▪ Revenues & Expenditures

(journal entries & closing entries)

▪ Balance sheet & the statement of

revenue, expenditures, and changes
in fund balance.
 Classification of financial resources:

Financial resources inflows Financial resources outflows

Revenues Other financing sources Expenditures Transfer to other
funds
Debt issue
Transfer from other fund

Financial resources inflows:

Revenues:
Classification of revenues:
Revenues should be classified by source, Major sources of revenue of state and
local governmental units are:
a. Taxes (Property taxes, income taxes, sales taxes, stamp taxes);
b. Grants (Gifts and donations, pledges and grants, grants from federal, state, or
local governmental units);
c. Other revenues (Fines and forfeits, service charges, licenses and permits, sales of property).

Revenues are classified by fund and by major revenue source. Major sources of
revenue for state and local governmental units are summarized in following table,
the number of sources of revenue available to governmental units is impressive
when compared with those available to business enterprises.
Types of Revenues Time of recognition
Property taxes When taxes are levied or assessed
Sales taxes and income tax When tax retunes are filed with payment
Fines and forfeits When cash is collected
Sales of property Time of sale
pledge When pledge is made
Grants:
If grants depend on the performance of When the services are provided
services
If grants do not depend on the When the grants are authorized
performance of services

Governmental Accounting Page 19

Recognition of revenue (when revenue is recorded in the accounting records):
In accounting for expendable fund entities, revenue is not recognized until:
a. It can be objectively measured (Measurability),
b. It is available to finance expenditures of the current period (availability).

Debt issue proceeds Transfer from other funds

Governmental units may finance their Transfers of resources from other fund
operations through the issuance of bonds or entities within an organization do not
other debt instruments. represent an increase in the expendable
Debt issue proceeds should be classified financial resources of the organization.
separately from revenue for purposes of Even though they represent an increase in
financial reporting financial resources of the recipient fund
entity, they should be classified separately
from revenue for financial reporting purposes

Governmental Accounting Page 20

Recording approved budget:

Cases Accounts & explanations Debit Credit

In case of estimated revenue equal Estimated revenues xx
the maximum amount of appropriations xx
expenditures that are authorized to
spend (appropriations)
In case of estimated revenue greater Estimated revenues xx
than (appropriations) Unreserved fund balance xx
appropriations Xx
In case of estimated revenue less Estimated revenues xx
than (appropriations) Unreserved fund balance xx
appropriations Xx
Exercise (recording approved budget): Record separately each of the following transactions:

Transaction Accounts & explanations Debit Credit

The city council approved the budget for Estimated revenues 1.500.000
the general operations fund, the budget appropriations 1.500.000
shows estimated revenues and
appropriation for expenditures of
1.500.000
The city council approved the budget for Estimated revenues 1.900.000
general operations fund, the budget Unreserved fund balance 100.000
shows estimated revenues of 1.900.000 appropriations 2000000
and appropriations of expenditures of
2.000.000
The legislative unit approved the budget Estimated revenues 4000000
for the general operations fund, Unreserved fund balance 400000
estimated revenues are 4.000.000 and appropriations 3600000
appropriations for expenditures are
3.600.000

Governmental Accounting Page 21

Recording Revenues: There are three kinds of revenues:
1-Taxes 2-Grants 3-other revenues
a-property tax Fines and forfeits – service charges
b-other taxes Licenses and permits-interest of loans
(VAT tax, income Tax) Sales of property-interest of investment
Recording kinds of revenues:
Kinds Accounts and explanations DR CR
1-Taxes: Property tax receivable x
a-Property tax: Revenue x
assessment of property Allowance for uncollectible property x
tax: (recording the assessment of property tax)
Collecting property tax: Cash x
Property tax receivable x
(recoding the collection of property tax receivable)
Writing-off property tax Allowances for uncollectible property tax x
Property tax receivable x
(recording writing-off allowances for uncollectable property tax)

b-other taxes: Cash x

Collection in cash: revenue x
(collection from: remitted, collected, cash receipts)

