Presentation on theme: "Introduction to Federal Accounting Presented by: John Reifsnyder, CDFM Graduate School Instructor firstname.lastname@example.org."— Presentation transcript:
1Introduction to Federal Accounting Presented by: John Reifsnyder, CDFM Graduate School Instructor
2Of the financial records of an enterprise AccountingThe Systematic - Classification - Recording - Reporting - Analyzing - InterpretationOf the financial records of an enterpriseused to- recognize the factors that determine financial condition- evaluate the progress or failures of an activity
3Common Accounting Terms Accounting CycleDouble Entry AccountingGeneral JournalLedger AccountsGeneral LedgerCash and Accrual Basis of Accountingdetails later
4The United States Constitution “No money shall be drawn from the Treasury but in consequence of appropriations made by law . . .”– and –“. . . A regular statement and account of receipts and expenditures of all public money shall be published from time to time.”(Article 1, Sec 9, Clause 7)Previous focus was on receipts and payments from the U.S. Treasury.FY 97 - Audited consolidated Financial Statements were produced for the government as a whole.Article 1 - Legislative Branch - Law making powers to CongressArticle 2 - Executive Branch - Gives the President power to ExecuteArticle 3 - Judicial powers to the courts
5Accounting Introduction Federal accounting frameworkBudgetary accountingFinancial accountingManagerial cost accountingUsers of Federal Financial InformationExternal users (citizens and Congress)Internal users (agency heads and management)Budgetary Accounting - Track the expenditure of government fundsFinancial Accounting - Account for assets, liabilities, the same as a private business.Managerial Accounting - Relates to performance based budgeting and reporting.External users are the stockholders in the federal government.
6Federal Financial Statements UNITED STATES GOVERNMENT CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997(In billions of dollars)Consolidated StatementsAssets:Cash and other monetary assetsAccounts receivableLoans receivableTaxes receivableInventories and related propertyProperty, plant, and equipmentOther assetsTotal assetsCommitments and contingencieNet positionTotal liabilities and net positionLiabilities and net position:Accounts payableFederal debt securities held by theFederal employee and veteran benEnvironmental liabilitiesBenefits due and payableLoan guarantee liabilitiesOther liabilitiesTotal liabilitiesUNITED STATES GOVERNMENT CONSOLIDATED STATEMENT OF NET COSTS FOR THE YEAR ENDED SEPTEMBER 30, 1997National defenseHuman resources:Education, training, employme social servicesHealthMedicareIncome securitySocial securityVeterans benefits and servicesTotal human resourcesPhysical resources:EnergyNational resources and enviroCommerce and housing creditTransportationCommunity and regional develTotal physical resourcesNet interest:Treasury securities held by thOther functions:International affairsGeneral science, space, and teAgricultureAdministration of justiceGeneral governmentTotal other functionsTotalUNITED STATES GOVERNMENT CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 1997Less:Financing sources from non-exchange revenues:Individual income tax and tax withholdingsCorporation income taxesUnemployment taxesExcise taxesEstate and gift taxesCustoms dutiesMiscellaneousTotal non-exchange revenuesOther earned revenuesExcess of costs over revenues before unreconciled transactionsUnreconciled transactions affecting the change in net position.Change in net positionNet position-beginning of periodNet position-end of period1,247.5179.827.855.819.720.026.11,603.3Net cost of Government operations1,576.711.6-15.012.4-2.6-5,000.4-5,003.0Balance SheetStatement of Net CostStatement of Change in Net PositionRequired Supplemental Stewardship Information - Vol 6B, Chapter 11RSI - Vol 6B, Chapter 12 (DM)
7Accounting-Related Legislation BUDGET AND ACCOUNTING ACT OF 1921:- ESTABLISHED AN EXECUTIVE BUDGET PROCESS - REQUIRED THE PRESIDENT TO SUBMIT HIS BUDGET RECOMMENDATIONS TO CONGRESS EACH YEAR. TO ASSIST HIM, THE BUREAU OF THE BUDGET WAS CREATED - CONGRESS WOULD BETTER COORDINATE REVENUE AND SPENDING DECISIONS - APPROPRIATIONS COMMITTEES JURISDICTION OVER SPENDING WAS STRENGTHENED - GOVERNMENT ACCOUNTABILITY OFFICE (GAO) WAS ESTABLISHED
8Accounting-Related Legislation 1950 BUDGET AND ACCOUNTING ACTAmended the 1921 Budget and Accounting Act.Assigned to the executive branch the responsibility for maintaining accounting systems and producing financial reports.The Comptroller General, in consultation with the Director of OMB, was required to prescribe the principles, standards, and related requirements for accounting to be observed by the executive agencies.Each was given the responsibility for establishing and maintaining systems of accounting and internal controls.Established accounting systems of executive agencies were required to conform to the principles, standards, and related requirements prescribed by the CG.The Budget and Accounting Procedures Act of 1950 ultimately adopted a less descriptive definition of performance budgeting.Specific language detailing the requirements of a performance budget was dropped before final passage of the bill since in the opinion of the Bureau of the Budget (now OMB)1.the executive branch was already implementing performance budgeting, and2.specific performance budgeting language would appear too rigid and make it difficult to proceed with future budgeting improvements.
