Capital Project Fund: Illustrative Journal Entries

The following illustration shows accounting for representative transactions of capital projects
fund for the year 2011.

1. The Council of a certain Town authorized an issue of $1,200,000 of 6% bonds as partial

financing of a Fire Station expected to cost approximately $1,500,000; the $300,000
additional was to be contributed by other governments. The project, to utilize land already
owned by the Town, was done partly by a private contractor and partly by the Town's own
workforce.

Completion of the project was expected within the current year. The $1,200,000 bond issue,
which had been approved by voter referendum, was officially approved by the Town
Council.

The sum of $50,000 was borrowed on a short-term basis from the National Bank for
defraying engineering and other preliminary expenses.

2. Total purchase orders and other commitment documents issued for supplies, materials, items
of minor equipment, and labor required for the part of the project to be performed by the
Town's employees amounted to $443,000.

3. A contract, in the amount of $1,050,000, was signed for certain work to be done by a private
contractor.

4. Special engineering and miscellaneous costs that had not been encumbered were paid in the
amount of $48,000.

5. When the project was approximately half finished, the contractor submitted a bill requesting
payment of $495,000.

6. Payment in full was received from the other governmental units that had agreed to pay part of
the cost of the new fire station. (Refer Transaction 1)

7. The National Bank loan was repaid with interest mounting to $ 1,000.

8. On June 15, 2011, the town of Brighton issued at par bonds with a par value of $1,200,000
and dated June 15, 2011.

9. The contractor's initial claim was fully verified and paid (See transaction 5.)

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10. Total disbursements for all costs encumbered in Transaction 2 amounted to $440,000.

11. Billing for the balance owed on the construction contract was received from the contractor.

12. Inspection revealed only minor imperfections in the contractor's performance, and on
correction of these, the liability to the contractor was paid.

13. All requirements and obligations related to the project having been fulfilled, the operating
statement accounts were closed in the capital projects fund and governmental activities
general ledgers.

14. Since the project has been completed, it is appropriate to close the Capital Projects Fund. The
only asset of the fund remaining after the transaction 13 is Cash in the amount of $6,000.
State laws often require that assets no longer needed in a capital projects fund be transferred
to the fund that will service the debt incurred for this project, a debt service fund.

Illustrative Financial Statements for a Capital Project Fund

TOWN OF BRIGHTON
FIRE STATION CAPITAL PROJECTS FUND
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE
FOR THE YEAR ENDED DECEMBER 31, 2011
Revenues:
From other Governmental Units........................................... $ 300,000
Expenditures:
Construction.......................................................................... 1,494,000
Excess of Revenues over (under) Expenditures................................. (1,194,000)
Other Financing Sources (Uses):
Proceeds of bonds................................................................. $1,200,000
Interfund transfer out............................................................ (6,000) 1,194,000
...............................................................................................
Change in Fund Balance for Year...................................................... –0–
Fund Balance, January, 1, 2011......................................................... –0–
Fund Balance, December 31, 2011.................................................... $ –0–