Collection on account: Due from ---- x

Revenue x
(collection on account from: received a statement, received a notification)

2-Grants: Due from ---- x

Revenue x
(when the grants are authorized)

Governmental Accounting Page 22

 Cash x
Due from --- x
(when the grants is received)

3-other revenue Cash/accounts receivable x

Revenue x
Cash x
Bond issue proceeds x

Recording other financial resources:

Transfer from other fund and transfer to:

Transaction Accounts & explanations Debit Credit

Record the authorization of transfer Due from ---- xx
from fund: Transfer from ----- xx
Record the receipt of transfer from cash xx
fund: Due from ---- xx
Record the authorization of transfer to Transfer to debit service fund xx
debit service fund Due to debit service fund xx
Record the transfer to debit service Due to debit service fund xx
fund: cash xx

Governmental Accounting Page 23

Exercise on recording transfer from and transfer to:

Record the following transactions for the general fund:

Transaction Accounts & explanations Debit Credit

The budget authorized the transfer of Due from water fund 50.000
50.000 from water fund to the general Transfer from water fund 50.000
fund
Transfer of funds from water fund cash 50.000
was received Due from water fund 50.000
Authorized 100.000 transfer from Transfer to debit service fund 100.000
the general fund to the debit service Due to debit service fund 100.000
fund
Transfer of funds to debit service Due to debit service fund 100.000
fund were paid cash 100.000

Governmental Accounting Page 24

 Classification of Expenditures and Other Resource Outflows:
Financial resources outflows are classified as follows:
(1) Expenditures:
A-cash expenditures:
-Salaries, wages, payroll and compensations -Water, light and gas
-Power supply - Office supply - Purchasing without order or contract
b- Non-Cash Expenditures: includes purchases by signing a contract or
issuing purchase order.

(2) Transfer to other fund:

Transfers of resources to other fund entities within an organization do not
represent decreases in the expendable financial resources of the
organization. Accordingly, even though they represent a decrease in the
financial resources of a particular fund, they ordinarily should be classified
separately from expenditures for financial reporting purposes.

Notes:
- Expenditures is any decrease in net current financial resources other than
transfer to other funds.
- Thus, expenditures are not matched to the production of current revenues
as are expenses for profit seeking enterprises.
- Expenditures may be classified by:
Fund (ministry of interior – ministry of education)
Function (Public Safety - Public Works)
Organization unit (police department or file department)
Activity (Drug Control- custody of prisoners- patrol)
Character or nature of expenditure (Current Operating)
Object class (Supplies or salaries)

Governmental Accounting Page 25

 - Activity classification is particularly significant because it facilities
evaluation of the economy and efficiency of operations by providing data for
calculating expenditures per unit of activity.

Recognition of expenditures:
An expenditure is one of four critical events in the use of the financial resources
of an expendable fund entity. The sequence of events is as follows:
Appropriations represent the maximum amount
Appropriations Authorization of expenditures that entities are authorized to
spend.
Purchase order or is a commitment for expenditure arising from
Encumbrances signing contract issuing a purchase order or signing of contracts
for goods or services
Receipts of goods is a decrease in fund resources (or an increase in
Expenditures or contract is fund liabilities) that occurs when the vendor or
implementation supplier performs on a contract or purchase
order and goods or services are received.
Payment represent the payment of cash for expenditures
Disbursement

The financial resources of a fund are said to be encumbered when a transaction is

entered into that requires performance by another party before the governmental
unit becomes liable to perform its part of the transaction by spending financial
resources. An encumbrance reduces the remaining portion of appropriations
encumbered and is formally recorded in the accounting records.
Thus, at any particular time the accounting records will reflect management’s
remaining available appropriation authority as follows:
Unencumbered Appropriations – (Encumbrances + Expenditures )
balance =