9Accounting-Related Legislation THE CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL ACT OF Changed the fiscal year to October 1 through September Established the Congressional Budget Office (CBO) Established to provide data to the Congress on and analysis of the federal budget- Established the House and Senate Budget Committees-Charged with development of a “Concurrent Resolution on the Budget”The Congressional Budget and Impoundment Control Act of 1974Describes the current Congressional budget process and controls certain aspects of congressional action, i.e., the budget resolution process.Created the deferral and rescission process.Created the House and Senate Budget CommitteesEstablished the Congressional Budget OfficeMoved the start of the fiscal year from July 1 to October 1
10Accounting-Related Legislation 1982 Federal Managers’ Financial Integrity Act:Each agency reports the results of a self-evaluation of the adequacy of systems of internal controlAssurance that agencies are managed properlyObligations and costs comply with applicable lawsFunds, property and other assets are safeguarded against waste, loss, and unauthorized use
11Accounting-Related Legislation Prompt Payment Act of Pay vendors on time or pay interest
12Accounting-Related Legislation Chief Financial Officers Act of Required the establishment of CFOs in cabinet departments and specified agencies - CFOs charged with overseeing financial management activities
13Accounting-Related Legislation Government Performance and Results Act of 1993Requires agencies:to submit 5-year strategic plans…DoD must update at least every 4 yearsto submit annual performance plansNow part of Performance Budgetto report prior year program performance by November 15th of each yearPerformance and Accountability Report (PAR) or separate Performance and Accountability reportsShifts focus of programs from workload activities to performance metric outputs and outcomes.When Congress passed GPRA, it made the following observations,1. Waste and inefficiency in federal programs undermine the confidence of the American people in the government and reduces the federal government’s ability to adequately address vital public needs.2. Federal managers are seriously disadvantaged in their efforts to improve program efficiency and effectiveness, because of insufficient articulation of program goals and inadequate information on program performance.3. Congressional policy making, spending decisions and program oversight are seriously handicapped by insufficient attention to program performance and results.What are your reactions to the Congressional findings?Performance Budgets:Beginning with the FY05 budget, agencies prepare a “performance budget” instead of the Annual Performance Plan (APP) for their budget submission to OMB and Congress.GPRA still requires the APP, but the agency performance budget substitute for the APP per OMB Circular A-11.
