Capter 9: Government Accounting: fund based Financial Statements

Government Activities

-different from business activities

-governments receive cash from a number of sources such as taxes, fees, and borrowing and spend those funds for the public good

-citizens are concerned that services are provided in an efficeint manner

-citizens demand assurance that all of the funds have been entrusted to their governemnt can be accounted for

-regulators are concerned that governmental units maintain compliance with all applicable laws and regulations

-investors that purchase state and municipal bonds require financial information in order to determine the risk inherent in their investment

-the governmental accounting standards board (GASb) is the primary accounting standard setting body for governmental accounting standards

—> identifies citizenry, legislators, oversignt bodies and investors and creditors as the primary users of state and local governmental financial reports

—> it confims that these fianncal reports are used to compare actual fianncail results with the leagally adopted budget; to assess financial ocndition and results of operations; to assist in determining compliance with finance related laws, rules, and regulations, and to assist in evaluating efficiency and effectiveness

Accountability

the philosophical cornerstone of governmental financial reporting

-governmental accountability is based on the belif that the citizenry has a right to know, a right to receive openly declaired facts that may lead to public debate by the citizens and their elected representatives. Financial reporting plays a major role in fulfilling governments duty to be publically acocuntable in a democratic society

Governments are required to issue two types of financial reports

1. fund financial statements - governmental fund financial statements are prepared to focus on the sources, uses, and balances of the current financial resources that have been entrusted to government offifials and therefore use a modified accrual basis of accounting. A significant use of fund financial statements is to ensure that the resources entrusted to the government by its citizens have been used as approved and that the government has operated within the budget set for it by its citizenry. Proprietary and fiduciary fund financial statements are prepared to focus on the longterm flow of economic resourcesto and from these types of funds, and therefore use an accrual basis of accounting

2. Government-wide financial statements - these statements provide information about the governemnt on an actual accrual basis, which is similar to businesses. THese accrual bassis statements allow users to asses the financial condition of the government in order to make investment and operating decisions

-used to only be required to use fund financial statemntents and they are still the promary method. It organizes the governemnt into discrete accounting and fiscal entities calle dfunds, each of which is accounted for seperatly. FOr example, General FUndincludes public saftey, education, public works, health and social services, and parks and rec. Or the Captial Projects Fund relating to the construction of a new school

-a fund segregates these accountifn for these activities so each activity can be monitored. They raise funds by taxing citizens and the use of their tax receipts is resticted by law

-Fund accounting focusses on the current year. Long term capital assets and liabilities are not reported on the governmental fund balance sheeet. So it is difficult to analyce the financial condition of the governemnt from an investment perspective. GOverment wide financial statements are rpepared under accrual accounting ans include those long term captial assets and liabilites. Helps us answer the questions of if the gov is efficient in delivering the services we expect and if the governemnt is financially solvent

Budgetary Accounting

-central to the effective functioning of a government

-a form of control usually having the force of law. a legally adopted budget provides both authorization of and limitations on amounts that may be spent for particular purposes

-budgedary authorizations result from competition for scrce resources and budgetary limitations generally cannot be exceeded without due process. The governmental entity needs to demonstrate that it is accountable from both the authorization and limitation perspective

-establish te tpes and levels of services that the governemtn will provide to its citizens for the upcoming year

-state level governments raise funds in the form of income or sales taxes (derived taxes) and proposed spending levels must be set in relation to expected tax inflows

-local level governments, cash inflows are primarly the result of taxes on real estate and personal property (imposed taxes) and spending levels must be set in relation to the tax burdan that citizens are willing to accept

-purchases of captial assets and infrastructure are typically financed with bonds, and these proejcted inflows and expenditures must also be identified in the proposed budget

Appropriations and Estimated Revenues

-all governemntal units present a budget to taxpayers that includes anticipated receipts and proposed expenditures (to elected reps for fed statea nd large minicipal levels or directly to its citizens for smaller governments)

-Warrent: the agenda for the meetng. Drawn up by selectment from various proposals made by the selectman, the school committee, and other boards staff and citizens)

-Warrant articles: motions related to all the significant financial decistions for the upcoming year

Appropriations

a sum of money that has been set aside for a specific use

-’Expended’: The word expenditure is used in governmental funds in place of the word expense. An expenditure is an expending of an appropriation to be paid in cash. Governmental funds focus on the short term inflows and outflows of current financial resources, not revenues and expenses as do proprietary and fiduciary funds

