Departamento de Contabilidad - Fund Accounting · 2018. 4. 11. · 4. Capital Projects Funds They...
Transcript of Departamento de Contabilidad - Fund Accounting · 2018. 4. 11. · 4. Capital Projects Funds They...
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Lcdo. Edwin Renán Maldonado, CPA, LL.M© Prim. Sem. 2016-17.
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▪ This presentation contains information, in addition to the
material prepared and provided by the professor, from the
book Government and Not-for-Profit Accounting, 7th. Ed.,
Granof which is the textbook assigned for the course CONT
4059 – “Contabilidad para Entidades que no son Negocios”
at the University of Puerto Rico, Río Piedras Campus.
Textbook: Government and Not-for-Profit
Accounting, Granof
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What is a Fund?
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A fund is a fiscal and an accounting entity.
Each fund has its own self-balancing set of accountsfrom which financial statements can be prepared.
What is a Fund?
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Thus governmental and not-for-profit entitiescustomarily use several funds to account fortheir resources and activities.
What is a Fund?
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Example: A nonprofit organization, a Church.
What is a Fund?
Church
General Operating
Revenues and Expenses
Religious SchoolConstruction of a
New Building
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Governmental Funds
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Main Types of Governmental Funds:
1. Governmental Activities: Those financedthrough taxes and intergovernmental grants.
2. Business-Type Activities: Those financedpredominantly through user charges.
3. Fiduciary Activities: Those for which thegovernment acts as a trustee or agent.
Governmental Funds
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Governmental Activities
1. General fund
2. Special revenue funds
3. Debt service funds
4. Capital projects funds
5. Permanent funds
Governmental FundsGovernmental Activities
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1. General Fund
Governmental FundsGovernmental Activities
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1. General Fund
The general fund is the most significant fundmaintained by all state and local governmentalentities.
It is used to account for all resources that are notlegally or contractually restricted or arbitrarily setaside for specific activities.
Governmental FundsGovernmental Activities
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1. General Fund
In a city or other general-purpose government, itembraces most major governmental functions:
Police
Fire
Street maintenance
General administration
Governmental FundsGovernmental Activities
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2. Special Revenue Funds
Governmental FundsGovernmental Activities
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2. Special Revenue Funds
Special revenue fund are established to account forspecific revenue streams that are legally restricted orcommitted for specific purposes.
Accounts for financial resources that are restricted orcommitted (does not include assigned) toexpenditure for specific purposes other than debtservice or capital projects.
Governmental FundsGovernmental Activities
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2. Special Revenue Funds
Examples:
Gasoline tax revenues that must be used for highwaymaintenance.
Hotel occupancy taxes earmarked for specific purposes.
Private donations that must be used to repair andmaintain parks and other recreational facilities.
Governmental FundsGovernmental Activities
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3. Debt Service Funds
Governmental FundsGovernmental Activities
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3. Debt Service Funds
Debt service funds are a particular type of specialrevenue fund
In that they are maintained to account for resourcesrestricted, committed, or assigned for a specificpurpose: the payment of principal and interest onall general long-term obligation debt.
Governmental FundsGovernmental Activities
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3. Debt Service Funds
The debt covenants often require that theborrowing government set aside financial resourcesintended for servicing the debt.
Debt service funds derive their resources fromother funds, or from taxes or fees dedicated for debtservice.
Governmental FundsGovernmental Activities
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4. Capital Projects Funds
Governmental FundsGovernmental Activities
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4. Capital Projects Funds
They are maintained to account for, and report,financial resources that are restricted, committed,or assigned to be used for capital outlays, includingthe acquisition or construction of major capitalfacilities and other capital assets.
Governmental FundsGovernmental Activities
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4. Capital Projects Funds
Capital projects funds typically derive theirresources from the proceeds of bonds.
However, they may also receive resources that wereinitially received by other funds and subsequentlyearmarked for the acquisition of capital assets.
Governmental FundsGovernmental Activities
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5. Permanent Funds
Permanent funds are relatively new type ofgovernmental fund, a creation of the GASBStatement No. 34 reporting model.
Permanent funds may spent only the income theygenerate, not the principal.
Governmental FundsGovernmental Activities
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5. Permanent Funds
Example: Suppose that a government received adonation to support one of its parks. The resourcesreceived were to be invested and only the income,not the principal, could be expended.
Governmental FundsGovernmental Activities
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5. Permanent Funds
Example: The government would establish apermanent fund to account for and maintain thedonation (the principal).
As income is earned, the government wouldtransfer it to a special revenue fund, from which itcould be used for the intended purpose.
