1. 19 - 0 Advanced Accounting by Debra Jeter and Paul Chaney Chapter 19: Introduction to Accounting for State and Local Governmental Units Slides Authored by Hannah Wong, Ph.D. Rutgers University

2. 19 - 1 Components in Governmental Accounting lGovernmental funds (expendable) lProprietary funds (nonexpendable) lFiduciary funds lAccount groups

3. 19 - 2 Governmental Funds lAccounting focus: n sources, use and balances of current financial resources n compliance with legal provisions that specify the types of revenues to be raised and purposes for which financial resources may be expended

4. 19 - 3 Types of Governmental Funds lGeneral fund n account for all financial resources unaccounted for in another fund lSpecial revenue funds n to account for proceeds of specific revenue sources lCapital projects funds n to account for resources to be used for acquisition/construction of major capital facilities

5. 19 - 4 Types of Governmental Funds lDebt service funds n to account for accumulation of resources for, and payment of, general long term debt principal and interest lPermanent funds n to account for resources legally restricted such that only earnings may be used for government programs

6. 19 - 5 Proprietary Funds lAccounting focus: n determination of operating income, changes in net assets, financial position, and cash flows

7. 19 - 6 Types of Proprietary Funds lEnterprise funds n to account for any activity for which a fee is charged to external users lInternal service funds n to account for any activity that provides goods or services to other government agencies on a cost-reimbursement basis

8. 19 - 7 Fiduciary Funds lAccounting focus: n reports assets held in a trustee or agency capacity and that cannot be used to support the government’s own programs n focus on net assets and change in net assets

9. 19 - 8 Types of Fiduciary Funds lPension funds lInvestment trust funds lPrivate-purpose funds lAgency funds

10. 19 - 9 Account Groups lGeneral fixed assets account group n to account for all fixed assets of a governmental unit other than those related to specific proprietary funds or trust funds lGeneral long-term obligation account group n to account for all unmatured general obligation liabilities of a governmental unit other than those of proprietary funds or trust funds

11. 19 - 10 Capital Project Funds - Early Stage Due from state government1,000,000 Grant Revenue1,000,000 Setting Up The Fund To record authorization of library construction grant by state legislature Cash2,100,000 Bond issue proceeds - other financing sources2,100,000 Bond Issuance To record receipt of proceeds from issuance of bond securities

12. 19 - 11 Capital Project Funds - Early Stage Transfer to debt service fund100,000 Cash100,000 Premium on Bond Issuance To transfer bond premium to debt service fund Certificates of deposit1,000,000 Cash1,000,000 Investment To record investment of excess cash in temporary investments

13. 19 - 12 Capital Project Funds - Early Stage Encumbrances2,500,000 Reserve for encumbrances 2,500,000 Construction Contract To record signing of construction contract Cash750,000 Due from state government750,000 Receipt of Grant To record collection of grant from state legislature

14. 19 - 13 Capital Project Funds - Early Stage Expenditures 200,000 Vourchers payable200,000 Fees Unencumbered To record unencumbered expenditures for architect and legal fees Expenditures 1,300,000 Contracts payable1,300,000 Reserve for encumbrances 1,300,000 Encumbrances1,300,000 Billings on Construction To record billings on construction completed to date and to remove the encumbrance

15. 19 - 14 Capital Project Funds - Early Stage Vouchers payable 150,000 Contracts payable1,300,000 Cash 1,450,000 Payment To record payment of liabilities Interest receivable12,500 Interest Revenue12,500 Interest Revenue To record interest earned on certificates of deposit

16. 19 - 15 Capital Project Funds - Year End Bond issue proceeds2,100,000 Grant revenue1,000,000 Interest revenue 12,500 Transfer to debt service fund 100,000 Unreserved fund balance3,012,500 Revenues Closing Entry To record revenue and related accounts to unreserved fund balance

17. 19 - 16 Capital Project Funds - Year End Unreserved fund balance2,700,000 Encumbrances1,200,000 Expenditures1,500,000 Expenditures Closing Entry To record expenditures and encumbrances accounts to unreserved fund balance

18. 19 - 17 Capital Project Funds Completion of Construction Encumbrances1,200,000 Unreserved fund balance1,200,000 Reestablish Encumbrances To reestablish contract encumbrance closed out at end of previous year Expenditures 225,000 Vourchers payable225,000 Expenditures Unencumbered To record unencumbered expenditures

19. 19 - 18 Capital Project Funds Completion of Construction Cash250,000 Due from state government250,000 Receipt of Grant To record collection of grant from state legislature Cash1,020,000 Certificate of deposit1,000,00 Interest receivable 12,500 Interest Revenue 7,500 Redemption of CD To record redemption of certificates of deposit