14Accounting-Related Legislation Government Management Reform Act – Required systems to: -- support the control of cost of government -- support full cost reporting and full disclosure of financial data - Required application of accounting standards to produce consistency in financial reporting
15Accounting-Related Legislation Federal Financial Management Improvement Act – 1996Each agency head establish, evaluate, and maintain adequate systems of accounting and internal controlIncorporate accounting standards and reporting objectivesEach audit of an agency’s financial statements shall report if the agency is in compliance with the preceding requirements
16Federal Accounting Standards Advisory Board (FASAB) Develops and recommends federal accounting concepts and standardsestablished in 19905 Concepts36 StandardsFederal Generally Accepted Accounting Principles (GAAP)
17Implementation of Federal Accounting Standards Office of Management and Budget (OMB)Government Accountability Office (GAO)OMB - Publishes and implements approved Standards – OMB Cir A-136 (Form and Content of Financial Statements)GAO - When standards are approved GAO updates Title 2Department of Treasury - Performs four basic functions:1. Formulates/recommends economic, financial, tax & fiscal policies, also updates the US Standard General Ledger2. Serves as Financial Agent for the US Govt.3. Enforce the law4. Manufacture coins & currencyDepartment of Treasury
18Types of Government Funds Department of Defense:Appropriated FundsReimbursable FundsRevolving FundsTrust FundsNonappropriated FundsAPPROPRIATED FUNDS - Provided by Congress and have a limited life for obligationsREIMBURSABLE FUNDS - Funding in addition to those appropriated by Congress - Must be included in the Budget RequestREVOLVING FUNDS - Work like a for-profit business and sell products and services to customers at a price that covers the costs incurredTRUST FUNDS - Used for carrying out specific purposes and programs, (Foreign Military Sales)NON-APPROPRIATED FUNDS - Not appropriated by Congress - Funds generated from:- Sale of goods & services to DOD Military & Civilian personnel Used to support MWR
19Budgetary AccountingBudgetary accounting is often referred to as fund accounting.Budgetary accounts are a set of accounts that are self-balancing and represent different levels of obligational authority for different units.
20Budgetary Accounting Purpose Record appropriation status Record subdivisions of budgetary authoritiesRecord valid commitments, obligations, expenditures, outlaysControl use of budgetary authoritiesUse for appropriate purposeUse during time providedUse within amount provided
21Budgetary Definitions AppropriationsCongressional authorization to obligate government and make payment from the TreasuryApportionmentDistribution of congressional budgetary authority to a federal agency by OMBAllotmentDistribution of apportioned budgetary authority to organizational activitiesCommitmentAdministrative reservation of budgetary authority
22Budgetary Definitions (cont’d) ObligationLegally encumbers a specified sum of budgetary authority that requires future paymentOutlays/DisbursementsPayment for costs incurred, goods and services receivedExpended AuthorityBudgetary authority used to fund goods and services receivedExpired AuthorityBudgetary authority that is no longer available for new obligationsCanceled AuthorityBudgetary authority that has been closed
23Categories of Appropriations Annual AppropriationsMultiyear AppropriationsNo-Year AppropriationsPermanent (Indefinite) AppropriationsANNUAL APPROPRIATIONS - O & M, and Salaries & ExpensesMULTIYEAR APPROPRIATIONS -RDT&E yearsPA yearsShipbuilding & Conversion Navy – 5 years Military Construction 5 YearsNO-YEAR APPROPRIATIONS - They do not expire (Working Capital Funds) NOTE: Closed if there were no payments for two yearsPERMANENT (Indefinite) Appropriations - Social Security, Federal Retirement, interest on the debt. NOTE: What’s needed will be provided by Congress
24Flow of Funds CONGRESS THE PRESIDENT TREASURY OMB Agency Divisions PRESIDENT AND CONGRESSAGREE ON THE BUDGETPRESIDENT SIGNSAPPROPRIATIONSBILLSTREASURYOMBISSUE TREASURYWARRANTS ANDCREATES “BANKACCOUNTS”APPORTIONS THEAPPROPRIATIONSUnits A, B, CBUDGETEXECUTIONBEGINSAgency Hqs.Agency Divisions
25Fiscal Law An agency may obligate and expend appropriations: Only for a proper purposeOnly within the authorized time limitsWithin the amounts established by Congress for a bona fide need
26Purpose Proper Purpose Rule: For the purposes for which they were appropriatedper 31 U. S. C (a):“ Appropriations shall be applied only to the objects for which the appropriations were made except as otherwise provided by law ”Purpose - Necessary expense rule - Expend only for the purposes authorized in the appropriations acts.The Necessary expense rule must meet three tests:- Logical Relationship must exist- Not prohibited by law- Not funded for elsewhere
27Time Within the authorized time limits: Expenditure of funds must be incurred within the time for which the appropriation was made available.Do not execute current year funds for prior or future year expenditures. (31 USC 1502)31 U.S.C. 1502“The balance of a fixed-term appropriation is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period.”