-Governemtns account for their activities using a number of funds. A fund is a seperate acoounting entity designed to keep track of all transactions and balances for a specific activity

-The appropriation of money for this appropriation relates only to the current fiscal year. The time horizon for governmental budgets is usually one year. Interest and principal payments in future years will be appropriated in future budgets

Estimated revenues for the governmental funds

governemtal budgets mustinclude proposed taxes that will be levied upon its citizens to fund those expenditures

-local governemnts are largely dependant on real estate taxes and taxes on personal property for their funding, although some local governemnts also have income taxes

-the development of budgets for estimated reenues from taxes, fees, and other sources, and for proposed expenditures are not independent processes. Rather they must be developed simultaneously in a negotiated process between the government and its citizens. It is not unusual for this budgetary process to go through several iterations of proposed expenditure levels and citizen repsponse before both the total amount of the budget and the required tax levy are finally established

-many local governemtns strive for a balanced budget one which the estimated revenues are equal to the appropriations

Budgets for enterprise funds

-an activity that is avaliable to the public and financed in whole or in part by fees charged to users of the enterprise. A business like activity an dbecause its fundigng does not require access to general tax revenues, its budget is rpesented seperatly from the general budget and together with other consent articles that are usually approved without much debate

-Expample: parking systems, airpoirt, utilities

Fund accounting

funds segregate the financial records of a governemnt by activities (ongoing activities like public saftey and education special projects like constructuion of a bridge, business like activities like a municipal swimming pool that charges users a fee, trusts, and many others)

-helps governments monitor the inflow and outflow of resources to each activity to ensure that managers have not overspent the resources alloted to them in the budgetarry process and to ensure they they have not underspent in an area that citizens deem important

-make sur that funds allocated for a specific purpose arent just comingling wiht a general purpose fund

Types of funds

1. Governemtnal funds: relate to the type of activities that are customeary for a governemnt to perform, such as providing general government, public saftey, education, recreation and culture, and health and social welfare. THey also include funds for special projects, such as the constuctuon of a bridge. Issueing bonds for borrowing, servicing the general obligation long term dept, investing an endowment received by a donor who specified the income be spendt for specific purposes. Govt activities are typically funded by taxes together with fed and stae recenue sharing to municipalities

2. Proprietary fundsTypically set at a level that is sufficient to cover the cost of the service provided, not to generate cash flows. Providing public services such as utilities, public trans, public parking, garbage collectingm golf courses, airports, rec facilities. Providing intergovernmental services, such as centralized IT, photocopying, vehicals, and supplies

3. Fiduciary funds: used to monitor resources that are require to be held in trust for others. Funds for pension plans, other post employment benefit plans, and investments. Fiduciary activities may also include the collection and disbursment of taxes such as property taxes for otehr governmental entity

-One requirement for the establishment fo fudns is that there fhould only be one general fund. GOvernments should establish and manitain their funds that are required b law and are neccessary for sound finanical iadministration. ONly the minimum number of funds consistant with legal and operating requirements should be estalished ebcause unnessary funds results in inflexibility undue complexity an dinefficient funancal information

Measruement FOcus and Basis fo Accounting for Governmental Funds

-FOr governmental funds, we recognize revenues and expenditures using the current financial resources measurement focus and the modified accrual basis of accounting

• Current financial resources measurement focus refers to what is being reported. Focuses on resources that can be consumed in the near future like cash, prepaid, investments, and recevables, not PPE, and AP and accural not long term liabilities

• MOdified accrual basis of accounting refers to when the trasaction is recognized. Revenues are recognized in the accounting period in which they become both measureable and avaliable to finance expenditures. Avaliable means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures should be recognized inthe accounting period in which the fund liability is incurred exept for interest on general long term debt which is recognized whien it is legally due

-Governemnt trasactions are typically two types

• exchange transactionsL sale of goods and services to outsiders in various business-like activities. governemtns recognize revenue when transactions are completed

• Nonexchange transactions: including income or sales taxes, real estate and eprsional property taxes, grants and private donations in which the provider of those resources does not receive equal value to the resources tat were exchanged . Governemtns recognize revenue when the resoruces are avalible to satisfy existing liabilites

