•

Receipt of Goods Ordered in Prior Year

Budgetary accounting has no effect on the
Government-Wide Financial Statements, thus no
encumbrance is recorded at the government wide level
when goods or services are ordered or contracted for.
Purchase orders and other commitment documents
issued in 2005 and not fulfilled or cancelled by the end
of that year total Br 127,000. This amount is
designated as Reserve for Encumbrances––2005 in
the December 31, 2005, General Fund Balance Sheet
of the Town of TIRUSEW.
When the goods on order at the end of FY 2005 are
received in FY 2006 their actual cost is considered an
Expenditure of the 2005 Appropriations to the extent
of the amount encumbered in 2005; any additional
amount must be charged to the 2006 Appropriations.
The Appropriations account for 2005, however, was
closed at the end of that year to Fund Balance, as
were the other budgetary accounts for that year.
The Encumbrances account can be reestablished at
the beginning of a new fiscal year. When goods or
services ordered in 2005 are received in 2006 it is
convenient to debit the Expenditures-2005 account
when the liability account is credited and eliminate the
encumbrance in the normal manner. At year end, the
Expenditures-2005 account is closed to Fund
Balance, along with Expenditures-2005 and all other
operating statement and budgetary accounts. For the
Town of TIRUSEW, assuming that the goods were
ordered by the Parks and Recreation functions, the
Encumbrance Reestablishment Journal Entry is:
 General Ledger Subsidiary Ledger
General Fund: Credits Debits Credits
Debits
15.Encumbrances––2005 127,000

Fund Balance 127,000

Encumbrances Ledger:
Parks and Recreation––2005 127,000
Assuming that all goods and services for which
encumbrances were outstanding at the end of 2005
were received in 2006 at a total invoice cost of Br.
127,250. Notice that only the estimated amount, Br.
127,000, is charged to Expenditures––2005 since this
was the amount of the encumbrance against the 2005
appropriations; the difference between the amount
encumbered in 2005 and the amount approved for
payment in 2006 must be charged against the 2006
appropriations for Parks and Recreation.
 General Ledger Subsidiary Ledger
General Fund: Debits Credits Debits Credits
16. Reserve for Encumbrances––2005 127,000
Encumbrances––2005 127,000
Encumbrances Ledger:
Parks and Recreation––2005 127,000
17a. Expenditures––2005 127,000
Expenditures––2006 250
Vouchers Payable 127,250
Expenditures Ledger:
Parks and Recreation––2005 127,000
Parks and Recreation––2006 250
•Recording the transaction at the Government-wide Level:

General Ledger

Governmental Activities: Debits Credits

17b. Expenses – Parks and Recreation 127,250

Vouchers Payables 127,250

Interim Financial Statements
Periodically during a year it is desirable to prepare financial
statements, for information, to the administrators and member
of the legislative branches of the governmental units. Balance
sheet for the town of TIRUSEW, if it were prepared in 2006
after the entries were made; the date is assumed to be March
31, 2006. The interim balance sheet reflects the balance of
both proprietary and budgetary accounts. Instead of “Assets”
which those familiar with accounting for profit-seeking entities
would expect, the caption must be “Assets and Resources”
because the excess of Estimated Revenues over Revenue is
not an asset as of the balance sheet date but does indicate the
amount that will be added to assets when legally budgeted
revenues are recognized.
Similarly, the caption is not “Equities,” or
“Liabilities and capital” or another title commonly
found in financial reports of profit seeking entities,
but “Liabilities and fund equity”. The liabilities
section is consistent with profit seeking entities,
but the next sections disclose the three
subdivision of the fund equity.
The first division presents the amount appropriated for
the year (Appropriation); less the amount of
appropriation that have been expended (Expenditures)
during the year to date, and less the amount of
appropriation encumbered by purchase order and
contracts outstanding at the balance sheet date
(Encumbrances); the net is the amount that legally may
be expended or encumbered during the remaining of
the budget year. The second division Fund Balance
Reserved for Encumbrances discloses the portion of
net asset and resource that is not available for
appropriation because expected liabilities exist.
The last subdivision, fund balance, discloses the
portion of the taxpayer equity available for
appropriation. Accordingly, in financial statement
presentation, the world Unreserved or Available for
Appropriation is sometimes used in the place of fund
balance.
 TOWN OF TIRUSEW
GENERAL FUND BALANCE SHEET
AS OF
Asset and Resources
Assets:
Cash 513,660
Taxes Receivable––Current 2,707,969
Less: Estimated Uncollectible Current Taxes 108,333 2,599,636
Tax Receivable–Delinquent 220,000
Less: Estimated Uncollectible Delinquent Taxes 50,000 170,000

Interest and penalties receivable on taxes 4,400

Less Estimated uncollectible interest and penalties 3,300 1,100

Total Assets 3,284,396

Resources:
Estimated Revenue 3,986,000
Less: Revenue 2,859,436 1,126,564
Total Assets and Resources 4,410,960
Liabilities and Fund Equity
Liabilities:
Vouchers Payable 581,450

Due to Federal Government 51,520

Due to State Government 10,800

Tax Anticipation Notes Payable 700,000
Total liabilities 1,343,770
Fund Equity:
Appropriation 4,180,000
Less: Expenditure––2006 1,191,710

Less: Encumbrance––2006 36,675 1,228,385

Available Appropriation 2,951,615

Reserve for Encumbrance––2006 36,675
Fund Balance 78,900
 TOWN OF JIMMA
GENERAL FUND
STATEMENT OF ACTUAL AND ESTIMATED REVENUES
FOR THE THREE MOTHS ENDED MARCH 31 2006