28TimeA valid obligation must be made to an appropriation within the period the funds are available.O&M: One fiscal yearRDTE: Two fiscal yearsProcurement: Three fiscal yearsMILCON: Five fiscal yearsSCN: Five fiscal yearsNo Year: Dollar specific, indefinite expiration
29Amount Within the amounts established by Congress: The obligation may not exceed the amountappropriated by statute, nor may it be incurred before the appropriation becomes law (31 U.S.C. 1341)Amount - May not exceed the amounts established in law U.S.C. 1341“An officer or employee of the United States Government may not(A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation; or(B) involve the government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law.”
30No-Year Appropriations 31 U.S.C. 1555A No-Year Account is to be Closed If:Agency Head or President Determines Purpose FulfilledNo Disbursements Have Been Made for Two Years
31Flow of Resources Commitments (FMR Volume 3 Chapter 8) Obligations (Bona fide need - FMR Volume 11A )Obligating DocumentsContracts, Purchase OrdersTravel OrdersRequisitionsMilitary Interdepartmental Purchase Requests (MIPR)Project Orders (FMR Volume 11A, Chapter 2)Economy Act Orders (FMR Volume 11A, Chapter 3)OutlaysCOMMITMENT- Administrative Reservation of FundsOBLIGATION - Legal Reservation of Funds (May want to address object classes.)CONTRACTSMIPR (DDFORM 448)MIPR ACCEPTANCE (DD FORM 448-2)ACCEPT AS EITHER DIRECT CITE OR REIMBURSABLE- PROJECT ORDERS (Title 41, USC Sec. 23)DODI R Volume 11A, Chapter 2- ECONOMY ACT ORDERS (Title 31, USC 1535)DFAS -IN RegOUTLAYS - THE terms “EXPENDITURE”and “NET DISBURSEMENTS” are used interchangeablyREIMBURSEMENTS - Amounts earned and collected from the selling of goods and services.REFUNDS - Recovery of excess payments and are credited to the appropriation that made the payment.
32Accounting Classification Identifies the source of funding and purpose for which usedCreates an audit trail
34Government Definition Orders placed,Contracts awarded,Grants issued,Services received, etc.---- that will require payments (“outlays”) during the same or a future period.
35Obligations are Classified as: Undelivered OrderDelivered OrderUse of the Standard General Ledger ensures government-wide identification of apples to apples and oranges to oranges.Unpaid 4801Paid 4802Paid 4902Unpaid 4901
36What is an “Accrued Expenditure”? Charges…that reflect liabilities incurred and the need to pay for:services…goods…received…amounts becoming owed under programs for which no current service or performance is required (such as annuities, benefit payments..)*Expenditures accrue regardless of when cash payments are made…**GAO, “Glossary of Federal Terms Used in the Federal Budget Process”, 1981.
37Expenditures in the Budget OBLIGATIONDelivered OrderUNPAIDPAIDExpenditure
38Accrual Accounting Events Timing of the Recording of Purchase ofMaterials Under Accrual Method of AccountingRecords in Accounting Records in Month in Which:TransactionOrder is PlacedMaterials are DeliveredBill is PaidMaterials are usedPlacing an order for materialsAs an obligationMaterials DeliveredAs an accrued expenditurePayment made for materialsAs a disbursement of cashMaterials used or consumedAs an applied cost
40A payment of an obligation Once all payments are made, the obligation goes away (is “liquidated”)Outlays during a fiscal year may be for payment of obligations incurred in prior years or in the same year
41Outlays are Paid Obligations Undelivered OrderDelivered OrderAn outlay is an accounting event that has to be recorded in an accounting system.UNPAIDPAIDPAIDUNPAIDOUTLAY
42Reimbursements Project Order (41 U.S.C. 23): Placed with and accepted by:A DoD Government Owned and Government Operated (GOGO) establishment.Shipyard, arsenal, ordinance plant or other manufacturing plant or shop.
