< Belo" are !rie er statementsC a. Expenditures and encumbrances are !oth charges against appropriations< An encumbrance is a charge or an estimated amount at the time goods are ordered; an expenditure is a charge or an actual amount at the time the goods are received =accrual and modi ied accrual !asis> or paid =cash !asis>< *ncum!rance accounting is used only in those unds "here it is needed to achieve !udgetary control over e&penditures< Revenues are increases in net position o the government as a "hole or o a und other than rom inter und trans ers or de!t issue proceeds3 recogni5ed at the time the increase is earned =accrual !asis>3 availa!le or use =modi ied accrual !asis> or received in cash =cash !asis>< Estimated revenues are amounts e&pected to !e availa!le or use or received under ena!ling legislation during a !udget period< *stimated 0evenues is a !udgetary account representing the e&pected amount o revenues to !e reali5ed rom various sources< .he term encumbrances is de ined in a a!ove< Encumbrances Outstanding is a memorandum account that permits dou!le-entry !ooDDeeping o encum!rances< #t al"ays has the same !ut opposite !alance o the control account Encumbrances.

b.

c.

d. Expenditures is de ined in a a!ove< An appropriation is an authori5ation !y the legislative !ranch or administrators to incur e&penditures or speci ied purposes not to e&ceed speci ied amounts< ?sually the authori5ation is or a limited time< Appropriations is a !udgetary account<

3-3

Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Ans"ers3 3-- =ContBd>

e. Expenditures3 de ined in a a!ove3 represent out lo" o current inancial resources or asset ac4uisition as "ell as or salaries3 supplies or immediate consumption3 travel3 and so orth,"hatever is speci ied in the appropriations< .he term is used in und inancial statements< Expenses3 in governmental accounting as "ell as !usiness accounting3 are e&pired costs; the ull cost o services or goods consumed in providing services to citi5ens and others< *&penses are ound in the government-"ide inancial statements as "ell as in the proprietary inancial statements< 3-/< a< b. c< d< .a&es Charges or services Eicenses and permits 6ines and or eits e. f. g< h< #ntergovernmental revenue 8iscellaneous revenues Charges or services Eicenses and permits

3<1<

Budgetary comparison schedules =or statements> must !e provided or the General 6und and each ma9or special revenue und or "hich a !udget is adopted< #n order or !udget to actual comparisons to !e meaning ul3 actual revenues and e&penditures must !e reported in the same manner as the !udgeted amounts< Actual revenues and e&penditures reported in the statement o revenues3 e&penditures3 and changes in und !alances should !e on the GAA( !asis< GASB standards identi y several possi!le di erences !et"een GAA( and !udgetary inancial accounting< .hese include !asis3 timing3 perspective3 and entity< GASB re4uires reconciliation o the di erences !et"een amounts reported in the GAA( !asis operating statement and those reported in the !udgetary comparison schedule3 either on the ace o the !udgetary comparison schedule or on a separate page< (u!lic school systems are e&pected to ollo" the classi ication system speci ied !y the $ational Center or *ducation Statistics =$C*S>3 as re ined or mandated !y a state education oversight !ody< .he $C*S system com!ines the GASB e&penditure classi ication structure into nine categories3 most o "hich are necessary or ade4uate internal management and compara!le inancial reporting across schools< .he $C*S revenue classi ication scheme also groups classi ications into numerous categories3 !ut are generally classi ied !y und3 source3 and pro9ect2reporting code< .he $C*S e&penditure and revenue dimensions should !e compared "ith the corresponding GASB e&penditure and revenue classi ications descri!ed in this chapter< GASB standards re4uire that e&penditures !e classi ied !y und3 unction or program3 organi5ation unit3 activity3 character3 and o!9ect and that revenues !e classi ied !y und and source< Comparison o the $C*S and GASB classi ication sho"s that they are generally compati!le3 !ut the $C*S classi ication structure is considera!ly more detailed to meet the uni4ue reporting needs o pu!lic school systems<