Recognition of Revenue from property taxes

-property taxes are levied pursuant to law as of a specific date, and once levied an enforcable legal claim attaches to the properties and or taxpayer

-the property taxes due to a government net of estimated uncollectables, typically can be determined and recorded in the accounts when levied. Property taxes are typically levied in one budgetary year and collected in the next. The tax revenues are regcognized in a governmental fund in the accounting period in which they become both measurable and avaliable to finance expenditures> property taxes are considered avalible if they are colelcted within the current period or expected to be collectd within the first 60 days of the next fiscal year

—> only the portion of the receavable that is expected to be collected within 60 days should be recognized as revenue in the year of assessment and the remainidg amount colelctible after 60 days hsould not be recognized as revenue until colelcted int he subsequent fiscal year

-the taxes levied would be recognized as deferred revenue in the current year

DR Tax receivable

CR Property taxes revenue

CR deferred revenues

(to recognize revenue s for the portion of taxes recevable expected to be collected within 60 days from the end of the fiscal year and to defer revenue recognition for the remaining amount)

Defered revenues are recognized as revenue in the subsequent eyar whne collected with a DR to Deferred revenues and a CR to property tax revenues for the amt of the rev recognized. An allowance for uncollectible accounts could also be set up with a reduction ot prop tax revenues

Revenue recognition in the presence of eligability requrirements for grnats and other subsidies

-Local governemnts often receive aid from the state or federal govenemnts in the form of grants and other subsidies. These grants often contain conditions that must be met in order for the local government to use the funds

• the receipient has the charateristics specified by the provider

• time requirements specified by enabling legislation or the provider have been met

• the provider offers resources on a reimbursement basis, and the recipient has incurred allowable costs under the applicable program

• The providers offer of resources is contingent upon a specified action of the recipient and that action has occured

Governemtns recognize receivables (or a dec in liab) and reveneus (net of estimated uncolelctible acocunts) when all applicable eligibility requirements including time, are met. Resources received before the eligibility requirements should be reported as defferd revenues

Revenue and expense recognition ofr proprietary and fiduciary funds

-proprietary (business type activities) and fiduciary (trust) funds are accounted for differntly from the governemntal fund

-revenues and expenses for propietary and fiduciary funds should be recognized in the acccounting period in which they are earned and become measureable and expenses sould be recognized in the period incurreed (accural basis)

Governmental FUnd accounting journal entries

-focuses on the sources and uses of current fianncial resources

-ensure that managers do not overspend the monies that have been appropriated by the taxpayers, and its focus on current financial reosurces

Budget entry

Dr. Estimated Revenues—Property Taxes Control: $89,006,214

Dr. Estimated Revenues—Excise Taxes Control: $3,738,000

Dr. Estimated Revenues—Charges for Services Control: $160,000

Dr. Estimated Revenues—Penalties and Interest on Taxes Control: $160,000

Dr. Estimated Revenues—Payments in Lieu of Taxes Control: $45,000

Dr. Estimated Revenues—Licenses and Permits Control: $800,000

Dr. Estimated Revenues—Fines and Forfeits Control: $92,000

Dr. Estimated Revenues—Intergovernmental-School Control: $922,673

Dr. Estimated Revenues—Intergovernmental-Control: $1,685,390

Dr. Estimated Revenues—Department and Other Control: $450,000

Dr. Estimated Revenues—Investment Income Control: $117,000

Dr. Estimated Other Financing Sources: $3,789,557

Cr. Appropriations—General Government Control: $9,431,160

Cr. Appropriations—Public Safety Control: $9,181,497

Cr. Appropriations—Education Control: $62,690,936

Cr. Appropriations—Highway and Public Works Control: $4,184,695

Cr. Appropriations—Health and Human Services Control: $2,321,356

Cr. Appropriations—Culture and Recreation Control: $1,544,968

Cr. Appropriations—Employee Benefits and Insurances Control: $8,643,719

Cr. Appropriations—State and County Charges Control: $324,959

Cr. Appropriations—Debt Service Control: $2,642,544

Cr. Budgetary Fund Balance (Plug): $9,040,050

This entry allwos that administarators to regularly analyze actual vs budgeted variances during the year in order to monitor expenditure levels. Governemtns can only increase revenues through the legislative process and may not be able to move cash from one fund to another to make up for shortfalls. And they need to make sure the expedentures do not exceed appropriations. This entry is reversed int he closing process