Governmental Accounting Page 26

Recording of expenditures:
Purchase order : Encumbrance (appropriately classified) x
Reserve for Encumbrance x
( to record an order for goods in the amount of xx)
Receipts of goods: Expenditures x
(expenditure) Vouchers payable x
( to record the receipts of goods in the amount of xx)
Reserve for Encumbrance x
Encumbrance x
(to remove the encumbrance recorded before)
Payments of goods Vouchers payable x
Cash x
( to record payment of vouchers in the amount of xx)
Recording budgeted Estimated revenues x
& actual revenue Appropriations x
and expenditure Unreserved fund balance x

Notes:
Stages for recording non-cash expenditures:

recording estimated expenditures in the approved budget Appropriations

Issuance of purchase order or signing a contract Encumbrances
Goods & services are received, contract is implemented, or Expenditures
invoices are approved for payment
Payment of voucher payable or contract payable disbursement

Governmental Accounting Page 27

The concept of Capital expenditures:
- Capital expenditures represent the purchase price of fixed assets and all
what is paid to make the assets ready for use.
- Accounting for capital expenditures in profit-oriented enterprises differs
from that of expenditures fund entities as follows:
profit-oriented enterprises expendable fund entity
Capital expenditures are recorded as Capital expenditures, like other
assets and are distinguished from expenditures, are treated as an outflow
expenses. of financial resources, thus, they are
not recorded or reported as assets of
fund entity
The costs of such assets are recognized Depreciation is not accounted for in the
in the operating statements (income records of an expendable fund entity
statement) of such enterprises through for the same reason that fixed assets are
depreciation. excluded from the records of such
entities.

Governmental Accounting Page 28

Summary of important concepts :

1- Pension trust fund is an example of fiduciary fund entities:

2- Fund balance the difference between the financial resources of an
expendable fund entity and claims against those resources
3- Appropriations represents the maximum of expenditures that are
authorized to spend.
4- Fund balance between the net financial resources that are available for
expenditures for the specific purposes or objectives for which the fund
was created.
5- Proprietary fund entities are used to account for the activities of
non-business organizations that are similar to those of business
enterprises.
6- Measurement focus of expendable fund entities is on the flow of
current financial resources.
7- The two basic financial statements prepared for governmental funds are
balance sheet and operating statements.
8- One of the relevant measures of the operations of expendable fund
entities is change in fund balance.
9- When budgeted expenditures are enacted into law, they are referred to
as appropriations.

Governmental Accounting Page 29

 Exercise (recording expenditures):Journalize the following transactions:
- the manager of local government signed a contract to purchase an equipment for
16000.
- the equipment was accepted, the invoice in the amount of 15.000 was approved
for payment.
- paid the invoices of 15.000.
Solution

NO. Accounts and explanations Debit Credit

1 Encumbrances 16.000
Reserve for encumbrances 16.000
(record signing a contract to purchase equipment)

2 Expenditures 15.000
Contract payable 15.000
(record the receipt of equipment)

Reserve for encumbrances 16.000

Encumbrances 16.000
(record cancellation of encumbrances)

4 Contract payable 15.000

cash 15.000
(record payment of contract payable)

Governmental Accounting Page 30

 Expenditure Exercise (1): (page 819)
Consider an expendable fund with a beginning balance, on January 1,2008 of
100.000 L. E of the fund balance:
1- For the year: revenue and appropriations for expenditure were estimated to
be 800.000 L. E and 780.000 L. E respectively.
2- During the year: commitments for expenditures (purchase order – contracts)
were 775.000 L. E, and revenue was 850.000 L.E.
3- However, for the year actual expenditure were 600.000 L. E these
expenditures were related to 600.000 L.E worth of commitments for
expenditures (purchase orders – contracts).
Required: prepare the journal entries for the above transactions.
SOLUTION

1-the required journal entries:

NO. Accounts and explanations Debit Credit
1 Estimated Revenue 800.000
Appropriations 780.000
Unreserved fund balance 20.000
(record budgeted revenues & expenditures adopted by budget)

2 Receivable (or cash) 850.000

Revenue 850.000
(record revenues recognized during the year)