43Project OrdersSame as a commercial contract to the customers’ appropriationExtends beyond the life of the appropriation. Up to five years after the appropriation expires for new obligationsOver-billing may create a 31 USC 1517 violationNormally issued for the overhaul or manufacturing of a specific number of items within a specific time frame for a specific pricePerforming activity should incur costs of not less than 51% of the total costs of performing the workThe performing activity must not accept the project order if the requirements of the project order regulations are not metA Military Interdepartmental Purchase Request (DD 448 Form) is used to issue project orders
44Project Order Characteristics Specific regarding work to be doneSingle purpose with identification to a final product or end itemIncludes a production scheduleIncludes funded cost per itemUsually mission orientedBe performed in houseBona fide need in the year executedCommence work within a reasonable time (90 days)Return orders for cancellation if work financed by an expiring appropriation is not started by 1 January
45Economy Act Orders Must be closed-out by 30 September. Change in dollar amount requires:An amendment to the original MIPR (DD Form 448).Acceptance (DD Form 448-2) of the amendment by the performing activity.Adjust the obligation in accounting based on the acceptance of (DD Form 448-2).
46Non-Economy Act Orders Non-Economy Act orders are for intra-governmental support, where a DoD activity needing goods and services obtains them from a Non-DoD agency.Specific statutory authority is required to place an order with a Non-DoD agency for goods or services, and to pay the associated cost.If specific statutory authority does not exist, the default will be the Economy Act, 31 U.S.C
47Customer/Provider Scenario Customer (ordering agency) prepares MIPR requesting the repair and overhaul of 400 widgets for a total cost of $ 1,300,000. The MIPR was issued as a Project Order and is funded with an annual O&M appropriationPerforming agency accepts the MIPR and prepares a MIPR acceptance, DD Form 448-2Based on the MIPR acceptance the ordering agency records an obligation in their accounting records and the performing agency records an order received in their accounting records in the amount of $1,300,000
48Order Impact On Customer/ Provider Books MIPR ACCEPTANCE $ 1.3MFY ’10 – 15 – AvailableTo complete Work thru30 Sept., 2015Assumes O&M customer 4220/4210 Unfilled Orders/Anti. Reimb & Other IncomeProject Order(DD 448-2) 4610/4801Orders ReceivedObligations$ 1.216MBilled to Customer based on Cost In support of the Project(SF 1080 bill submitted) /4220 R.E./UFO1310/5200 A/R - REV$ MBased on SF 1080 Bill /49016100/21103100/5700Reimbursements EarnedCost$ 1.216M /4251 R.E. COLL./R.E / FWTT/A.R.$ M / /1010CollectionsPayment / Liquidation$ 84Should complete work by30 Sept. 2015Must be de-obligated if notCompletely liquidated byUnfilled OrdersUnliquidated ObligationsCustomer Books
49How do we Link to the Budget? Accounting events are assigned unique identifiers from a standard government-wide list (U.S. Standard General Ledger)All federal agencies are required to use these standard accounts in order to properly link to the Budget
50USSGL Chart of Accounts 1000 Assets2000 Liabilities3000 Net Position (Capital)4000 Budgetary5000 Revenues and Financing Sources6000 Expenses7000 Gains and Losses8000 Memorandum AccountsUSED IN SUPPORT OF:BUDGETARY, FINANCIAL(PROPRIETARY), AND MANAGERIAL ACCOUNTING1000, 2000, are PERMANENT or REAL ACCOUNTS4000 -Budgetary accounts - Maintained in the Accounting records by FY.5000, 6000, are TEMPORARY ACCOUNTS, (the balances in these accounts are closed at the end of the FY).are MEMORANDUM ACCOUNTS in support of Guaranteed Loan Programs (or) reserved for Agency Use.