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Solutions to Cases 3-1< Students should easily !e a!le to locate a cityBs Fe! site3 then e&plore the 6inance Department =or compara!le name> linD and looD or linDs to inancial reports< 0esponses to each o the 4uestions in this case "ill depend on ho" a particular city classi ies its revenues and e&penses2e&penditures< a. Occasionally3 one may ind a city that classi ies its program revenues and direct e&penses !y program3 !ut unctional classi ications3 similar to those descri!ed in this chapter3 are much more common< #n most cases3 all unction or program line items on the statement o activities "ill report a net e&pense3 "ith num!ers in parentheses< .his is not a pro!lem since most unctions are supported in part rom general revenues reported at the !ottom o the statement o activities< b. On the statement o revenues3 e&penditures3 and changes in und !alances3 revenues and e&penditures are reported in separate columns or the General 6und and other major governmental unds< #n ormation or all nonma9or governmental unds is reported in aggregate in a single column< Students "ill liDely ind that the revenues reported on this statement are classi ied !y source =ta&es3 licenses and permits3 charges or services3 etc<>< Some cities "ill report a di erent amount or ta& revenues on their statement o activities than on their statement o revenues3 e&penditures3 and changes in und !alances !ecause all ta& revenues levied or the year "ill !e reported on the ormer statement3 "hile those that "ill not !e collected during the current iscal year or "ithin +0 days therea ter "ill !e reported as de erred ta&es on the latter statement< c. *&penditures "ill generally !e classi ied !y unction on the statement o revenues3 e&penditures3 and changes in und !alances and3 in re4uently3 !y program< Students are almost certain to ind di erent amounts reported or e&penses on the statement o activities and e&penditures on statement o revenues3 e&penditures3 and changes in und !alances< Among other e&planations3 e&penses e&clude outlays or capitali5ed assets3 !ut include depreciation e&pense; e&penditures include capital outlays !ut e&clude depreciation e&pense< Generally3 e&penses and e&penditures "ill not !e the same amounts or the reasons 9ust e&plained< 3<%< Again the responses to individual 4uestions "ill depend on the practices o the particular city selected< Some general e&pectations or each 4uestion includeC a. .ypically more detail is provided or revenues and e&penditures in the !udgetary comparison schedule3 though not al"ays< .he reason or including more detail in the !udgetary comparison schedule3 !oth or revenues and e&penditures3 is to !etter match the level o detail used in the !udget document< 6or revenues3 cities o ten report !udget and actual in ormation or su!classes o sources3 such as various types o ta&es< 6or e&penditures3 cities o ten report !udget and actual in ormation or organi5ation units and o!9ects<

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 Case 3-% =ContBd>

b. Students "ill pro!a!ly ind that actual revenues on the !udgetary comparison schedule agree in amount "ith those reported on the GAA( operating statement< # a di erence is noted !et"een these amounts3 it is liDely attri!uta!le to revenues !eing recogni5ed on a cash !asis or !udgetary purposes3 rather than modi ied accrual< c. Some students "ill discover that actual e&penditures on the !udgetary comparison schedule di er rom those reported on the GAA( operating statement< .he e&planation given in most o these cases "ill !e that e&penditures on the !udgetary comparison schedule also include encum!rances outstanding at year-end< d. # actual revenues and2or e&penditures are prepared on a non-GAA( !udgetary !asis3 the !udgetary comparison schedule should indicate such3 either in the schedule heading or the Actual column heading< e. Although a variance column is not re4uired !y GASB standards3 it is di icult to imagine a city not providing a column sho"ing the variance !et"een the actual and the inal !udget amounts< 3<3< a. .he estimated amount o the re4uired property ta& levy is calculated3 in good orm3 as ollo"sC