Budget revisions

sometimes governemtns revise their budgets during the eyar to reflect changes in estimates. Usually in the face of cost overruns managers do not have the authority to move funds from one fund to another, and the revision requires an additional appropriation that may require approval by the citizens

DR budgetary fund balance

CR appropriations - high wya wand public work control

(to record the increased appropriation of xxx for snow removal)

-the budget comparison schoedule must alos include a column relating to budget revisions in order to identify any changes from the og budget to the final budget

Tax and fee revenues

taxes based on assed values (ad valorem) of real estate and personal property are typically the largest sources of revenue for local governemnts.

-these taxes require an annual assesment of ral and personal property values by the governemnt and the tax liability is usually set in the budgeting process as a percentage of assessed valuation. Real property is land and buildingns and personal propety is not attached to land, like equipment

Tax Levy entry

DR real estate taxes receivable

CR revenues - property taxes

(to record the tax levy)

or

DR real estate taxes receivable

CR Allowance for uncollectibel taxes

CR revenues - property taxes

(to record the tax levy)

DR cash

CR realestate taxes recevable

(to record collection of taxes receivable)

DR realestate taxes receable - deliquent

DR rel estate taxes receable —> lets the people know the the proprtion of receivables that have not been paid according to their terms

(to reclassify unpaid taxes recevable as deliquent)

Personal Property (Excise) tax entry

-Personal property taxes are assessed on specified items, like autos or equipment for a business, as a percentage of assessed valuation. Each year the personal property tax on a particular auto will decline with the reduction in its market value

-the allowance for uncollectible personal property taxes only affects the amount of receivables taht will ultimatly be colelcted. If the allowance is further adjusted, the offset will be to the receivable amount. And if an account is written off the right off is made to the allowance account

DR ALlowance for uncollectible pers prop taxes

CR personal prop tac rec

(to record the write off of an excise tax receivable)

Encumbrances and expenditures (purchase orders and payment)

accountability is the philosophical cornerstone of financial reporting in government

-accountibility requires governments to justify the raising of public resources and the purposes for which they are used

-purchases of supplies or capital assets (appropriations) must be approved in the budget process. When the purchase is ultimatly made, the apporpriation is used up and the using up of the appropriation is called an expenditure

-we need to keep track of both the amounts that have been expended to date as well as the amounts we have commited to spend. An enumbrance is a purchase order or other contractual commitment that requires the payment of funds in the future relating to an existing appropriation

Issuance of Purchase Order:

• Budgetary accounts

• Dr. Encumbrances: $50,000

• Cr. Budgetary Fund Balance: $50,000

• (to record issuance of purchase order for goods or services)

• Fund financial statement accounts No entry

Goods or Services Are Received:

• Budgetary accounts

• Dr. Budgetary Fund Balance: $50,000

• Cr. Encumbrances: $50,000

• (to reverse the previous encumbrance entry)

• Fund financial statement accounts

• Dr. Expenditures: $50,000

• Cr. Cash or vouchers payable: $50,000

• (to record purchase of goods or services)

-under accrual accounting a liab is not recognized until it is incurred. It is at the point of recipt that a business would record the asset or expense and teh related obligation to kake payment to the vendor. Under fund accounting, an encumbrance is recorded when a purchase order is signed

-an encumbrance is not a liability. It represents a reservation of the fund balance relating to a planned expenditure. When goods and services are received the encumberance is removed and the expenditure is recorded

Remaining authority to authorize appropriations = budgetary appropriations - (encumbances outstanding + expenditures to date)

Outstanding encumbrances at year-end

-some orders that have been recorded as encumbaces during the year might not be filled by the end of the fiscal year. Governments carry over the prior years commitments into the succeeding budget yera

-sometimes the legal authority for government managers to honor these commitments might expire, thus necessitating a new appropriation for the expenditure in the succeesing budget year

-whether legal authority lapses or does not lapse, the govt must remove the budgetary encumbance and assign its fund balance for the ongoing commitment

Dr. Budgetary Fund Balance: $50,000

Cr. Encumbrances: $50,000

Dr. Fund balance—unassigned: $50,000

Cr. Fund balance—assigned: $50,000

(to reverse the budgetary encumbrance and reserve the fund balance for the outstanding encumbrance)