Source of revenue Estimated Actual Estimated Revenue Not Yet

Realized
Taxes:
Property Taxes 2,600,000 2,599,636 364
Interest and Penalties Taxes 13,000 600 12,400

Sales Taxes 480,000 480,000

Total Taxes 3,093,000 2,600,236 492,764
License and Permits 220,000 100,000 120,000

Fines and Forfeits 308,000 151,000 157,000

Intergovernmental Revenue 280,000 - 280,000

Change for Services 70,000 7,000 63,000

Miscellaneous Revenue 15,000 1,200 13,800

Total General Fund Revenue 3,986,000 2,859,436 1,126,564
 TOWN OF JIMMA
GENERAL FUND
STATEMENT OF BUDGETED AND ACTUAL EXPENDITURE AND ENCUMBRANCE
FOR THE THREE MOUTHS ENDED MARCH 31, 2006

Expenditure of Outstandin Available

Function Appropriation 2006 g Appropriatio
Appropriations Encumbran ns
ce
General Government 660,000 129,100 15,750 515,150
Public Safety 1,240,000 592,400 - 647,600
Public Works 910,000 247,800 9,100 653,100
Health And Welfare 860,000 67,700 5,825 786,475
Parks And Recreation 315,000 72,000 6,000 237,000
Cont. to Retirement Plan 180,000 82,260 - 97,740

Misc. Appropriation 15,000 450 - 14,550

Total General Fund 4,180,000 1,197,710 36,675 2,951,615
Events Subsequent to Date of Interim
Statements
•Revision of the General Fund Budget

Example: The Town of TIRUSEW General Fund revenues

budget for 2006 has been reviewed as described and
the budget is legally amended to reflected that revenue
from charges for services are expected to be 5,000 more
than originally budgeted and miscellaneous revenues
are expected to be Br 15,000 more than originally
budgeted, revenue from other sources not expected to
be materially different from originally budgeted and
appropriations have been reviewed and legally
amended to reflect a 50,000 Br. decrease in the
appropriation for public works and an 80,000 Br.
increase in the appropriation for public safety. The
Entry to record the revision of budget is:
 General Ledger Subsidiary Ledger

General Fund: Debits Credits Debits Credits

18. Estimated Revenue 15,000

Fund Balance 15,000

Appropriation 30,000

Revenues Ledger:

Charges for services 5,000

Miscellaneous Revenue 10,000

Appropriations Ledger:

Public Works 50,000

Public Safety 80,000

•Collection of Current Taxes
Collection of property taxes levied in 2006 for the general fund of
the Town of TIRUSEW amount to Br. 2,041,668. Since the entry
was recognized at the time levy was recorded, the following entry
is made in both the General Fund and governmental activities
journals.
General Ledger

General Fund and Governmental Activities: Debits Credits

19. Cash 2,041,668

Taxes Receivable––Current 2,041,668

•Repayment of Tax Anticipation Notes
As tax collections begin to exceed current disbursements, it becomes possible for the
town to repay the local bank for the money borrowed on tax anticipation notes. Just as
borrowing the money did not involve the recognition of revenue, the repayment of the
principal is merely the extinguishment of debt of the general fund and is not
expenditure. Payment of interest, however, must be recognized as the expenditure of
an appropriation, because it requires a reduction in the net assets of the fund. Assume
the interest to be Br. 13,500 and the amount is properly chargeable to miscellaneous
appropriation, the entry is:

General Ledger Subsidiary Ledger

General Fund: Debits Credits Debits Credits
20a Tax Anticipation Notes Payable 700,000

Expenditure––2006 13,500

Cash 713,500
Expenditures Ledger:
Miscellaneous Appropriation 13,500
A similar entry, is made at the government-wide level,
except an expense rather than an expenditure is
recorded for the interest charged on the note. The
expense is deemed to be an indirect expense that
benefits no single function.
General Ledger

Governmental Activities: Debits Credits

20b. Tax Anticipation Notes Payable 700,000

Expenses––Interest on Tax Anticipation notes 13,500

Cash 713,500
•Internal Exchange Transactions––Interfund Transactions
Water utilities ordinarily provide fire hydrants and water service for fire protection at a
flat annual charges. A governmentally owned water utility accounted for by an
enterprise fund should be expected to support the cost of its operations by user
charges. Fire protection is logically budgeted for as an activity of the fire department, a
general fund department. Assuming the amount charged by the water utility to the
general fund for hydrant and water service is 30,000 Br., and the fire department
budget is a part of the public safety category in the TOWN of JIMMA, the general fund
should record its liability as:
General Ledger Subsidiary Ledger
General Fund: Debits Credits Debits Credits
21a. Expenditure––2006 30,000

Due to Other Funds 30,000

Expenditures Ledger:
Public Safety 30,000
The corresponding entry to record the inter-activities
transaction (between the governmental activities and
business type activities) at the Government–Wide
Level is:

General Ledger
Governmental Activities: Debits Credits
21b Expense––Public Works 30,000
.
Due to Business–Type Activities 30,000
Government utilities property is not assessed for property tax (Generally we
can say tax) purpose, but a number of governmental utilities make an annual
contribution to the general fund in recognition of the fact that the utility does
receive police and fire protections and other services. If the water utility of
the Town of TIRUSEW agrees to contribute Br. 25,000 to the general fund in
lieu of taxes, the required journal entries for the General Fund and
Governmental activities are:

General Ledger Subsidiary Ledger

General Fund: Debits Credits Debits Credits
22a Due Form Other Funds 25,000
.
Revenues 25,000

Revenues Ledger:
Miscellaneous Revenues 25,000
 General Ledger
Governmental Activities: Debits Credits
22b Due form Business-Type Activities 25,000
.
General Revenues––Payments in lieu of Taxes 25,000