U,i/er$i&! Ci&! Ge,er#. 0u,1 E$&im#&e o2 Amou,& &o Be R#i$e1 b! Proper&! T#-e$ 0or 0i$ #. Ye#r E,1i,3 4u,e 356 7587 A$ o2 Curre,& D#&e9M#! (6 758( E$&im#&e1 re$our e re:uireme,&$: *stimated e&penditures3 remainder o 6G %0H1 Appropriations proposed or 6G %0H% *stimated spenda!le und !alances re4uired3 !eginning o 6G %0H3 .otal estimated resource re4uirements E$&im#&e1 re$our e$ #/#i.#b.e #,1 &o be r#i$e16 o&;er &;#, 2rom proper&! &#-e$: Actual spenda!le und !alances3 8ay 1 o 6G %0H1 6rom estimated revenues3 remainder o 6G %0H1 6rom revenues in 6G %0H%3 other than property ta&es .otal estimated resources availa!le3 other than property ta&es Amou,& re:uire1 2rom proper&! &#-e$ i, 0Y 7587 b.

I 1%3-/+3000 -+311)3000 1)3%%33000 10'31%'3000

I1+3%013000 1%3-0%3000 ++3'1'3000 1)331-3000 I /3/0-3000

Calculation o the re4uired ta& rate =assuming the ull ta& levy "ill !e collected>C Since ?niversity CityBs legal ta& rate is e&pressed as I per I100 o assessed valuation3 the irst step is to divide the assessed valuation !y 1003 giving I'13'--3)%/< .he re4uired ta& rate J I/3/0-3000 2 I'13'--3)%/ J I0<1-/3 or I0<1/ =rounded up as is customary> per I100 o assessed valuation<

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 Case 3-3 =ContBd>

c.

6rom an economic vie"point3 the city manager should have little di iculty selling the city council on the re4uired one cent ta& increase in 6G %0H% property ta&es< She2he should point out that the assessed valuation o property has decreased !y ) percent rom last year< A comparative analysis sho"s the ollo"ing results< 6G %0H1 ta& levyC I0<1- H =I'13'--3)%/ 2 <1)> J I/3/)33/-3<'3 6G %0H% ta& levyC I0<1/ H I'13'--3)%/ J I/310)31))<0'3 "hich is only I)%30/1<+13 or 0<+ percent3 larger than the 6G %0H1 ta& levy< So3 the Dey point the city manager should maDe is that although the ta& rate "ill !e one cent higher3 the proposed 6G %0H% ta& levy is only slightly higher than the 6G %0H1 levy3 !ecause o the ) percent decrease in assessed valuation< Despite the only slight increase in the actual ta& levy3 political considerations could maDe it di icult or the city manager to convince the city council to accept the one cent increase in property ta& rate< .hey may vie" the proposal as @a ta& increase is a ta& increase3 regardless o the amount<A # so3 city o icials may have to looD or additional cuts in proposed spending or the orthcoming iscal year<

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.he reader can hardly help !ut notice the e&tensive coding scheme re lected !y the code structure sho"n in *&hi!it 30 o the .e&as *ducation AgencyBs =.*A> 6inancial Accounting and 0eporting =6A0> document< As descri!ed in Chapter 3 o the te&t3 !oth the GASB and $C*S re4uire revenues to !e classi ied !y und and source< 6or inancial reporting purposes3 governments generally report governmental und revenues rom ma9or sources3 such as those discussed in the chapter< Ko"ever3 or internal !udgeting and inancial management purposes3 governmental accounting records typically record revenues rom numerous detailed sources as "ell< Appendi& B o this chapter sho"s the e&tensive source classi ications de ined !y $C*S< #n addition3 $C*S classi ies revenues !y pro9ect2reporting code< *&hi!it 30 sho"s that the irst three positions in the code structure identi y unds and account groups3 the latter !eing used to report capital assets and long-term lia!ilities< (ositions +-1 o the code report the @o!9ect<A (osition + identi ies the account classi ication< 0evenue accounts are identi ied !y a ) in the account classi ication position< 6or e&ample3 page 3-- o the .*A 6A0 document sho"s that o!9ect code )-00 is used to report revenues rom local and intermediate sources< .hus3 the .*A revenue code )-00 com!ines the $C*S 1000 and %000 classi ications =see Appendi& B o Chapter 3>< ?nder o!9ect )-003 speci ic revenue accounts are denoted !y num!ers in the last t"o positions o the o!9ect code< 6or e&ample3 .a&es3 Current Gear Eevy are reported in o!9ect code )-11< As one peruses all the coding under o!9ect )-003 it should !e apparent that the coding structure captures !oth GASB and $C*S re4uirements< Similarly3 page '1%3 *&hi!it 3-3 o the .*A 6A0 document sho"s that e&penditures2e&penses are reported using a + in the account classi ication position3
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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 Case 3-' =ContBd>