3 Encumbrances 775.000
Reserve of encumbrances 775.000
(record commitments made against appropriations)

4 Expenditures 600.000
Vouchers payable (or cash) 600.000
(record receipts of encumbered goods or services)

Reserve of Encumbrances 605.000

Encumbrances 605.000

Governmental Accounting Page 31

 (remove encumbrances on goods and services that have been recorded
as expenditures)
5 Revenue 850.000
Estimated revenue 800.000
Unreserved fund balance 50.000
(close budgeted and actual revenue accounts)

6 Appropriations 780.000
Expenditures 600.000
Encumbrances 170.000
Unreserved fund balance 10.000
(close appropriations , expenditures and encumbrances accounts)

Notes:
- The balance of encumbrances at year-end (outstanding encumbrances =
170.000) is matched against appropriations because, although they are not
expenditures, encumbrances do represent commitments made against the
current year's appropriations authority of the current year.
- After entries 5&6 all account balances have been closed except:
Unreserved fund balance (CR) 180.000
Reserve for encumbrances (CR) 170.000
Assets & liabilities

- The balance in the reserve for encumbrance account (170.000) is carried

forward to the next year (2009), this balance is equal to the amount closed
for the encumbrances in entry (6) (outstanding encumbrances=170.000)

Governmental Accounting Page 32

Balance sheet of expendable fund entity:
Balance sheet (January 1, 2008)
Net financial resources ( assets – Liabilities ) 100.000
Fund balance (unreserved) 100.000
Balance sheet (December 31, 2008)
Net financial resources ( assets – Liabilities ) 350.000
Fund balance :
unreserved 180.000
Reserved for encumbrances(commitments) 170.000 350.000

The balance in the unreserved fund balance and reserve for encumbrances
accounts may be calculated as follows:
1-Reserve for encumbrances:
Reserve for encumbrances-January 1,2008 zero
Total amounts encumbered during 2008 (entry 3) 775.000
Total encumbrances expended (entry 4b) (605.000)
Reserve of encumbrances-December 31,2008 (CR) 170.000

2-unreserved fund balance

Unreserved fund balance-January 1,2008 100.000
Excess of estimated revenue over appropriations (enrty1) 20.000
Excess of actual revenue over estimated revenue (enrty5) 50.000
Excess of appropriations over expenditures & encumbrances (enrty6) 10.000
Reserve of fund balance-December 31,2008 (CR) 180.000

Governmental Accounting Page 33

 Expenditure Exercise (2):
▪ The budget consisting of 120.000 L. E & appropriations for expenditures of
100.000 was passed by town council.
▪ The equipment costing 50.000 L. E was purchased on cash.
▪ The manager signed a contract to purchase equipment costing 20.000 L. E.
▪ The equipment was delivered and accepted, the invoice in the amount of
18.000 L. E was approved for payment. The 18.000 L. E invoice was paid.
Required:
- Prepare the journal entries for the year's transactions.
- Calculate unexpended and uncommitted appropriations.
Solution
1-the required journal entries:
NO. Accounts and explanations Debit Credit
1 Estimated Revenue 120.000
Appropriations 100.000
Unreserved fund balance 20.000
(record budgeted revenues & expenditures adopted by budget )

2 Expenditures 50.000
cash 50.000
(record cash expenditures)

3 Encumbrances 20.000
Reserve of encumbrances 20.000
(record signing a contract)

4 Expenditures 18.000
Contract payable 18.000
(record receipts of a voucher)

5 Reserve of encumbrances 20.000

Encumbrances 20.000

Governmental Accounting Page 34

 (record the cancellation of encumbrances)

6 Contract payable 18.000

Cash 18.000
(record the payment of contract payable)

2- Calculating unexpended and uncommitted appropriations:

Appropriations Encumbrances Expenditures Total unencumbered
Explanations
(1) (2) (3) (4)=(2)+(3) Balance=1-4
Prior balance 100.000 -- -- -- 100.000
Cash expenditure -- -- 50.000 50.000 (50.000)
New balance 100.000 -- 50.000 50.000 50.000
Encumbrances -- 20.000 -- 20.000 (20.000)
New balance 100.000 20.000 50.000 70.000 30.000
Non-cash Expenditures -- (20.000) 18.000 (2000) 2000
New balance 100.000 -- 68.000 68.000 32.000

Governmental Accounting Page 35

REVENUES Exercise No.1:

A summary of activities and transactions for the General Fund during 2018 is
presented here:
1. The annual property tax levy of 10% on assessed valuation ($11,000,000) is
billed to property owners. Two percent is estimated to be uncollectible.
2. Taxes were collected from property owners in the amount of 10,500,000. On
which 500,000 are collections from previous year.
3. Past-due bills of 17,000 were charged off as uncollectible.
4. City retail establishments remitted a total of 300,000 in sales tax collections for
the year.
5. The City received a statement from the State Treasurer that the City’s portion of
the state sales tax for the first half-year is $375,000.
6. The federal government authorized a grant to the general fund amounted to
$200,000.
7. The general fund received the grant from federal government
8. Licenses and fees in the amount of $50,000 were collected.
9. Proceeds from the sale of Equipment in the amount of $40,000 were received
by the general fund. The equipment was purchased 10 years ago with resources
of the general fund at a cost of $100,000. On the date of purchase, it was
estimated that the equipment had a useful life of 10 years.
10. The City billed residents for trash services. Total billing amounted to
$100000.
11. Bonds with a face value of $750,000 were issued at par.
Required: Prepare the journal entries for the year's transactions.

SOLUTION

Governmental Accounting Page 36

NO. Accounts and explanations Debit Credit
1 Property Tax receivable(11.000.000x10%) 1.100.000
Revenue(1.100.00-22.000) 1.078.000
Allowances for uncollectable property tax 22.000
(record the assessment of property tax)
2 cash 10.500.000
Property Tax receivable 10.500.000
(record collection of the property tax receivable)
3 Allowances for uncollectable property tax 17.000
Property Tax receivable 17.000
(record writing-off allowances for uncollectable property tax)
4 Cash 300.000
Revenue 300.000
(record collection of sales tax)
5 Due from state 375.000
revenue 375.000
(record sales tax due from state)
6 Due from federal government 200.000
Revenue 200.000
(record the authorization of grant)
7 Cash 200.000
Due from federal government 200.000
( record the receipt of grant)
8 cash 50.000
revenue 50.000
(record collections of licenses and fees)
9 cash 40.000
revenue 40.000
(record proceeds from the sale of equipment)
10 Accounts receivable 100.000
Revenue 100.000
( record trash service billed)
11 Cash 750.000
Bonds issue proceeds 750.000
(record bonds issue proceeds)
Governmental Accounting Page 37
REVENUES Exercise No.2:
A summary of activities and transactions for the General Fund during 2013 is
presented here:
1-the city council adopted the following budget for 2013 : estimated revenues
2270 , authorization for appropriated expenditures 2300 , transfer from enterprise
fund 120 , transfer to debt service fund 70.

2- property taxes of 900 were assessed, 2% is estimated to be uncollectable.

3- bonds with a face value of 500 were issued at a par value to finance a new park.

4-old equipment was sold for 100.

5-goods and service amounting t0 1150 were ordered during the year.

6-vouchers in the amount of 800 were approved for payment , this was 20 more
than the amount originally encumbered for these purchases.

7-invoices for all goods in 2012 amounting to 80 were approved for payment.

8-property taxes in the amount 750 were collected.

9-revenues received from other sources, other than property taxes, of 800.

10- payment of 58 was received from the state government, this was a grant to be
used for training.

11- cash in the amount of 70 are transferred to debit service fund.

12-cash in the amount of 120 are transferred from enterprise fund.

13-the city council authorized the write-off of 80 of uncollectable property tax.

14-salaries and wages paid to employees during the year amounted to 300.

Required: Prepare the journal entries for the year's transactions.