-encumbances at year end will be reflected in the restricted, commited or assigned categories of the fund balance depending on their character. In this example they are recognized in the assigned fund category to reflect the outstanding purchase order

Purchase and sale of long term assets

-the purchase of capital assets, like a truck, for governemnt usehighlights the current fiancnial resources measurement focus

-purchases of capital assets are recorded as expenditures and are not capitalized on the baalcne sheet

Dr. Encumbrances: $40,000 estimated purchase cost

Cr. Budgetary Fund Balance: $40,000

(to record issuance of purchase order for a machine)

Dr. Budgetary Fund Balance: $40,000 reverse

Cr. Encumbrances: $40,000

Dr. Expenditures: $42,500 actual purchase cost

Cr. Cash or vouchers payable: $42,500

(to reverse the previous encumbrance entry and record purchase of machine)

Dr. Cash or accounts receivable: $15,000 amt sold for

Cr. Other financing sources*: $15,000

(to record the sale of the machine)

—> since there is no asset in the balance sheet, no gain or loss on sale is recognized. Instead the sale is recorded as an inflow of cash

Other fianancing sources and uses (long-term debt and leases and interfund transfers)

-governments typically fiannce the purchase or constructuon of capital assets with long-term notes and bonds or by leasing

-long term liab are not recognized on the BS instead, the proceeds of borrowing are recognized as other finacning sourcesand the payment of principal and interest are recorded as expenditures

Long term debt

the proceeds from long term debt are not recognized as revenue because the debt must be repaid and the future payment amounts are not recognized on the balance sheet since they will require the use of future financial resources. Instead the borrowing is reported as other financial sources

Dr. Cash: $10,000,000

Cr. Other financing sources—proceeds from bond issue: $10,000,000

(to record sale of a bond)

Dr. Expenditure—interest on bond: $500,000

Dr. Expenditure—repayment of bond: $10,000,000

Cr. Cash: $10,500,000

(to record payment of interest and principal on bond issue)

-the principal and interest payments are recognized as expenditures when paid. Interest is not accrued like i is for business. Instead it is recognized as an expenditure in the year in which it is due to be paid

Capital Leases

Under fund accounting, leases are recorded like bonds: the present value of the minimum lease payments is recorded as other financing sources. and the acquisition of the leased asset is recorded at the same amount as an expenditure

Dr. Expenditure—capital outlay: $40,000

Cr. Other financing sources—proceeds from capital lease: $40,000

(to record the acquisition of a capital asset via lease)

Dr. Expenditure—interest: $1,000

Dr. Expenditure—lease obligation: $2,000

Cr. Cash: $3,000

(to record the payment on a capital lease)

neither the expenditure or the financing sources are recognized

Interfund transactions

fund accounting separates governmental activities into discrete accounting entries to allow managers to monitor spending to ensure compliance with budgetary and legal restrictions

-transfers of cash between funds must be monitored closley so that deficits in one fund cannot be masked by transfers into that fund from another fund

-GASB requires any unterfund transfers to be clearly identified unless they are mearly reimbursements made for proper classification of the expenditure

1. Interfund loans—amounts provided with a requirement for repayment. These loans are usually to be repaid within the fiscal year and are, thus, a temporary funding mechanism that will be eliminated by year-end.

   • Interfund loans should be reported as interfund receivables in lender's funds and interfund payables in borrower's funds (not as other financing sources or uses in the fund financial statements).

     
     

2. Interfund services provided and used—sales and purchases of goods and services between funds for a price approximating their external exchange value. An example is an internal service fund such as a centralized motor pool for governmental vehicles or a centralized copy center that provides copy services to all branches of the government.

   • Interfund services provided and used should be reported as revenues in seller's funds and expenditures or expenses in purchaser's funds.

     
     

3. Interfund transfers—flows of assets (such as cash or goods) without equivalent flows of assets in return and without a requirement for repayment. An example is the transfer of cash from the General Fund to a debt service fund to provide cash for payment of debt obligations.

   • In governmental funds, transfers should be reported as other financing uses in the funds making transfers and as other financing sources in the funds receiving transfers.

     In proprietary funds, transfers should be reported after nonoperating revenues and expenses.

     
     

4. Interfund reimbursements—repayments from the funds responsible for particular expenditures or expenses to the funds that initially paid for them. An example would include the General Fund making payment to the local utility for electricity and, subsequently, receiving reimbursement from other funds that are properly charged for the utility expenditure.