51Flow of Budget Authority President signs appropriation into law, thereby creating budgetauthority - the authority for an agency to obligate thegovernment to pay for goods and servicesAccounting processes now come into playOMB prepares to apportionTreasury prepares agency warrantOMB apportionmentAgency requestAgency headquartersapportionmentallotmentMajor OrganizationsSub-allotment or allocationSubordinate organizations
52Flow of Budget Authority (continued) Organization may commit to reserve budget authority for actual obligation later in the fiscal periodOrganizational element with allotment or allocationObligate for goods and servicesCostConsumable supplies = costSupplies for inventory issued/consumed = costEquipment in revolving fund:Capitalized/depreciated = cost(in some accounting systems)ExpenditureReceipt of goods/services:cancellation or undelivered ordersOutlayCash from the Treasury pays for goods/services
53Budgetary Accounting RESOURCES = STATUS OF RESOURCES 4450 Unapportioned4510 Apportionments4610 Allotments4700 Commitments4801 Undel Order, Unpaid4901 Deliv Order, Unpaid Deliv Order, Paid4650 Expired Authority4350 Canceled Authority4119 Appropriations4201 Total Actual Resources Collected
54Proprietary Accounting PurposeAccounting for assets and liabilitiesAccounting for revenues and expensesDetermining financial positionDetermining results of operationsSFFAS NO. 7
55Proprietary Accounting Balance SheetAssets = Liabilities + Net Position1000 Assets = 2000 Liabilities Net Position (Capital)Statement of Net CostExpenses – Exchange Revenue = Net Cost of OperationsProprietary accounting (accrual basis) captures costs and revenues and applies them to the appropriate period.More complex than Budgetary accounting. Requires more general ledger accounts to accommodate this complexity.Statements compiled:Balance SheetStatement of Net CostStatement of Changes in Net Position
56The Historical Cost Concept Generally accepted accounting principles (GAAP) requires that assets always be stated at their actual cost rather than at their current market valuesAccounting is concerned with what you paid for something, not what it is worth today
57The Matching Principle Concept Expenses of a period that are recorded and reported are only those incurred to produce the revenues generated for the same periodSome expenses require periodic adjustment to reflect only the amount of expenses for the financial periodExamples:Prepaid InsurancePrepaid RentDepreciation of Capital Assets
58Cash versus Accrual Accounting Cash accounting --revenue is recorded when cash is received and expenses when cash payment is madefails to match revenue with related expenses, therefore does not lead to logical income measurement
61Accrual Accounting (cont.) Example: $10,000 payroll that is split between two reporting periods:A portion is earned but not paid at end of the month:4 days ($4,000) earned in September6 days($6,000 to be earned in October)$4,000 is recorded as a payroll expense in September. $4,000 is recorded as a liability (salaries payable)
62Flow of Accounting Data Recognized A Transaction Has OccurredPrepare A Source DocumentAnalyze andPrepare a Journal EntryProcess (Record) Into Accounting RecordsClose the BooksPrepare A Trial BalanceMake Period End Adjustments and AccrualsPrepare Financial Statements (Reports)
63The Accounting Process (Cycle) The Cycle Involves:Work Performed During The PeriodJOURNAL ENTRIESPOSTING TO LEDGER ACCOUNTSDETERMINING UNADJUSTED BALANCESESTABLISHING A TRIAL BALANCE AND COMPLETING WORKSHEETWork Performed At The End Of The PeriodJOURNALIZE AND POST ADJUSTING AND POST CLOSING ENTRIESPREPARE POST CLOSING TRIAL BALANCE AND FINANCIAL STATEMENTS
64General Journal“Original” day-to-day record showing the “debit” and “credit” effect of each eventIncludes a brief explanation for each eventUsed to update the general ledger accounts
65Ledger AccountMeans of accumulating in “one place” all information regarding changes in a specific accountComprised of three elementstitleleft side which is called the debit sideright side which is called the credit sideCommonly referred to as a “T Account”
66General LedgerAll ledger accounts are maintained within the general ledgerFederal government general ledger account structure is established, maintained, and updated by the Treasury Department
67Accounts And Ledgers Accounts Are Classified As Follows: Assets (What Is Owned)Liabilities - (What Is Owed)Costs/Expenses - (What Is Spent)Revenue/Income - (What Is Earned)Equity - (Assets –Liabilities =Net Worth) Gains/Losses Budget Memorandum
68The Accounting Equation Assets = Liabilities + Equity OrA = L + E Or A – L = E Given The Accounting Equation, With Any Two Of The Three Factors, We Can Determine The Third Factor
69Double Entry Accounting Forms the basis for most current day accounting operationsEvery business transaction affects two or more accountsEqual debit and credit entries are made for every transactionTotal of all debit entries must equal the total of all credit entries
70Normal Account Balance Refers to the Debit (left side) or Credit (right side) of a ledger accountAssets normally have debit balancesLiabilities and net position accounts normally have credit balancesExpense accounts normally have debit balancesRevenue accounts normally have credit balances
71Account Type Affected By Transaction Effect of Transaction on Account Debit and Credit GuideAccount Type Affected By TransactionEffect of Transaction on AccountHow You RecordNormal BalanceDebitCreditAssets+DR-CRLiabilitiesNet PositionBudgetaryCR*DR / CR **RevenuesExpenses* = To increase the budgetary account “Other Appropriations Realized” you debit (DR) ** = Budgetary Accounts have either a debit or credit balances, depending on the account.
