Introduction to Governmental and

Not-for-Profit Accounting, 7e
Chapter 4:
The Governmental Fund Accounting Cycle,
An Introduction to General and Special
Revenue Funds
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Chapter 4 Topics

General and Special Revenue Funds

Recognizing Revenues and Expenditures
Short-Term Financing and Investing
Basic Entries in General and Special
Revenue Funds
Closing the Accounts
Fund Financial Statements
Control Accounts and Subsidiary Ledgers
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Review: General Fund

Most significant fund
Only one, broad in scope
Accounts for financial resources not
recorded in other funds
Report on basic day-to-day activities of
governments

Examples of common programs:

Public health, public safety, education, public
works
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Review: General Fund

Three types of revenues
Taxes
Local governmentsreal property tax and general
sales tax
State governmentssales tax, income tax,
cigarette and motor fuel taxes

Intergovernmental grants
Miscellaneous items
Investment income, licenses, permits, fees, and
fines
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Review: Special Revenue Funds

Account for proceeds of specific revenue
sources that are restricted or committed to
spending for specified purposes other
than debt service or capital projects
Specific revenues for particular purposes

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Review: Special Revenue Funds

Possibly many special revenue funds,
narrow in scope
Example: gas tax for street maintenance
GAAP: only required when legally required
Helps ensure funds used as intended
Accounting like general fund

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Revenue and Expenditure

Recognition
Modified accrual consistent with budget
Recognize revenues when measurable
and available
Measurable: reasonable certainty of dollar
amount
Available: inflow within the current period
or within 60 days after for property taxes

Expenditures recognized when liability is

incurred
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Recognizing Revenues
Revenues may be accrued before
received
Examples: property tax, interest on
investments

Some revenues are recognized upon

receipt
Because of uncertainty
Examples: fines (Ch. 5)
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Recognizing Expenditures
Recognize expenditures when liability is
incurred
Recognize salaries when paid
Accrue salaries earned but not paid

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Short-Term Financing and Investing

Revenues lumpy, but expenditures
relatively even during year
Property taxes often required to be paid only
once or twice a year

Short-term financing
Tax anticipation notes

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Basic Entries in General Fund:

Record the Budget
Est. revenues property taxes 2,000,000
Est. revenues licenses and fees 70,000
Est. revenues fines and forfeits 50,000
Appropriations gen. gov.
300,000
Appropriations publ. safety sal.
1,200,000
Appropriations publ. safety sup.
100,000
Appropriations street main.
495,000
Appropriations debt service
5,000
Budgetary fund balance
20,000
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Basic Entries in General Fund:

Property Tax Levy
Property taxes receivable
2,000,000
Revenues Property taxes
2,000,000

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Basic Entries in General Fund:

Tax Anticipation Notes
Short-term borrowing to meet cash needs
until taxes receivable are collected

Recorded as liability in fund and interest

accrued
Cash
400,000
Tax anticipation notes payable
400,000

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Basic Entries in General Fund:

Purchase Orders
Encumbrances publ. safety
97,000
Encumbrances street main.
90,000
Budgetary fund balance reserved
for encumbrances
187,000

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Basic Entries in General Fund:

Record Expenditures
The following purchased items were
received:
Purpose
Encumbered
Pub safety
$97,000
Street maint.
90,000
Total
$187,000

Actual
$97,000
91,000
$188,000

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Basic Entries in General Fund:

Record Expenditures
1. Reverse the encumbrance
Budgetary fund balance
reserved for encumbrances 187,000
Encumbrances publ. saf.
97,000
Encumbrances street maint. 90,000
Encumbrances balances are now $0
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Basic Entries in General Fund:

Record Expenditures
2. Record the expenditures
Expenditures pub. safety
Expenditures street maint.
Vouchers payable
When paid:
Vouchers payable
Cash

97,000
91,000
188,000
188,000
188,000

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Basic Entries in General Fund:

Cash Receipts
Property taxes already accrued, received in
cash
Licenses, fees, fines, forfeitures on cash basis

Cash
1,110,000
Property taxes receivable
1,000,000
Revenues licenses and fees
63,000
Revenues fines & forfeitures
47,000
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Basic Entries in General Fund:

Tax Anticipation Notes
Tax anticipation note paid
Interest = $4,000
Tax anticipation notes payable 400,000
Expenditures debt service
4,000
Cash 404,000

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Closing the Accounts

1. Reverse the budgetary entry

Appropriations gen. gov

300,000
Appropriations publ. safety sal. 1,200,000
Appropriations publ. safety sup. 100,000
Appropriations street main. 495,000
Appropriations debt svc.
5,000
Budgetary fund balance
20,000
Est. revenues property taxes
2,000,000
Est. revenues fines and forfeits
50,000
Est. revenues licenses and fees
70,000
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Closing the Accounts

2. Close revenues/expenditures to fund
balance
Revenues property taxes 2,000,000
Revenues licenses and fees 63,000
Revenues fines and forfeits 47,000
Expenditures gen. gov
294,000
Expenditures pub. safety sal
1,190,000
Expenditures pub. safety sup 97,000
Expenditures street main.
477,000
Expenditures debt svc.
4,000
Fund balance 48,000

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Governmental-Type Funds
Financial Statements
Financial statements for governmentaltype funds:
Statement of revenues, expenditures, and
changes in fund balance (Table 4-4)
Balance sheet (Table 4-5)
Budgetary comparisons (Table 4-6)

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Control Accounts and

Subsidiary Ledgers
Must record taxes receivable by property
Governments use a general ledger
account
For the total tax amount
Control account

Subsidiary ledger kept for each property

Tax roll

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Control Accounts and

Subsidiary Ledgers
Tax roll also includes
Description of property/type of property
Owner and address
Assessed value

Interest/penalties on delinquent taxpayers

In extreme cases, town may foreclose

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