Governmental FundsGovernmental Activities
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5. Permanent Funds
Example:
Governmental FundsGovernmental Activities
PERMANENT FUND(Principal)
Income
SPECIAL REVENUE FUNDS
Expenditure for Specific Purposes
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Governmental FundsBusiness Type (Proprietary Funds)
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1. Enterprise Funds
Enterprise funds are used to accounts for business-type activities in which the government providesgoods or services on a user-charge basis to thegeneral public at large.
The resources of the fund must be kept intact andcannot be commingled with those of thegovernment’s other funds.
Governmental FundsBusiness Type (Proprietary Funds)
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1. Enterprise Funds
Example:
Utilities, such as electric, water, and sewer.
Hospital
Mass Transportation
Convention and entertainment facilities
Governmental FundsBusiness Type (Proprietary Funds)
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2. Internal Service Funds
This funds, like enterprise funds, are used to accountfor business-type activities, but they provide goods orservices to other funds, departments, or agencieswithin the same governmental unit (or occasionally toother governments).
Governmental FundsBusiness Type (Proprietary Funds)
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2. Internal Service Funds
Example:A vehicle repair service that maintains and service
the cars and trucks of the police department, firedepartment, and so forth.
An electronic data processing department thatmaintains records and performs computer servicesfor all other departments.
Governmental FundsBusiness Type (Proprietary Funds)
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Governmental FundsFiduciary Funds
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GeneralThese funds are used to account for assets held by a
government in a trust or agency capacity for others,which include employees, other government, andspecific individuals, corporations, or not-for-profitorganizations.
Accordingly, their activities do not result in revenuesor expenses to support the government’s programs.
Governmental FundsFiduciary Funds
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1. Trust Funds
Governmental FundsFiduciary Funds
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1. Trust Funds
A trust fund is defined as a “fund held by one person(trustee) for the benefit of another, pursuant to theprovisions of a formal trust agreement.”
Governmental FundsFiduciary Funds
GRANTORTRUST FUND
(Trustee = Government)BENEFICIARIES
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1. Trust Funds
There are three types of Trust Funds:
Pension
Investment
Private Purpose
Governmental FundsFiduciary Funds
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2. Agency Funds
Governmental FundsFiduciary Funds
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2. Agency Funds
Agency funds are custodial in nature and are used toaccounts for assets held, usually for a short period, onbehalf of other governments, funds, not-for-profitentities, or individuals.
Examples: Taxes collected by one government for the benefit of another.
Governmental FundsFiduciary Funds
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Governmental FundsSummary
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Governmental FundsSummary
Governmental Funds
• General Fund
• Special Revenue Funds
• Capital Projects Funds
• Debt Service Funds
• Permanent Funds
Proprietary Funds
• Internal Service Funds
• Enterprise Funds
Fiduciary Funds
• Agency Funds
• Trust Funds 39
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What Characterizes Funds?
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Accounting Equation that describes a businessentity:
Assets – Liabilities = Owner’s Equity
$10,000 - $6,000 = $4,000
What Characterizes Funds?
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Accounting Equation for Fund Accounting:
Assets – Liabilities = Fund Balance*
$10,000 - $6,000 = $4,000
* This equation will be modified later.
What Characterizes Funds?
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Comprehensive Annual Financial Report
(CAFR)
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CAFR (GASB Statement No. 34)
1. Auditor’s report
2. MD&A (Management’s discussion and analysis)
3. Basic Financial Statementsa. Government Wide Statements
b. Fund Statements
4. Required Supplementary Information RSI (Other than MD&A)
5. Combining the individual fund statements and schedules (if
required)
Comprehensive Annual Financial Report
(CAFR)
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Comprehensive Annual Financial Report
(CAFR)
Components of the Annual Financial Report
Management’s Discussion and Analysis
Government-wide Financial
Statements
Fund Financial
Statements
Basic Financial Statements
Notes to the Financial
Statements
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1. Auditor’s Report
Opinion of the CPA’s Firm.
Comprehensive Annual Financial Report
(CAFR)
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2. Management’s Discussion and Analysis
• Brief objective narrative providing management’sanalysis of the government’s financial performance.
• This is basically “Tell it like it is.”
Comprehensive Annual Financial Report
(CAFR)
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3(a). Government-Wide Statements• The objective is to present a fairly broad condensed consolidated
view of the financial position of the governmental entity.
• According to GAAP (GASB #34), there are just two requiredgovernment-wide statements:
• Statements of net position (balance sheet)
• Statement of Activities (statement of revenue and expenses)
• The government-wide statements are prepared on a full accrualbasis.
Comprehensive Annual Financial Report
(CAFR)
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3(b). Fund statements
The three main categories (Governmental, Proprietaryand Fiduciary) of funds necessitate three sets ofstatements, one for each type of fund, with eachcontaining a slightly different blend of statements.