72General Journal 100,000 100,000 Reference Debit Credit Account Title and ExplanationAPPROPRIATIONSAppropriations-Realized Resources4119100,000Unapportioned Appropriations4450100,000Funds With Treasury1010100,000Unexpended Appropriations100,0003101
73General Journal Reference Debit Credit Account Title and Explanation OMB APPORTIONMENTUnapportioned Authority445025,000Apportionment451025,000
74General Journal Reference Debit Credit Account Title and Explanation ALLOTMENTApportionments451020,000Allotments-Realized Resources461020,000
75General Journal Reference Debit Credit Account Title and Explanation COMMITMENTAllotments-Realized Resource46102,000Commitments47002,000
76General Journal Reference Debit Credit Account Title and Explanation OBLIGATIONCommitments47002,000Undel. Orders – Obligs. Unpaid48012,000
77General Journal Reference Debit Credit Account Title and Explanation RECEIPT OF MAT’LS ORDEREDUndel. Orders – Obligs. Unpaid48012,0002,000Del. Orders – Oblig. Unpaid4901Operating Materials Held for Use2,0001511Accounts Payable21102,000Unexpended Appropriation31072,0002,000Expended Appropriation5700
78General Journal Reference Debit Credit Account Title and Explanation PAYMENT OF INVOICEDelivered Orders Oblig. Unpaid49012,000Delivered Orders Oblig - Paid49022,000Accounts Payable21102,000Fund Balance With Treasury10102,000
83Managerial Cost Accounting Is the process of:- Accumulating - Measuring - Analyzing - Interpreting - Reporting CostSource: SFFAS No. 4MANAGERIAL COST ACCOUNTING - IS THE THIRD ACCOUNTING SYSTEM*SFFAS No. 4 Defines Managerial Cost Accounting as:THE PROCESS OF ACCUMULATING, MEASURING, ANALYZING, INTERPRETING AND REPORTING COSTTHE MOVE TO PERFORMANCE-BASED BUDGETING AND PERFORMANCE REPORTING WILL RELY A GREAT DEAL ON COST INFORMATION* SFFAS - STATEMENT OF FEDERAL FINANCIAL ACCOUNTING STANDARDS
84Managerial Cost Accounting Full CostDirect Costs (Direct Labor/Direct Material)Indirect Costs (Overhead)Intra-entity Costs (General and Administrative)Inter-entity CostsCost of goods and services received from other entitiesProviding entity responsible for providing cost dataRecognition limited to material amounts
85Reference - 10 U.S.C., Section 2208 DoDFMR Volume 3, Chapter 19 Working Capital FundsEstablished to satisfy recurring DoD requirements using a businesslike buyer-and-seller approach.Have a goal to breakeven over the long term.Use the funds collected to pay for acquisition of resources needed to operate the fund.Reference - 10 U.S.C., Section 2208 DoDFMR Volume 3, Chapter 19MAJOR REVOLVING FUND IN DODDBOF - OCT 1, 1991WCF - DEC NO-YEAR APPROPRIATION WITH BUSINESS AREAS IN THE SERVICES AND DEFENSE AGENCIES:ARMY WORKING CAPITAL FUNDAIR FORCE WORKING CAPITAL FUNDNAVY WORKING CAPITAL FUNDDEFENSE WORKING CAPITAL FUNDCOMMISSARY WORKING CAPITAL FUND (FY 1999)WCF SETS PRICES FOR GOODS AND SERVICES TO RECOVER COST OF OPERATIONS (STABILIZED RATES).TYPE OF ASSETS:SUPPLY MANAGEMENT - INVENTORYINDUSTRIAL ACTIVITIES - WORK IN PROCESS INV. References: DOD R, FMR. Vol. 2A - Cost Management Concepts as they relate to DWCFVol. 2B - DWCF Activity Group Analysis,(Cash Mgmt., Mgmt HQ costs, Mil. Personnel Costs, Pre/Post Investment Anal.) Vol 4, Ch 6. Vol. 11B - Reimb. Operations Policy & Procedures for WCFBASIC TENET - Make managers and decision-makers at all levels more concerned with the cost of goods and services
86DEFENSE WORKING CAPITAL FUND How it Works CUSTOMERSOPERATING FORCESREADINESS COMMANDSAPPROPRIATES$ FUNDSPLACEORDERSPAYBILL FORCOSTS/ SERVICESREVOLVINGFUNDSWORKINGCAPITAL $$CONGRESSAPPROPRIATED$ WORKINGCAPITAL AT INCEPITON OF THE FUNDFINANCES COST OF PERFORMING WORKPRODUCTIONOVERHEADGENERAL &ADMINISTRATIVELABOR COSTSDIRECT MATERIAL
87Objectives of Federal Financial Reporting Budgetary IntegrityFunding properly spent?Operating PerformanceOutputs and outcomes?ControlsSafeguarding assets?