so all e&penditures2 e&penses are reported using +&&& in the o!9ect code positions< .he summary coding ta!le on p< '13 sho"s the e&tensive e&penditure2e&penses o!9ect classi ications< Fhat a!out the other GASB e&penditure classi ication categories; i<e<3 !y und3 unction2program3 organi5ation unit3 activity3 and characterL .he .*A und code classi ication =positions 1-3> has already !een discussed< .he unction code classi ication =positions '-)> is very e&tensive =see summary ta!le on page %1' o the .*A 6A0 document> and essentially ollo"s the $C*S unction classi ications descri!ed in Appendi& B3 Chapter 3 o the te&t< .he unction codes3 descri!ed in detail in the many pages ollo"ing page %1' o the .*A 6A0 document3 align primarily "ith "hat GASB descri!es as activity and character classi ications< #n addition3 as sho"n in *&hi!its 303 code positions 1%-1' report organi5ational units and positions 1+-1- report program codes< 0evie"ing the documentation or those codes3 as "ell as the unction and o!9ect codes previously descri!ed3 it is apparent that the .*A coding structure acilitates !oth GASB and $C*S classi ication re4uirements or e&penditures< b. 0evie"ing the .*A 6A0 documentation or the o!9ect and program intent codes3 it should !e apparent that they re lect the $C*S classi ications discussed in Appendi& B o the te&t< Solutions to *&ercises and (ro!lems 3-1< *ach student should have a di erent governmental annual report3 so "ill have di erent ans"ers to the 4uestions in this e&ercise< Some time spent in class to allo" students to report on their o"n ans"ers and to get an idea o the range o ans"ers o other students is use ul< 1< %< 3< '< )< c< d. b. a< a. +< -< /< 1< 10< c. b. c. d. a.

3-%<

3-3. a.

The answer is no to both parts of the question. Subject to an ordinance or policy that requires a minimum end-of-year fund balance, any spendable fund balances above that amount can be considered available for appropriation in the same manner as revenues and other financing sources. Consequently, if the sum of any e cess fund balances and estimated revenues e ceeds appropriations, then town officials would be in compliance with any balanced budget requirement. !n fact, legislative bodies often budget the use of a portion of fund balance if it e ceeds any minimum requirement established by law or policy.
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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Chapter 33 Solutions3 3-3 =ContBd>

b. "und #alance$%nassigned at &-3'-(')3 after all closing entries will be *&)+,''', as shown below, S-./01#2. "%/0 #121/C.S "und #alance$%nassigned as of &-3'-(')( To close revenues for the year To close e penditures for the year "und #alance$%nassigned as of &-3'-(')3 * &'',''' 3,)3',''' 43,)5+,'''6 * &)+,'''

/ote, .stimated 7evenues and 1ppropriations are closed to #udgetary "und #alance by reversing the original budgetary entry. So the balance of #udgetary "und #alance will be 8ero. 3-9. a. Town of :illsboro ;es, barely. 1fter the equipment item that was purchased on <anuary 3', the available appropriation balance is *),+)' which provides sufficient legal authori8ation to order the new computer that is estimated to cost *),+''. ;es. The new computer is estimated to cost *),+''. 1ctual costs often e ceed the estimated cost because of une pected price increases, shipping charges, and setup costs. Since the actual cost might e ceed the available appropriation of *),+)', you would be well advised to at least notify the police chief of this possibility before ordering the computer. This would avoid a surprise later should the chief, or other authori8ed official, need to transfer a small amount of appropriations from another line item to cover the e cess cost. !f the available appropriation were less than *),+'', you should notify the police chief so he=she, or other authori8ed official, can ma>e a decision to not order the computer or else transfer appropriations from another line item to cover the e cess cost. 2ocal government budget policies often permit the finance director, upon recommendation of the department head, to transfer appropriation amounts from one line item to another within the same department. 1ny overall increase in an appropriation must be approved by ordinance of the governing body.

b.

c.