20. 19 - 19 Capital Project Funds Completion of Construction Expenditures 1,200,000 Contracts payable1,200,000 Reserve for encumbrances 1,200,000 Encumbrances1,200,000 Final Contract Billing To record billing on construction completed and to remove remaining encumbrance

21. 19 - 20 Capital Project Funds Completion of Construction Contracts payable1,200,000 Contracts payable - retained percentage 125,000 Cash 1,075,000 Payment To record payment of contract except for 5% retention Vouchers payable 275,000 Cash 275,000 Payment To record payment of liabilities

22. 19 - 21 Capital Project Funds Completion of Construction Contracts payable - retained percentage125,000 Cash 125,000 Final Payment To record final payment on contract Transfer to debt service fund - other financing use63,333 Expenditures31,667 Cash95,000 Fund Balance To transfer fund balance to debt service fund

23. 19 - 22 Debt Service Funds - Term Bonds Cash100,000 Transfer from capital projects fund - other financing use100,000 Transfer from capital projects fund Certificates of deposit100,000 Cash100,000 Investment in CD Interest receivable4,000 Interest income4,000 Interest receivable from CD

24. 19 - 23 Debt Service Funds - Term Bonds Required additions487,595 Required earnings 32,760 Fund balance520,355 Budget Additions Fund balance160,000 Appropriations160,000 Budgeted Bond Interest for Current Year Property tax receivable503,000 Allowance for uncollectible taxes 15,000 Revenue488,000 Property taxes earmarked

25. 19 - 24 Debt Service Funds - Term Bonds Cash485,000 Property tax receivable485,000 Property taxes collected Investments360,000 Premium on investments 15,000 Cash375,000 Investment of fund resources Cash26,000 Interest receivable 4,000 Interest income22,000 Received interest on investments

26. 19 - 25 Debt Service Funds - Term Bonds Allowance for uncollectible taxes13,000 Property tax receivable13,000 Property taxes collected Interest receivable 21,000 Interest income21,000 Accrued interest on investments Interest income 1,200 Premium on investments1,200 Premium amortization

27. 19 - 26 Debt Service Funds - Term Bonds Expenditures160,000 Interest payable160,000 Accrued interest on bonds Interest payable160,000 Cash160,000 Payment of interest on bonds

28. 19 - 27 Debt Service Funds - Term Bonds Revenue488,000 Required additions 487,595 Fund balance 405 Interest income41,800 Required earnings 32,760 Fund balance 9,040 Appropriations160,000 Expenditures160,000 Year End Closing entries

29. 19 - 28 Debt Service Funds - Term Bonds Expenditures - principal2,000,000 Expenditures - interest 160,000 Cash2,160,000 Transfer to X fund - other financing use60,000 Cash60,000 Fund balance2,220,000 Expenditures - principal2,000,000 Expenditures - interest 160,000 Transfers to X funds -other financing use 60,000 Closing out the fund

30. 19 - 29 Endowment Funds lClassics endowment fund n to account for the nonexpendable fund principal and the investment n a permanent fund lClassic acquisition fund n to account for the expenditure of the earnings of the endowment fund n a special revenue fund

31. 19 - 30 General Fixed Assets Account Group Machinery and equipment250,000 Investment from general fund revenues250,000 Purchase of a fixed asset Investment from general fund reserves225,000 Accumulated depreciation140,000 Machinery and equipment225,000 Reduction in investment from general fund revenues140,000 Sale of a fixed asset

32. 19 - 31 General Fixed Assets Account Group Construction in progress1,500,000 Investment from general obligation bonds1,000,000 Investment from state grant 500,000 Construction of a fixed asset Land 200,000 Buildings2,725,000 Investment from general obligation bonds 950,000 Investment from state grant 475,000 Construction in progress1,500,000 Construction completed

33. 19 - 32 General Fixed Assets Account Group Reduction in investment in general fixed assets due to accumulation depreciation 306,000 Accumulation depreciation - building120,000 Accumulation depreciation - machinery 55,000 Accumulation depreciation - improvements131,000 Depreciation

34. 19 - 33 General Long-term Obligation Account Group Resources to be provided in future years for payment of term bonds2,000,000 Term bonds payable2,000,000 Bond issuance Resources available in debt service fund - term bonds104,000 Resources to be provided in future years for payment of term bonds104,000 Increase in debt service fund

35. 19 - 34 Government-wide Statements lHelp users assess government’s investment in capital assets lassess services received during the year lidentify cost shifts to other periods lhighlights net cost of each government function/program

36. 19 - 35 Types of Interfund Activities lreciprocal activities n similar to exchange transactions n interfund loans: receivables and payables n interfund services: revenues and expenses lnonreciprocal activities n interfund transfers: other financing sources, other financing uses n interfund reimbursements

37. 19 - 36 Advanced Accounting by Debra Jeter and Paul Chaney Copyright © 2001 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.