88Federal Financial Reporting DoDFMR Volume 6BBalance Sheet (Chapter 4)Statement of Net Cost (Chapter 5)Statement of Changes in Net Position (Chapter 6)Statement of Budgetary Resources (Chapter 7)Statement of Custodial Activity (Chapter 9)Balance Sheet - presents the status of an organization as of a specific point in time. Presents the activities Assets, Liabilities and Net PositionBalance Sheet Equation: Assets = Liabilities + Net Position Statement of Net Cost - Shows the components of the net cost of the reporting entity’s operation for the period.Net Cost = the gross cost incurred by the entity less any exchange revenue earned from its activitiesStatement of Changes in Net Position - Reports the beginning net position, the items that caused net position to change during the reporting period, and the ending net position.Statement of Budgetary Resources - Provides information regarding how budgetary resources were made available as well as their status at the end of the period.Statement of Financing - Designed to report those differences between the Statement of Financing and the Statement of Budgetary Resources and facilitate reconciliation.
89Statement of Net Costs Also Referred to as: Purpose Statement of OperationsIncome statementPurposeintended to provide revenue and expense detailsreports results (net profit or net loss)Prepared on basis of general ledger 5000 and 6000 account balancesStatement of Net Cost - Shows the components of the net cost of the reporting entity’s operation for the period.Net Cost = the gross cost incurred by the entity less any exchange revenue earned from its activities
91Statement of Changes in Net Position Reports thebeginning net positioneffect of those transactions that caused the net position to changeending net positionPrepared on the basis of the Statement of Net Costs and the “Financing Sources”Statement of Changes in Net Position - Reports the beginning net position, the items that caused net position to change during the reporting period, and the ending net position.
92Statement of Changes in Net Position ITEMS THAT INCREASE NET POSITIONExcess of revenue over cost (net income)Legislative appropriationsProperty obtained from another govt. agency for which no reimbursed is requiredITEMS THAT DECREASE NET POSITIONExcess of cost over revenue (net loss or net cost of operations)Property provided to another agency for which no reimbursement is expectedFunds returned to the TreasuryAppropriations returned
93Statement of Financial Position Also referred to as the Balance Sheetassetsdollar amount of future economic benefits owned and managed by the agencyliabilitiesdollar amounts owed by the agencynet position (equity)the difference between assets and liabilities
94Statement of Financial Position Summarizes the net worth or liquidity of an entity at a particular timeChanges from day to dayAccounts on this statement are permanent accountsIs a summary of accounting equationAssets = Liabilities + Government Equity
96Statement of Budgetary Resources Provides information on how budget resources were made available as well as their status at the end of the reporting period.Should be reconcilable to the budget execution information reported on the SF 133 Report on Budget Execution and Budgetary Resources.Statement of Budgetary Resources - Provides information regarding how budgetary resources were made available as well as their status at the end of the period.
97SF 133 Report on Budget Execution and Budgetary Resources The SF 133 consists of the following sections: