ANO Assignment

8/8/2019 ANO Assignment

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Chapter IV BUDGETARY and ACCOUNTING

For General and Special Revenue FundsLecturer: SUON Reasmey, (Ph.D) Candidate

Group members:

Chhe Kongkea Kimly Nita (Miss)Ou Veasna Sum Sreyroath (Mrs)Chan Makara Ly Sreypov (Miss)Sles Sinal Ouk Somaly (Miss)

Sar Marina (Miss) 1


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WHAT is the Budget?y A budget is financial plan submitted to the

appropriate body for approval.y National budget is both a plan for fund raising,and a spending plan to ensure funds are used

effectively for the benefit of the people.y Once approved, budgets carry the status of law

y When voted upon, the legal authority to spend andgenerally sets the maximum limit for spending.y Budget must be allowed from Royal Government,

National Assembly, Senate and king before spending.

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IMPOR TANT of the Budget in SLG Accountingy Operating revenue is not a good measuring

government effectiveness.y Excess of revenue over expenditure does not mean

success, but indicate whether the funds received are inexcess of funds expended.

y Every government should adopt an annual budget.y Accounting system should make it possible to

compare actual and budgeted results.y Budget vs. actual comparisons are included in therequired supplemental information for the generalfund and special revenue funds for which an annualbudget is adopted.

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THE General P rocess of P uttingTogether a Budget

y Plan the expected inf lowsy Project revenues based on past history, economic

models, etc.y Plan the expected outflows

y Project expenditure based on past history or Askdepartment for their projected needs.

y Balance the inflows and the outflowsy For places to increase revenues or to cut spendingy Governments may also borrow or use accumulated

surpluses to balance inflows and outflows.

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RECORDING the BudgetFinancing Sources

y Assume $1,000,000 of revenues are budget along with $950,000 of estimated expenditures.

The budget entry would be:y Estimated Revenues $1,000,000

y Appropriations $950,000y Budgetary Fund Balance $ 50,000

y Alternatively, estimated revenues and appropriationscould be recorded in separate entries.

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R ECOR DING the Incorporating BudgetsF inancing Sources

y Assume a city budgets property tax revenues of $2,000,000; bond proceeds of $1,000,000;

expenditures of $2,800,000; and a transfer toanother fund of $100,000.The budget entry would be:

y Estimated Revenues $2,000,000y Estimated Other Financing Sou. $ 1,000,000

y Appropriations $2,800,000y Estimated Other Financing Use $ 100,000y Budgetary Fund Balance $ 100,000

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R ecording the BudgetsF inancing Uses or Outstanding Orders

y Place an order for $150,000 which consists of threemini-buses costing $50,000 each. Recorded as:

Encumbrances $150,000Reserve for Encumbrances $150,000

y Assume two of the buses arrive, but with freight, they cost $102,000 instead of $100,000.1.First, reverse a part of the encumbrances:

Reserve for Encumbrances $100,000Encumbrances $100,000

2. S econd, record the actual amount of expenditure:Expenditure $102,000

C ash $102,000

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CLASSIFI CATIO N of Inflows and O utflowson Budget Schedule

y Revenues are classified by sourcey Where the money came from: taxes, licenses and

permits, charges for service, etc.y May be subdivided further such as by type of tax,

sometimes shown in separate schedule.y Expenditures & Encumbrances may be classified

by y Function, program, department, activity, character,

or object.y Examples of function: General government, public

safety, streets and highways.

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EXCHANGE and N O N-exchange TransactionsG ASB Statement No. 33 indicates show different for

y Exchange and exchange-like transactiony These are like true sales you pay a certain amount

and receive equivalent value in return.y Revenue resulting from exchange transactions is

recognized in the period(s) that it is earned.y For example, revenue from the rental of

government property would be recognized over theterm of the lease.

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y Non-exchange transactionsy For taxes and certain other transactions you pay

more or less than the value of services received.y Derived tax revenues ( T ax on salary, T ax on profit,

value added taxes, and excise taxes on consumer

goods and machinery, or locally produced. )y Imposed non-exchange revenues ( T hese include

taxes on property, taxes on special assessment property, and fines and forfeits. )

y

Government mandated transactions (T

heserevenues result from the Federal or S tateGovernment making grants to other governments.T he grants are given to support specific activities. )

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y Voluntary non-exchange transactions ( T ypicallythese are resources provided by individual,donation, grant to support specific activities )(Example: expanding the book holdings at thelibrary ).

NoteFor Government mandated expenditures and

Voluntary non-exchange transactions, recognizethe revenue when the eligibility requirements aresatisfied.

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R EVIEW: M odified Accrual and Accrual y Accrual

y Recognize revenues when earnedy Match expenses against the revenues.

y Modified Accrualy Recognize revenues when measurable and available

(available to pay this year s bills for example,

property taxes received within 60 days of year end)y Recognize expenditures when the liability is

incurred no attempt to match to revenues, match toperiod of occurrence only.

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MO DIFI ED Accrual R evenue Cycley Property tax for 2007 levied = $1,000,000;

$800,000 is collected in calendar year 2007$ 120,000 is collected in January and February 2008$ 80,000 is collected in March and April 2008.

Recording Entries During 2004:Record levy: Taxes receivable $1,000,000

Revenue $1,000,0002004 collections: Cash $ 800,000

Taxes Receivable $ 80,000 Year end adjustment: Revenue $ 80,00

Deferred Revenue $ 80,000(Receipts of property taxes over 60 days after year end will be

a 2008 revenue)

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MO DIFI ED Accrual Expenditure Cycley Supplies are ordered at an estimated cost of $3,000 Supplies

are received with an actual cost of $3,000 plus shipping of $250. Invoice from the supplies is paid

y Recording Journal Entries:y Place Order: Encumbrances $3,000

Reserve for Encumbrances $3,000y Receive Goods: Expenditures $ 3,250

Account Payable $ 3,250Budgetary Fund Balance

Reserve for Encumbrances $ 3,000Encumbrances $ 3,000

y Payment: Accounts Payable $ 3,250Cash $ 3,250

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TR ANSFER Sy Any shifting of resources from one fund to another

where there is no expectation that the amounts will berepaid.

y Transfers In are considered Other Financing Sources.

y

Transfers Out are considered Other Financing Uses.y Recurring Transfers such as for debt service may be

built into the budget.

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THE Closing P rocessy Background the business closing process

y Close revenues and expenses to income summary y Close income summary and withdrawals to Retained

Earnings or Capital.y Closing process for government type funds needs to

accomplish the following:y Close budgetary accountsy

Close Revenues, expenditures, encumbrances, andrelated other financing sources or uses to Fund Balancey Reclassify the Budgetary Fund Balance Reserved for

Encumbrances to Fund Balance Reserved forEncumbrances.

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