Akuntansi Lanjutan 2: Accounting For State and Local Governmental Units

Akuntansi Lanjutan 2
Chapter 20
Dra Retno Suliati Akt MM
UEU101
Accounting for State and Local
Governmental Units
Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Ltd. All Rights Reserved.
Governmental Funds: Objectives (continued)
20.4 Prepare governmental fund financial statements.

20.5 Convert governmental fund financial statements to
government-wide financial statements.

20.1: Record Transactions
Accounting for State and Local Governmental Units –
Governmental Funds
Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Fund Balance Classifications
There are five classifications of governmental fund

balances:
1. Nonspendable – amounts not in spendable form,
such as inventories, or endowment principal
2. Restricted – amounts may only be spent for
purposes designated by outside authority
3. Committed – amounts may only be spent for
purposes designated by government authority
4. Assigned – amounts to be used for a specific
purpose as determined by operating units
5. Unassigned – all other spendable fund balances

General Fund Transactions
The General Fund holds all funds which are not

specifically designated to another fund. Every
governmental entity has one. The first entry to
prepare is the recording of the budget.
Estimated revenues 3,500 blank
Appropriations blank 3,320
Estimated other financing uses - transfer out blank 115

Fund balance - unassigned blank 65

Revenue and Collections
Taxes receivable - current 2,000 blank

Allowance for uncollectibles – current blank 20
Revenues blank 1,980
Cash 1,900
Taxes receivable – current blank 1,760
Taxes receivable – delinquent blank 140
Allowance for uncollectibles – delinquent 10 blank
Taxes receivable - delinquent blank 10
Revenues are recorded net of the estimated allowance.

Separate accounts are used for this year's taxes and all
prior years' taxes. Write-offs occur when the taxes are
deemed uncollectible. When they are late, they are simply
moved from current to delinquent (an adjustment).

Other Revenues and Collections
Accounts receivable 150 blank

Revenue blank 100
Deferred revenue blank 50
Cash 200 blank
Revenue blank 200
Taxes which are billed and are to be received within

60 days (and therefore available to pay current
liabilities) are recorded as Revenue. Amounts to be
received after that are recorded as Deferred
Revenue.
Revenue from licenses, permits, and fines is
recorded when received.
Expenditures and Payments
Expenditures 200 blank

Vouchers payable blank 200
Vouchers payable 200 blank
Cash blank 200
Expenditures that are not encumbered first (no

purchase orders are placed for wages, utilities, and
many other items) are recorded as they become
due. These expenditures can be for current services
or capital outlays (like fixed assets).

Supplies (without encumbrance)
Supplies inventory 60 blank

For supplies, this is the consumption method, like

most businesses use. Adjustments will recognize
supplies used as Expenditures.
Expenditures xxx blank
Vouchers payable blank xxx
For the purchase method, Expenditures would be

debited at the time of purchase. At year end, an
adjusting entry would record Supplies inventory and
Fund Balance - Nonspendable.
Capital Lease
A fixed asset acquired by capital lease will result in

the recording of an Expenditure and an Other
Financing Source.
Other financing source – capital lease blank 50
Subsequent lease payments are recorded as

Expenditures also. This appears to be recording the
same expenditure twice, but is correctly recording
the source and use of working capital in each
reporting period. The asset, liability, and related
depreciation will be recorded in the government-
wide financial statements.
Year-End Adjustments (1 of 2)
Supplies inventory blank 30
Revenues 50 blank
Deferred revenue blank 50
Supplies inventory (consumption method) is

adjusted to its proper balance.
Revenues that haven't been collected yet and are

not expected to be collected in the next 60 days are
reclassified. They will be revenue next period when
collected.

Year-End Adjustments (2 of 2)
Taxes receivable – delinquent 240 blank
Allowance for uncollectible taxes – current 20 blank
Taxes receivable – current blank 240

Allowance for uncollectible taxes –
delinquent blank 20
At the end of the fiscal year (or tax year), amounts

still due from taxpayers are reclassified from
current to delinquent. Prior delinquencies may still
be in the delinquent accounts. This does not write
off any account or suspend collection procedures. It
empties the "current" accounts so that new taxes
can be recorded.
Closing the Budget
Appropriations 3,320 blank

Estimated other financing uses - transfers out 115 blank
Fund balance - unassigned 65 blank
Estimated revenues blank 3,500
The current year's budget is removed from the

books at the end of the year. This entry is a
reversal of the initial entry putting the budget on
the books.