SOLUTION
Governmental Accounting Page 38
 NO. Accounts and explanations Debit Credit
1 Estimated revenues 2270
Unreserved fund balance 30
Appropriations 2300
(recording the approved budget)
Due from enterprise fund 120
Transfer from enterprise fund 120
(recording authorization of transfer from enterprise fund)
Transfer to debit service fund 70
Due to debit service fund 70
(recording authorization of transfer to debit service fund)
2 Property Tax receivable 900
revenues 882
Allowances for uncollectible property tax 18
(recording assessment of property tax)
3 cash 500
Bonds issue proceeds 500
(recording bonds issue proceeds)
4 Cash 100
Revenue 100
(recording proceeds from the sale of equipment)
5 Encumbrances 1150
Reserve from encumbrances 1150
(recording purchase order for goods)
6 Expenditures 800
Vouchers payable 800
(recording the expenditures)
Reserve for encumbrances 780
encumbrances 780
(recording the cancellation of encumbrances)
7 Expenditures (2012) 80
Vouchers payable 80
( recording goods ordered for 2012)
8 cash 750
Property tax receivable 750
Governmental Accounting Page 39
 (recording the collection of property tax receivable)
9 cash 800
revenue 800
(recording collections of other revenues)
10 cash 58
Due from state government 58
( recording the receipt of grant)
11 Due to debit service fund 70
cash 70
(recording the transfer to debit service fund)
12 Cash 120
Due from enterprise fund 120
(recording the receipt of transfer from enterprise fund)
13 Allowances for uncollectable property tax 80
Property tax receivable 80
(recording writing-off allowances for uncollectable tax)
14 Expenditures 300
cash 300
(recording payment of salaries)

Governmental Accounting Page 40

Preparing closing entries :

Closing entries on December 31,2019

NO. Accounts and explanations Debit Credit
1 revenue xx
Unreserved fund balance xx
Estimated revenue xx
( to close revenue)
2 Reserve for encumbrances (last year) xx
Unreserved fund balance xx
Expenditures(last year) xx
(to close last year expenditures)
3 Appropriations xx
Unreserved fund balance xx
Encumbrances xx
Expenditures xx
(to close encumbrances & expenditures)
4 Transfer from other fund xx
Unreserved Fund balance xx
Transfer to debit service (other) fund xx
(to close transfers)
Preparing approved budget entry :

NO. Accounts and explanations Debit Credit

1 Estimated Revenue xx
Unreserved fund balance xx
Appropriations xx
( recording the approved budget )

Governmental Accounting Page 41

Exercise No.1: (page No.840)

Following is the pre closing trial balance for the general fund of the city of Doyle:

Doyle city – the general fund

General ledger trial balance (December 31,2009)
Accounts Debit Credit
Cash 400.000
Certificates of deposit 350.000
Due from state government 112.000
Due from other funds 30.000
Taxes receivables 774.000
Estimated revenues 3.110.000
Expenditures 1.960.000
Encumbrances 734.000
Transfers to other founds 90.000
Expenditures (2008) 55.000
Estimated uncollectible taxes 30.000
Vouchers payable 64.000
Due to other fund 27.000
Unreserved fund balance 760.000
Reserve for encumbrances 734.000
Reserve for encumbrances (2008) 50.000
Appropriations 2.700.000
revenue 3.210.000
Transfers from other funds 40.000
Total 7.615.000 7.615.000
Required: Prepare the necessary closing entries on December 31,2017.

Governmental Accounting Page 42

 SOLUTION

Closing entries on December 31,2019

NO. Accounts and explanations Debit Credit
1 revenue 3.120.000
Unreserved fund balance 100.000
Estimated revenue 3.110.000
( to close revenue)
2 Reserve for encumbrances (2008) 50.000
Unreserved fund balance 5.000
Expenditures(2008) 55.000
(to close last year expenditures)
3 Appropriations 2.700.000
Unreserved fund balance 6.000
Encumbrances 734.000
Expenditures 1.960.000
(to close encumbrances & expenditures)
4 Transfer from other fund 40.000
Unreserved Fund balance 50.000
Transfer to debit service (other) fund 90.000
(to close transfers)

Governmental Accounting Page 43

Exercise No.2:

The following are the pre-closing balances of the state fund for the city of Galsglow
of December 31,2018:

Accounts Debit Credit

Cash 350.000
Property tax receivable 108.000
Estimated uncollectable taxes 40.000
Reserve for encumbrances-2017 30.000
Unreserved fund balance 270.000
Estimated revenue 1.560.000
Appropriations 1.400.000
revenue 1.533.000
Encumbrances 240.000
Reserve for encumbrances 240.000
Expenditures 1.196.000
Expenditures-2017 29.000
Transfer from water fund 50.000
Transfer to debit service fund 80.000
Required:
- Prepare the necessary closing entries on December 31,2019.
- Prepare the balance sheet & the statement of revenue, expenditures , and
changes in fund balance for the year 2018.

Solution

Governmental Accounting Page 44

 Closing entries on December 31,2019
NO. Accounts and explanations Debit Credit
1 revenue 1.533.000
Unreserved fund balance 27.000
Estimated revenue 1.560.000
2 Reserve for encumbrances (2017) 30.000
Unreserved fund balance 1.000
Expenditures 29.000
3 Appropriations 1.400.000
Unreserved fund balance 36.000
Expenditures 1.196.000
Encumbrances 240.000
4 Transfer from water fund 50.000
Unreserved balance 30.000
Transfer to debit service(other) fund 80.000

Governmental Accounting Page 45

The statements of revenues & expenditures and change in fund balance:
- liabilities: any amounts mentioned in trial balance (vouchers payable, contract
payable)
- the fund balance beginning:
= unreserved fund balance beginning + reserve for encumbrances last year
- unreserved fund balance beginning:
Fund balance = unreserved fund balance + reserve for encumbrances
beginning beginning (calculate it) (last year)

(given in trial balance)

Unreserved = unreserved fund balance + unreserved fund balance
fund balance beginning budget entry
(trial balance) (refer to budget entry)

The fund balance ending in statement of revenue = fund balance amount in the
balance sheet

Governmental Accounting Page 46

 City of Glasglow-general fund
Balance sheet
December 31,2018
Assets :
Cash 350.000
Property taxes receivable 108000
+
(-) allowances for uncollectable taxes (40.000)
= net property taxes receivable 68.000
Total assets 418.000
Liabilities and fund balance :
Liabilities zero
Fund balance :
= unreserved fund balance
+
(270.000 – 27.000 + 1000 – 36.000 – 30.000) 178.000
+ reserved for encumbrances 240.000
Total fund balance 418.000
Total Liabilities and fund balance 418.000

Governmental Accounting Page 47

 City of Glasglow-general fund
statement of revenue , expenditures & change in fund balance
for the Year ended on December 31,2018
Revenue 1.533.000
(-) Expenditures (2017+2018) 29.000
1.196.000 (1.225.000)
Excess of revenues over expenditures (A) 308000
Transfer to debit service fund 50.000
(-) Transfer to debit service fund (80.000)
Net transfers (B) (30.000)
Change in fund balance (D=A+B) 278.000
+ Fund balance beginning (C) 270.000
(160.000) 140.000
Fund balance ending (D+C) 418.000

Governmental Accounting Page 48

Calculations of fund balance beginning:
Fund balance = unreserved fund balance beginning
beginning ( 270.000 – 160.000 ) 110.000
+ Reserve for encumbrances 2017 30.000
140.000
Unreserved fund = unreserved fund balance + Unreserved fund balance
balance used in beginning (2) amount in budget entry (3)
trial balance (1)
(2) = (1) – (3) = 270.000 – 160.000 = 110.000
Appropriations = estimated revenues - unreserved fund balance
1.400.000 = 1.560.000 - ?????????
Unreserved fund balance = 1.560.000 – 1.400.000 = 160.000
Notes:

- The closing entries (4):

Revenue, expenditure (for the same year and one for the last year) the
transfer.
- The balance sheet : the two sides should be equal according the following
equation :
(Assets = Liabilities + Fund balance)
- The fund balance = unreserved fund balance + reserve for encumbrances
unreserved fund balance Reserve for encumbrances
Trial balance (-Debit closing entries Directly from trial balance
+ credit closing entries)