Comprehensive Annual Financial Report
(CAFR)
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Governmental Funds
1. Balance sheet
2. Statement of revenues, expenditures, andchanges in fund balances
Comprehensive Annual Financial Report
(CAFR)
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Proprietary Funds
1. Balance sheet
2. Statement of revenues, expenses, and changes innet position
3. Statement of cash flows
Comprehensive Annual Financial Report
(CAFR)
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Fiduciary Funds
1. Statement of fiduciary net position
2. Statement of changes in fiduciary net position
Comprehensive Annual Financial Report
(CAFR)
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Under GASB Statement No. 54, governmentalfund balance information is reported in five(5) different classifications, which provide ahierarchy indicating the extent to which thegovernment is bound to honor constraints onthe specific purposes for which amounts in thefund can be spent.
What Characterizes Funds?
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Five (5) Different Classifications of Fund Balance1. Nonspendable
2. Restricted
3. Committed Expendable
4. Assigned Fund Balance
5. Unassigned
What Characterizes Funds?
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Accounting Equation for GovernmentalFunds:
Assets – Liabilities = Fund BalanceNonspendable
Restricted
Committed
Assigned
Unassigned* Excludes Proprietary and Fiduciary Funds
What Characterizes Funds?
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1. Nonspendable Fund Balance:
Includes amounts that are:
not spendable form, or
are legally or contractually required to bemaintained intact.
Nonspendable Fund Balance
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Legally or contractually required to memaintained intact.
Example:
Endowment Gifts
Bequests to be held in perpetuity.
Nonspendable Fund Balance
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Not spendable form = Not expected to beconverted to cash.
Example:
Inventory
Long-term note receivable
Nonspendable Fund Balance
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Funds must likely to be included:General
Permanent
Nonspendable Fund Balance
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2. Restricted Fund Balance: Includes amountsexternally constrained for specific purposesby:External parties
Ex. Creditors or bondholders
Enabling legislation
Ex. Law or regulations
Restricted Fund Balance
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Funds must likely to be included:Special revenue
Debt service
Capital projects
Restricted Fund Balance
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3. Committed Fund Balance: Constraintsimposed (internally) by formal action of thegovernment’s highest level of decision-making authority.
Committed funds include contractual obligationsfor which existing resources in the fund havebeen specifically committed for use.
Committed Fund Balance
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3. Committed Fund Balance:
Note: In contrast to fund balance that is restricted by
enabling legislation, amounts in the committed fund balance
can be redeployed for other purposes with appropriate due
process.
Committed Fund Balance
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Funds must likely to be included:Special revenue
Debt service
Capital projects
Committed Fund Balance
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4. Assigned Fund Balance: Includes amountsa government explicitly intends to use forspecific purposes. Amounts neither restricted nor committed.
Intent can be expressed by either a governingbody, an official, a finance committee, which hasbeen delegated the authority to assign amounts tobe used for specific purposes.
Assigned Fund Balance
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Funds must likely to be included:Debt service
Capital projects
Assigned Fund Balance
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5. Unassigned Fund Balance: Is the residualclassification for the general fund andcomprises all amounts not included in theother classifications.
Unassigned Fund Balance
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Funds must likely to be included:General Fund
Unassigned Fund Balance
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Level of Constraints (GASB 54)
Most constraint
•Restricted
•Committed
•Assigned
No constraint
•Unassigned
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Fund Balance Disclosure
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Disclosure in Financial Statements: The government shoulddisclose:
1. For the assigned fund balance, the body or official authorizedto assign amounts to a specific purpose and what policy isestablished.
2. The order in which restricted, committed, assigned, andunassigned amounts are spent when amounts in more thanone classification are available for a particular purpose.
3. The purpose of each major special revenue fund.
Fund Balance Disclosure
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Basis of Accounting
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Full Accrual
• Revenues recognized when earned.
• Expenses recognized when incurred.
Cash
• Revenues recognized when available.
• Expenses/expenditures recognized when paid.
Basis of Accounting
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Modified Accrual
• Revenues are recognized when measurable and
available.
• Expenditures when incurred.
• Excludes the recognition of both:
• Long-term assets
• Long-term liabilities
Basis of Accounting
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Example: Page 44
A newly formed public school district accounts for itsoperations on a modified accrual basis.
It maintains four funds:
General
Capital
Debt Service
Special Revenue
Basis of Accounting
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Example: Page 44
1. The district levied $9.0 million of general property
taxes, of which it actually collected $8.8 million. The
taxes are unassigned, they can be used for any
legitimate educational purpose. What is the fund?What is the JE?
Basis of Accounting
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Example: Page 44
1. The district levied $9.0 million of general property taxes, of whichit actually collected $8.8 million. The taxes are unassigned, theycan be used for any legitimate educational purpose. What is thefund? What is the JE?
General Fund
Cash 8.8
Property taxes receivable 0.2
Property tax revenue 9.0
To record property taxes
Basis of Accounting
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Example: Page 44
2. The district received a state grant of $0.2 million to
purchase computers. What is the fund? What is theJE?
Basis of Accounting
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Example: Page 44
2. The district received a state grant of $0.2 million topurchase computers. What is the fund? What is theJE?
Special Revenue Fund
Cash 0.2
Grant revenue 0.2
To record a state grant restricted for the acquisition of computers.
Basis of Accounting
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Example: Page 44
3. The district issued $12.0 million in long-term bonds to
construct a school building. What is the fund? What is
the JE?
Basis of Accounting
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Example: Page 44
3. The district issued $12.0 million in long-term bonds to
construct a school building. What is the fund? What is
the JE?
Capital Projects FundCash 12.0
Other financing source: Proceeds from borrowing 12.0
To record the issuance of bonds
Basis of Accounting
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Example: Page 44
Capital project fund is on modified accrual basis, which excludes
the recognition of both long-term assets and long-term liabilities.
The proceeds are recognized in a revenue-type account, one that
will cause fund balance, rather than a liability, to increase.
Of course, the district must maintain a record of both its long-lived
assets and obligations in capital asset and long-term obligation
ledgers. They will also be recorded in the district’s government-
wide statements.
Basis of Accounting
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Example: Page 44
4. The district constructed the school building for $11.0
million. What is the fund? What is the JE?
Basis of Accounting
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Example: Page 44
4. The district constructed the school building for $11.0million. What is the fund? What is the JE?
Capital Project FundConstruction of building (expenditure) 11.0
Cash 11.0
To record the costs of constructing the school building.
Basis of Accounting
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Example: Page 44
5. The district incurred $6.0 million in general operating
expenditures, of which it actually paid $5.5 million.
What is the fund? What is the JE?
Basis of Accounting
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Example: Page 44
5. The district incurred $6.0 million in general operatingexpenditures, of which it actually paid $5.5 million. What is thefund? What is the JE?
General Fund
General operating expenditures 6.0
Cash 5.5
Accounts payable 0.5
To record general operating expenditures.
Basis of Accounting
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Example: Page 44
6. Using its state grant, the district purchased
computers for $0.1 million. What is the fund? What is
the JE?
Basis of Accounting
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Example: Page 44
6. Using its state grant, the district purchased computers
for $0.1 million. What is the fund? What is the JE?
Special Revenue Fund
Acquisition of computers (expenditures) 0.1
Cash 0.1To record the acquisition of computers.
Basis of Accounting
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Example: Page 44
As with construction of the building, the district would
recognize the acquisition as an expenditure, but record
the asset in a supplementary ledger or list as well as
the government-wide statements.
Basis of Accounting
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Example: Page 44
7. The district transferred $1.1 million from the general
fund to the debt service fund to make the first
payments of both principal and interest that are due
in the following year. What is the fund? What is the
JE?
Basis of Accounting
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Example: Page 44
7. The district transferred $1.1 million from the general
fund to the debt service fund to make the first
payments of both principal and interest that are due
in the following year. What is the fund? What is the
JE?
General Fund and Debt Service Fund.
Basis of Accounting
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Example: Page 447. The district transferred $1.1 million from the general fund to the debt
service fund to make the first payments of both principal and interest that
are due in the following year. What is the fund? What is the JE?
General FundOther financing use: Nonreciprocal transfer-out to debt service fund 1.1
Cash 1.1
To record transfer to the debt service fund.
Basis of Accounting
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Example: Page 447. The district transferred $1.1 million from the general fund to the debt service
fund to make the first payments of both principal and interest that are due in
the following year. What is the fund? What is the JE?
Debt Service Fund
Cash 1.1
Other financing source: Nonreciprocal transfer-in from general fund 1.1
To record transfer from the general fund.
Basis of Accounting
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Not-for-Profit Entities
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Unless mandated by law, not for profit organizations
need not employ fund accounting for purposes of
internal accounting and administration.
They must, however, comply with FASB requirements
for external reporting. They need only distinguish
between resources that are restricted and those that
are unrestricted.
Not-for-Profit Entities
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The FASB requires that not-for-profits classify their net
assets into three categories based on the restrictions
of donors:
Unrestricted
Temporarily restricted
Permanently restricted
Not-for-Profit Entities
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Temporarily restricted: Resources that must be used
for a specific purpose, or cannot be spent until
sometime in the future.
Permanently restricted: Only the income form which
can be spend.
Not-for-Profit Entities
114