Closing Current Year Accounts
Revenues 3,520 blank

Other financing sources – capital lease 50 blank
Expenditures blank 3,264
Encumbrances blank 50
Other financing uses - transfers out blank 164
There may be multiple accounts for other financing

sources and uses (transfers in, proceeds from sales
of fixed assets, nonreciprocal transfers out). The
Fund Balance - Unassigned is adjusted for the
difference between total fund sources and total
fund uses.
Closing Prior Year Accounts
Reserve for encumbrances - prior year 90 blank

Expenditures - prior year blank 85
"Reserve for encumbrances – prior year" is a

temporary account established at the start of the
year and closed at the end. The "reserve for
encumbrance" account is part of fund equity which
is on the balance sheet.
$90 represents the purchase order that was
outstanding at the end of last year, whereas $85 is
the actual bill on the goods received.

Unique Governmental Accounting Issues
Governmental Funds

The Budget
Governmental entities formally record the budget in

the accounting records.
Budgets record approved amounts in functional and

object categories.
Budgetary accounts are easily compared to the

actual accounts to facilitate control.
● Revenues (cr) and Estimated revenues (dr)
● Excess spending is easily monitored and must
be approved.
Budget entries were presented earlier with general

fund beginning and closing entries.

Budget – Levels of Detail
Budgeted revenues are classified by source.

● Taxes, licenses, fines, investment income
Appropriations, the budgeted expenditures, are

organized by
– Character class (current services, capital
outlays)
– And function (general government, public
safety)
– May also further classify
● Department, fire, police, zoning
● Object, supplies, salaries
Encumbrance Accounting
Plac Encumbrances 150 blank

e
orde
Reserve for encumbrances blank 150
Receiv
r Reserve for encumbrances 150 blank
e
goods Encumbrances blank 150
When a purchase order is issued, an

encumbrance is recorded. When the related goods
or services are received, the encumbrance is
reversed and the Expenditure is recorded for the
actual amount.
At Encumbrances 90 blank
start of Reserve for encumbrances blank 90
year
If there were purchase orders outstanding from the

prior accounting period, they would need to be
reinstated at the beginning of the current year. This
entry would then be reversed when the goods or
services were received, and the expenditure would be
recorded and classified as Prior Year for control
purposes.
Receiv Expenditures - prior year 85 blank
e
Goods

Interfund Transactions - Transfers
Interfund transfers may be reciprocal (expected to be paid

back) or nonreciprocal (no repayment is expected – shown
below).
Other financing use - nonreciprocal transfer to debt
GF service fund 14 blank
Cash blank 14
DS Cash 14 blank
F Other financing source - nonreciprocal transfer
from general fund blank 14
Example: General fund (first entry) transfers $14 to the

Debt service fund; Debt service fund (second entry)
receives funds from general fund

In exchange (nonreciprocal) transactions, a city general fund
might be paying its water bill and the city water department
fund (enterprise fund) recording the receipt of revenue.
GF Expenditures 5 blank
Cash blank 5
EF Cash 5 blank
Revenues blank 5
In reciprocal transfers, we would record short-term

receivables and payables.
● Due from other funds (basically, accounts receivable)
● Due to other funds (analogous to accounts payable)
● Advance to other fund (short-term loan receivable)
● Advance from other fund (short-term loan payable)
20.3: Which Fund?
Governmental Funds

Five Governmental Fund Types
Governmental Fund Types

 Special revenue funds. Account for the proceeds of specific revenue sources (other than trusts
for individuals, private organizations, or other governments or for major capital projects) that
are legally restricted to expenditure for specified purposes.
 Permanent funds. Report resources that are legally restricted to the extent that only earnings,
and not principal, may be used for purposes that support the reporting government’s programs
– that is, for the benefit of the government or its citizenry.
 Capital projects funds. Account for financial resources to be used for the acquisition or
construction of major capital facilities (other than those financed by proprietary funds or in trust
funds for individuals, private organizations, or other governments).
 Debt service funds. Account for the accumulation of resources for, and the payment of, general
long-term debt principal and interest.
 General fund. Accounts for all financial resources except those required to be accounted for in
another fund.

Special Revenue Funds
Accounts for revenue sources restricted by law or

administrative action, other than those for:
● Permanent funds (endowment)
● Capital projects funds (construction)
● Debt service funds (repayment of debt)
Example: education, highway maintenance
Accounting is similar to the general fund.
● Fund balance can only be Unassigned if there is
a deficit.
● Budgetary accounts needed if the budget is
legally adopted.

Receive Cash 20 blank
cash Revenue collected in advance blank 20
Expenditures 18.5 blank
Meet
require- Vouchers payable blank 18.5
ments Revenue collected in advance 18.5 blank
Grant revenue blank 18.2
Special revenue funds are often used to account for

federal or other grants.
Revenue is recognized when eligibility requirements
are met, usually when the required expenditure is
made.
● Could be before or after cash receipt
Permanent Funds
Used to account for funds on which only the earnings

may be expended. The earnings may or may not be
restricted in use. Its fund balance is a Nonspendable
Fund Balance.
Cash or Investments 500 blank
Revenues – addition to permanent endowments blank 500
Cash 12.5
Revenues – investment income blank 12.5
Cash blank 3
Unrestricted earnings are transferred to the general

fund, but restricted earnings may be spent in this fund
or transferred to a special revenue fund.

Capital Projects Funds
Accounts for funds being used for major capital
projects, such as building new town offices.
Use encumbrance accounting for the construction
contract and for other purchase orders and
commitments.
● Generally no budgetary accounts
Spending on the project is an Expenditure.
Its main source of funds may be Other Financing
Sources, such as proceeds from bonds.
● Bond receipts are recorded at gross.
● Any premium received is generally
transferred to the debt service fund.

CPF Entries (1 of 3)
Cash 502 blank

Other financing sources – Proceeds from bonds blank 502
At the approval of the capital project, a memo entry

is made. $500 of bonds are issued for the project,
and are sold at a premium of $2.
Encumbrances 475 blank
Reserve for encumbrances blank 475
A contract for the project is signed for $475, and

like a purchase order, the signed contract is
recorded as an Encumbrance.

CPF Other financing uses – nonreciprocal transfer

to debt service fund 2 blank
Cash blank 2
Cash 2 blank
DSF
Other financing sources – nonreciprocal
transfer from capital projects fund blank 2
The premium from the bonds is transferred out of

the Capital Projects Fund to the Debt Service
Fund. There it can be applied to the upcoming
interest payment or invested to use later in
repaying the bonds.

Reserve for encumbrances 475 blank

Encumbrances blank 475
Contracts payable blank 427.5
Contracts payable – retained percentage blank 47.5
When the contractor bills the city, both entries are made.
● The encumbrance (a portion of the contract) is
removed.
● An expenditure is recorded for that amount.
The payable is usually split between the amount due now
and the percent that waits until successful contract
completion.

CPF – Completing the Project
Fixed assets:
● As construction continues, construction in
progress is recognized as part of fixed assets
in an amount equal to expenditures.
● At completion, the construction in process
becomes the fixed asset, building, etc.
● The fixed asset is not recorded for fund
accounting.
Capital projects fund:
● Capital project fund closing entries and
statements are prepared each period with
ongoing construction.
● At completion, any remaining cash is
transferred to debt service or general fund.
Debt Service Funds
Accounts for the funds set aside and being used to

repay debt principal and interest.
Most inflows are transfers from other funds

although there will be investment revenue.
Interest and principal are recorded as expenditures

and payables when due, but no long-term debt is
recorded.

DSF Entries (1 of 2)
Cash 16.25 blank

DSF
Other financing sources – nonreciprocal
transfer from general fund blank 16.25
Other financing uses – nonreciprocal transfer to
GF
debt service fund 16.25 blank
Cash blank 16.25
The debt service fund receives $16 from the

general fund for the upcoming amounts due on
bonds: $2 interest and $14.25 principal. Both
funds record this transfer.

DSF Entries (2 of 2)
Expenditures – principal 14.25 blank
Expenditures – interest 2 blank
Matured principal payable blank 14.25
Interest payable blank 2

Matured interest payable 14.25 blank
Interest payable 2 blank

Cash blank 16.25
Principal on bonds, $14.25, is due along with $2

interest. Interest and principal are recorded as
expenditures and liabilities on the date due.
Liabilities are removed when paid.