- In the assets side:

Property tax receivable allowances – allowances (reserve) for uncollectable taxes

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Exercise No.3:

The following account balance were included in the pre closing trial balance of
general fund of city of California on December 31,2013 (amounts in thousands):

Cash 240 Certificates of deposits 400

Appropriations 2500 Property tax receivable 645
Transfer from other fund 100 Estimated uncollectible taxes 45
Transfer to other fund 120 Due from state government 60
Revenues 2600 Due to debit service fund 120
Expenditures (2012) 40 Estimated revenue 2300
Reserve for encumbrances 50 Vouchers payable 370
2012 Unreserved from balances 170
Contract payable 150 Reserve for encumbrances 120
Expenditures 2300 Encumbrances 120
Required:

▪ Prepare closing entries.

▪ Prepare a balance sheet and statement of revenues, expenditures, and
changes in fund balances for 2013.

SOLUTION

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 1- Preparing Closing entries on December 31,2013
NO. Accounts and explanations Debit Credit
1 revenue 2600
Unreserved fund balance 300
Estimated revenue 2300
(to close revenue)
2 Reserve for encumbrances 2012 50
Unreserved fund balance 10
Expenditures 2012 40
(to close last year expenditures)
3 Appropriations 2500
Expenditures 2300
Encumbrances 120
Unreserved fund balance 80
(to close expenditures & encumbrances)
4 Transfer from other fund 100
Unreserved fund balance 20
Transfer to other fund 120
( to close transfer)
2- preparing the financial statements:
Closing entries & the approved budget entry should be prepared before the
preparation of financial statements, the approved budget entry is prepared as
follows:
Estimated revenue 2300
Unreserved fund balance 200
Appropriations 2500
(recording the approved budget)

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Preparing statements of revenues, expenditures and changes in fund balance:
Two items should be calculated before the preparation of statement of revenues,
expenditures and change in fund balance:
a-unreserved fund balance beginning:
Unreserved fund balance in Unreserved fund balance beginning ± unreserved fund
pre-closing trial balance : balance in approved budget entry

Unreserved fund balance beg. = 200+170+=370

Note that:
Unreserved fund balance Credit side : It will be added
comes in : Debit side : It will be deducted
b-calculating fund balance beginning:
Fund balance beginning : = unreserved fund balance beginning + reserve for
fund balance (last year)
= 370 ( calculated in above) + 50 = 420

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Statements of revenues :
City of California - general fund
statement of revenue , expenditures & change in fund balance
for the Year ended on December 31,2013
Revenue 2600
(-) Expenditures (2012+2013) 40
Total of expenditures 2300 (2340)
Excess of revenues over expenditures (A) 260
Other financial sources (uses)
Transfer from other fund 100
(-) Transfer to other fund (120)
Net transfers (B) (20)
Change in fund balance (D=A+B) 240
+ Fund balance beginning (C) 420
Fund balance ending (D+C) 660

Notes:
One item should be calculated before the preparation of the balance sheet this
items:
Unreserved fund = unreserved fund balance in pre-closing trial balance ±
balance ending = unreserved fund balance in closing entries
= 170+300+10+80-20=540
- Total fund balance in the balance sheet "660" should equal fund balance in
the statement of revenues, expenditures and changes in fund balance "660"
- Total fund balance in the balance sheet = unreserved fund balance + reserve
for fund balance (current year)

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Preparing the balance sheet:
City of California - general fund
Balance sheet
for the Year ended on December 31,2013
Assets :
Cash 240
Certificate of deposits 400
Property taxes receivable 645
(-) estimated uncollectable taxes (45) 600
Due from state government 60
Total assets 1300
Liabilities and fund balance :
Liabilities :
Vouchers payable 370
Contract payable 150
Due to debit service fund 120
Total liabilities 640
Fund balance :
unreserved fund balance 540
+ Reserve for encumbrances 120
Total fund balance 660
Total Liabilities and fund balance 1300

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