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Chapter 33 Solutions =ContBd>

3-+. a.

City of <ac>son .stimated revenues total$"; (')9 1ppropriations total$"; (')9 Therefore, unassigned fund balances at the end of "; (')3 must be at least or else the fund would be thrown into a deficit. @eneral 2edger 0ebits Credits Subsidiary 2edger 0ebits Credits * 4('','''6 * 9,&+',''' 9,?+','''

b.

.ST!A1T.0 7.B./%.S #%0@.T17; "%/0 #121/C. 1--7C-7!1T!C/S Estimated Revenues Ledger: T1D.S

9,&+',''' ('',''' 9,?+','''

3,''',''' ),''',''' 9'',''' )+',''' )'','''

!/T.7@CB.7/A./T12 7.B./%.S 2!C./S.S 1/0 -.7A!TS "!/.S 1/0 "C7".!TS A!SC.221/.C%S 7.B./%.S Appropriations Ledger: @./.712 @CB.7/A./T -%#2!C S1".T; -%#2!C EC7FS :.12T: 1/0 E.2"17. A!SC.221/.C%S

),''',''' (,''',''' 3+',''' ?+',''' +','''

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions =ContMd>

3-&.

City of <ac>son 4ContGd6 @eneral 2edger 0ebits Subsidiary 2edger Credits 0ebits Credits

a.

./C%A#71/C.S (')9 ./C%A#71/C.S C%TST1/0!/@ (')9 Encumbrances Ledger, @./.712 @CB.7/A./T -%#2!C S1".T; -%#2!C EC7FS :.12T: 1/0 E.2"17. A!SC.221/.C%S

33+,'''

33+,'''

+',''' ('',''' 5+,''' &+,''' +,'''

b.

-urchase orders issued by a governmental fund have the effect of using all or a portion of one or more appropriations for that fund. !ssuance of purchase orders or other commitment documents is a step in the e penditure of an appropriationH administrators may be subject to legal penalties if they e pend more resources than were appropriated. 7ecording encumbrances helps administrators avoid overe pending appropriations. The same legal issues do not e ist in business organi8ations, although a well-managed business should certainly >eep trac> of outstanding purchase orders and contracts to have a clear understanding of what transactions are in process that will result in the acquisition of assets, the incurring of e penses, and the incurring of liabilities.

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions =ContMd> 3-5. @eneral 2edger 0ebits a. .ST!A1T.0 7.B./%.S #%0@.T17; "%/0 #121/C. 1--7C-7!1T!C/S Estimated Revenues Ledger: T1D.S 2!C./S.S 1/0 -.7A!TS "!/.S 1/0 "C7".!TS !/T.7@CB.7/A./T12 7.B./%.S Appropriations Ledger: @./.712 @CB.7/A./T -%#2!C S1".T; -%#2!C EC7FS -17FS 1/0 7.C7.1T!C/ A!SC.221/.C%S b. @eneral 2edger 0ebits ). C1S: 7.B./%.S Revenues Ledger: 2!C./S.S 1/0 -.7A!TS "!/.S 1/0 "C7".!TS 3),''' )(,''' 93,''' 93,''' Credits Subsidiary 2edger 0ebits Credits +'',''' ),&'',''' 3+',''' )+',''' +',''' ('',''' ),3'',''' 3+',''' (+',''' +',''' (,&+',''' (,5'',''' Credits Subsidiary 2edger 0ebits Credits