   • Reimbursements should be accounted for as a reduction of expenditure in the fund originally making payment.

     
     

Interfund Transaction JE

1. Loans:

Fund Paying Cash (X):

Dr. Due from Fund Y: xxx

Cr. Cash (to Y): xxx

Fund Receiving Cash (Y):

Dr. Cash (from X): xxx

Cr. Due to Fund X: xxx

2. Services:

Fund Paying Cash (X):

Dr. Expenditures*: xxx

Cr. Cash (to Y): xxx

Fund Receiving Cash (Y):

Dr. Cash (from X): xxx

Cr. Revenue: xxx

3. Transfers:

Fund Paying Cash (X):

Dr. Other financing uses: xxx

Cr. Cash (to Y): xxx

Fund Receiving Cash (Y):

Dr. Cash (from X): xxx

Cr. Other financing sources: xxx

4. Reimbursements:

Fund Paying Cash (X):

Dr. Expenditures: xxx

Cr. Cash (to Y): xxx

Fund Receiving Cash (Y):

Dr. Cash (from X): xxx

Cr. Expenditures: xxx

Inventories

governments typically do not maintain large quantities of inventories

-puhases of inv are usally recorded as expenditures either when invesntories are puchased (purchases method) or when used (consumption method).

-If the ending balance of inv is considered to be material, the inv should be reported on the balance sheet, and if the inventory is shown on the balance sheet, an amount equal to inv balance reduces fund balance to signify that the fund is not avaliable for expenditure

-both the purchases and consumption method start with:

Dr. Expenditures: $3,000

Cr. Vouchers payable: $3,000

(to record purchase of $3,000 of supplies inventory)

-If deemed material, the ending balance is recognized on the BS using one of two acceptible approaches. the purch or consumption

Purchases Method

Dr. Inventory—supplies: $2,500

Cr. Fund balance—nonspendable: $2,500

(to recognize the remaining balance of supplies inventory)

Consumption Method

Dr. Inventory—supplies: $2,500

Cr. Expenditures: $2,500

(to recognize the remaining balance of supplies inventory)

Dr. Fund balance—unassigned: $2,500

Cr. Fund balance—nonspendable: $2,500

(to recognize the remaining balance of supplies inventory)

Under both methods the inv are reported on the bs at the unused amt and an equal am of fund balance is reseved to signify that it is not avaliable for future expenditures

Difference:

—> purchases method has expenditures = the amount purchased

—> consumption method has expenditures = the amount consumed

-both methods are used in practice, and the choice depends on whether the budgeted appropriation is for expeted purchases or expected consumption of inventories during the upcoming year

Fund fianncial statements

use the preclosing tb to prepare the fund fianncal statements

Here is a detailed breakdown and summary of the financial statements required for each fund category outlined in the image:

Required Financial Statements by Fund Category

1. Governmental Funds

   • Balance Sheet

   • Statement of Revenues, Expenditures, and Changes in Fund Balances

     
     

2. Proprietary Funds

   • Statement of Net Position

   • Statement of Revenues, Expenses, and Changes in Fund Net Position

   • Statement of Cash Flows

     
     

3. Fiduciary Funds (and Fiduciary-Type Component Units)

   • Statement of Fiduciary Net Position

   • Statement of Changes in Fiduciary Net Position

     
     

-Governmental Funds are evaluated using the current financial resources measurement focus paired with the modified accrual basis of accounting

-Proprietary and Fiduciary Funds are evaluated using the economic resources measurement focus paired with the accrual basis of accounting.

-no long term assets or liabilities

Fund balances

Fund balances are reported for the excess of assets over liabilities. These fund balances are grouped into the following five categories as defined in GASB (Cod. Sec. 2200.166–177):

a. Nonspendable—amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The "not in spendable form" criterion includes items that are not expected to be converted to cash, for example, inventories and prepaid amounts. It also includes the long-term amount of loans and notes receivable, as well as property acquired for resale.

b. Restricted—amounts that are restricted to specific purposes such as (a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation.

c. Committed—amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government's highest level of decision-making authority.

d. Assigned—amounts that are constrained by the government's intent to be used for specific purposes, but are neither restricted nor committed.

e. Unassigned—the residual classification for the General Fund. This classification represents a fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund

There should be a total column like in the pictuer

Closing entries

After financial statements are prepared, three key closing activities occur:

Reversing the initial entry recorded for the annual approved budget.