DSF – Continuing Payments
The Debt Service Fund continues to accept money

(usually from General Fund) and make payments
on the outstanding bonds or other debt, including
capital lease payments.
Legal requirements may dictate separate Debt
Service Funds for separate debt, but some may be
combined.
Cash in the Debt Service Fund is usually invested to
provide earnings until needed.
❖ Investments
❖ Investment Revenue

20.4: Fund Financial Statements
Governmental Funds

Fund Financial Statements
Required governmental fund financial statements

1. Statement of net assets or balance sheet
2. Statement of revenues, expenditures, and
changes in fund balance
3. Budgetary comparison information
● General Fund
● Special Revenue Funds with legally adopted
budget
1 and 2: Statements will have columns for general
fund and other significant governmental funds.
● Combine insignificant funds
● Show total (no interfund eliminations)
General Fund Balance Sheet
Assets blank $187

Taxes receivable - delinquent $240 blank
Allowance for uncollectibles (20) 220
Accounts receivable blank 180
Supplies blank 90
Total blank $677
Vouchers payable $325
Deferred revenue 50 $375
Reserve for encumbrances $50 blank
Unassigned 252 302
Total blank $677

General Fund Statement of
Revenues, Expenditures, and
Changes
Total revenues in $3,520
Less expenditures blank
Fund Balance
Current services (3,158)
Capital outlays (190)
Excess of revenues over expenditures $171
Other financing sources (uses) blank
Capital leases 45
Transfers out (164)
Excess of revenues and OF sources over
expenditures and OF uses $52
Fund balance, 10/1/16 250
Fund balance, 9/30/17 $302

20.5: Government-Wide Financial
Statements
Governmental Funds

Government-Wide Statements
Governmental fund statements

– Modified accrual basis
Government-wide statements
– Accrual basis
Convert governmental funds to accrual basis for

inclusion in government-wide statements.
– Statement of Net Assets
– Statement of Activities
Adjustments are prepared on worksheet.

● Individual fund records are not changed.

Fixed Assets
Add existing fixed assets with accumulated

depreciation to assets and net assets. Include
Construction in Progress from the Capital Projects
Fund expenditures.
Current acquisitions
● Remove expenditures for capital outlays
● Add to fixed assets
Current dispositions
● Remove other financing source – proceeds
from sale of fixed assets
● Reduce fixed assets, accumulated depreciation
and record gain or loss

Long-Term Debt
Add existing long-term liabilities, and reduce net

assets
Current borrowings
● Remove other financing source
● Increase liability
Current principal repayments
● Remove expenditures
● Decrease liability

Leases and Other Adjustments
Capital leases have both fixed asset and long-term

liability adjustments.
Revenues
● Deferrals based on 60-day availability may
be recognized.
Expenditures convert to expenses.
Interfund activities and balances
● Eliminate transfers and balances to/from
● Eliminate interfund internal service activities


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Akuntansi Lanjutan 2

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

20.4 Prepare governmental fund financial statements.

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

There are five classifications of governmental fund

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

The General Fund holds all funds which are not

Estimated revenues 3,500 blank

Appropriations blank 3,320

Estimated other financing uses - transfer out blank 115

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Taxes receivable - current 2,000 blank

Revenues are recorded net of the estimated allowance.

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Accounts receivable 150 blank

Taxes which are billed and are to be received within

Expenditures 200 blank

Expenditures that are not encumbered first (no

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Supplies inventory 60 blank

For supplies, this is the consumption method, like

For the purchase method, Expenditures would be

A fixed asset acquired by capital lease will result in

Subsequent lease payments are recorded as

Supplies inventory (consumption method) is

Revenues that haven't been collected yet and are

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Taxes receivable – delinquent 240 blank

Allowance for uncollectible taxes – current 20 blank

Taxes receivable – current blank 240

At the end of the fiscal year (or tax year), amounts

Appropriations 3,320 blank

The current year's budget is removed from the

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Revenues 3,520 blank

There may be multiple accounts for other financing

Reserve for encumbrances - prior year 90 blank

"Reserve for encumbrances – prior year" is a

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Governmental entities formally record the budget in

Budgets record approved amounts in functional and

Budgetary accounts are easily compared to the

Budget entries were presented earlier with general

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Budgeted revenues are classified by source.

Appropriations, the budgeted expenditures, are

Plac Encumbrances 150 blank

When a purchase order is issued, an

If there were purchase orders outstanding from the

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Interfund transfers may be reciprocal (expected to be paid

Example: General fund (first entry) transfers $14 to the

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

In reciprocal transfers, we would record short-term

Copyright © 2018 Pearson Education, Ltd. All Rights Reserved.

Governmental Fund Types

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Accounts for revenue sources restricted by law or

Copyright © 2018 Pearson Education,www.esaunggul.ac.id

Special revenue funds are often used to account for

Used to account for funds on which only the earnings