3-1%

Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 3-- =ContMd>

@eneral 2edger 0ebits (. ./C%A#71/C.S$(')9 ./C%A#71/C.S C%TST1/0!/@$(')9 Encumbrances Ledger: @./.712 @CB.7/A./T -%#2!C S1".T; -%#2!C EC7FS -17FS 1/0 7.C7.1T!C/ A!SC.221/.C%S 3. ./C%A#71/C.S C%TST1/0!/@$(')9 ./C%A#71/C.S$(')9 .D-./0!T%7.S$(')9 C1S: Encumbrances Ledger: @./.712 @CB.7/A./T -%#2!C S1".T; -%#2!C EC7FS -17FS 1/0 7.C7.1T!C/ A!SC.221/.C%S Expenditures Ledger: @./.712 @CB.7/A./T -%#2!C S1".T; -%#2!C EC7FS -17FS 1/0 7.C7.1T!C/ A!SC.221/.C%S (3,('' (3,('' (3,)'' (3,)'' (3,3'' (3,3'' Credits

Subsidiary 2edger 0ebits Credits

5,9'' )),3'' &,)'' 9,('' 3''

5,9'' )',5'' +,3'' 9,('' 3'' 5,3'' )',?'' &,)'' 9,)'' 3''

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 3-- =ContMd>

c. C12C%21T!C/ C" #%0@.T.0 #%T %/7.12!I.0 7.B./%.S 1S C" <%2; 3), (')3 %/7.12!I.0 SC%7C. -7C-.7T; T1D.S 2!C./S.S 1/0 -.7A!TS "!/.S 1/0 "C7".!TS !/T.7@CB.7/A./T12 TCT12 #%0@.T.0 *),3'',''' 3+',''' (+',''' ('',''' *(,5'',''' 1CT%12 * -'3),''' )(,''' -'*93,''' 7.B./%. *),3'',''' 3)3,''' (3?,''' ('',''' *(,&+5,'''

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 3-- =ContMd>

d. C12C%21T!C/ C" 1B1!21#2. 1--7C-7!1T!C/S, 1S C" <%2; 3), (')3 1B1!21#2. 1--7C-7!1T!C/S @./.712 @CB.7/A./T -%#2!C S1".T; -%#2!C EC7FS -17FS 1/0 7.C7.1T!C/ A!SC.221/.C%S TCT12 * +'',''' ),&'',''' 3+',''' )+',''' +',''' *(,&+',''' ./C%A#71/C.S * -'&'' ('' -'-'*?'' .D-./0!T%7.S * 5,3'' )',?'' &,)'' 9,)'' 3'' *(3,('' 1--7C-7!1T!C/S * 93(,5'' ),+??,&'' 393,5'' )9+,3'' 93,)'' *(,&(','''

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions =ContMd>

3-?. a. b. c.

City of Salem *)9,3?',''' 4the sum of the amounts presently in the .stimated 7evenues column of the subsidiary ledgers6. *)+,''',''' 4the sum of the ')=') entries in the .stimated 7evenues column6 ). ;es (. '(=(? 49+ & folio entry to -roperty Ta es6 3. *(',''' 9. 0ecreased

d. e.

*)(,'?',''' 4the sum of the amounts in the 7evenues column6 -roperty ta revenue is being accruedH revenue from the other three sources is being recogni8ed when the cash is received. That is, when it is first measurable and available according to the modified accrual basis of accounting.

3-3. a.

2incoln City 1pparently, 2incoln City uses a )'-digit account number structure having three segments. 1s is customary, the first segment is the fund code, with ') representing the @eneral "und. 1s the heading implies, the second segment 4divided into two sub-segments6 is the organi8ation unit, with '?-'' assigned to the -ar>s and 7ecreation 0epartment. The 8eros in the second sub-segment can be replaced with numbers representing activities within the department, such as par>s, aquatic recreation, athletic facilities, administration, and so forth. The third segment represents the object of e penditure. This segment can be further subdivided to provide greater e penditure detail, such as 5)(' for building materials, 5)3' for maintenance supplies, and 5)9' for office supplies. This account structure appears to meet the @1S#Gs e penditure classification requirements.

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 3-1 =ContMd>

b.