Zeroing out actual operating statement revenues and expenditures to update Fund Balance—Unassigned.

Assigning the Fund Balance for encumbrances intended to be honored in the subsequent year.

Entry 1: To close budgetary accounts established at the beginning of the year

Dr. Appropriations—General Government Control: $9,431,160

Dr. Appropriations—Public Safety Control: $9,181,497

Dr. Appropriations—Education Control: $62,690,936

Dr. Appropriations—Highway and Public Works Control: $4,184,695

Dr. Appropriations—Health and Human Services Control: $2,321,356

Dr. Appropriations—Culture and Recreation Control: $1,544,968

Dr. Appropriations—Employee Benefits and Insurances Control: $8,643,719

Dr. Appropriations—State and County Charges Control: $324,959

Dr. Appropriations—Debt Service Control: $2,642,544

Dr. Budgetary Fund Balance (Plug): $9,040,050

Cr. Estimated Revenues—Property Taxes Control: $89,006,214

Cr. Estimated Revenues—Excises Tax Control: $3,738,000

Cr. Estimated Revenues—Charges for Services Control: $160,000

Cr. Estimated Revenues—Penalties and Interest on Taxes Control: $160,000

Cr. Estimated Revenues—Payments in Lieu of Taxes Control: $45,000

Cr. Estimated Revenues—Licenses and Permits Control: $800,000

Cr. Estimated Revenues—Fines and Forfeits Control: $92,000

Cr. Estimated Revenues—Intergovernmental—School Control: $922,673

Cr. Estimated Revenues—Intergovernmental—Control: $1,685,390

Cr. Estimated Revenues—Department and Other Control: $450,000

Cr. Estimated Revenues—Investment Income Control: $117,000

Cr. Estimated Other Financing Sources: $3,789,557

(to close budgetary accounts established at the beginning of the year)

Entry 2: To close operating statement accounts

Dr. Revenues—Real estate and personal property taxes: $88,428,671

Dr. Revenues—Tax liens: $100,236

Dr. Revenues—Motor vehicle and excise taxes: $3,767,678

Dr. Revenues—Charges for services: $184,677

Dr. Revenues—Penalties and interest on taxes: $185,218

Dr. Revenues—Payments in lieu of taxes: $42,083

Dr. Revenues—Licenses and permits: $859,479

Dr. Revenues—Fines and forfeits: $80,206

Dr. Revenues—Intergovernmental—School Building Authority: $922,673

Dr. Revenues—Intergovernmental—other: $1,694,706

Dr. Revenues—Department and other control: $303,915

Dr. Revenues—Investment income: $129,310

Dr. Revenues—Miscellaneous: $44,104

Cr. Expenditures—General government: $6,303

Cr. Expenditures—Public safety: $7,007,469

Cr. Expenditures—Education: $9,204,495

Cr. Expenditures—intergovernmental: $62,690,935

Cr. Expenditures—Highway and public works: $2,988,041

Cr. Expenditures—Health and human services: $2,071,658

Cr. Expenditures—Culture and recreation: $1,350,839

Cr. Expenditures—Employee benefits and insurance: $8,280,543

Cr. Expenditures—State and county charges: $322,515

Cr. Expenditures—Debt service: $2,251,891

Cr. Other financing uses: $568,267

Cr. Fund balance—unassigned (Plug): $3,000,000

(to close operating statement accounts)

Entry 3: To close remaining encumbrances and reserve fund balance

Dr. Budgetary Fund Balance: $300,000

Cr. Encumbrances: $300,000

Dr. Fund balance—unassigned: $300,000

Cr. Fund balance—assigned: $300,000

(to close remaining encumbrances and reserve fund balance for encumbrances that lapsed, but are expected to be honored in the following year)

Budgetary comparison schedules or statements

-budgetary comparisons should be presented for the General Fund for each major governmental fund that has a legally adopted budget

-presents the original and the final appropriated budgets for the reproting periods as well as the actual inflows and outflows and balances stated on the governments budgetary basis

-a seperate column reports the variance between the final budget and actual amounts is encouraged but not required

Financial statements for proprietary funds