.ncumbrance control procedures are generally used only for purchases of goods and services for which there is delay between placing the order or contract and receipt of the goods or services. 7ecurring e penditure requirements such as payroll and utilities are fairly predictable, so encumbrance procedures are generally not necessary to adequately control these e penditures. Conferences and training are usually not JorderedK in advance in the sense of a purchase order or contract for future service. .ven if conference registrations or airline reservations are made in advance, those are usually paid at the time of the registration or reservation and thus are actual, not estimated, e penditures.

c.

1t the mid-point of "; (')3, the -ar>s and 7ecreation 0epartment has e pended or encumbered the following percentages of its appropriations, -ersonnel Services Aaterials and Supplies Conferences and Training Contractual Services %tilities Capital Cutlay Cther 9+.+L &(.+L 35.+L &3.+L +).)L 93.)L 5(.)L

1t first glance, it appears that the Aaterials and Supplies, Contractual Services, and Cther accounts could e pend their appropriations well before the end of the fiscal year. 1dditional information about normal seasonal usage patterns would be required, however, to confirm if the spending rate is too rapid for these accounts. 2arger quantities of materials and supplies may be used every spring and early summer in preparing par>s and recreation facilities for heavy summer use. Contractual services may have involved a larger than average service contract that was fulfilled early in the year and contracts may have been signed early in the year for services to be

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions3 3-13 c. =ContMd>

provided later in the year. Other is a miscellaneous category, albeit a large one, for which analysis of what it entails and e pected spending rates would need to be underta>en before any conclusions can be reached. d. !t may appear that the -ersonnel Services, Conferences and Training, and Capital Cutlay accounts could get by with lower appropriations. This is li>ely not the case, however, since departments typically have to defend their appropriation requests during the budgeting process. -ar>s and recreation departments often require more labor in the summer for grounds maintenance, swimming pool lifeguards, recreational activity instructors, and for other purposes. Consequently, personnel e penditures will li>ely be greater in the second half of the fiscal year. Similarly, many conferences are held in late summer and fall so it may be that department officers and staff will be attending conferences or training events later in the year. The relatively small budget authori8ation for capital outlay suggests that the purpose of the account is to acquire equipment. 2ate acquisition of equipment might reflect a strategy to hold off until it is >nown whether these monies might be needed for other purposes, or perhaps management is simply waiting for a good deal or the latest model of equipment to be released. e. -ossible e planations for the observed over- and under-spending patterns have been provided in parts c and d. These e planations ma>e it clear that one needs to analy8e past spending patterns and evaluate specific spending plans within individual accounts before it can be determined whether spending patterns are unreasonable. Such analysis yields a budgeted spending rate to which the actual spending rate can be compared.

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Chapter 03 - Governmental Operating Statement Accounts; Budgetary Accounting

Ch< 33 Solutions =ContMd>

3-)'. E.STCB.7 B!221@. Statement of 1ctivities 4partial6 "or the ;ear .nded <une 3', (')9 /et 4. pense6 7evenue and Changes in /et 1ssets . penses "unctions=-rograms -rimary @overnment General government Public sa et! #ealt$ an% sanitation &ulture an% recreation 'nterest on long(term %ebt *otal governmental activities $ 9,571 34,844 6,738 12,352 6,"68 $ 69,573 -rogram 7evenues Charges for Cperating Capital Services @rants @rants $ 3,146 1,198 5,612 3,995 ))))))) $ 13,951 $ 843 1,3"7 2,45" ))))) $4,6"" @overnmental 1ctivities $ $ 62 )))) $ 62 (5,582) (32,277) (1,126) (5,9"7) (6,"68) (5",96") 56,3"" 1,2"" 1,958 59,458 3,473 62,931 11,971 1,643,""" $1,654,971

@eneral revenues, Pro+ert! ta,es -nrestricte% grants an% contributions 'nvestment earnings *otal general revenues .+ecial item/gain on sale o +ar0 lan% *otal general revenues an% s+ecial items &$ange in net +osition 1et +osition/2ul! 1, 2"13 1et +osition/2une 3", 2"14

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