chapter 4pp - Budgeting, Budgetary Accounting, and...

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Unformatted text preview: Budgeting, Budgetary Accounting, and Budgetary Reporting Budgetary Chapter 4 Learning Objectives Learning • Understand budgetary accounting & reporting Understand practices and requirements practices • Understand budgeting terminology, approaches, Understand & recommended practices recommended • Discuss basic procedures of preparing and Discuss adopting a budget adopting • Understand differences between Budgetary Understand Fund Balance and GAAP Fund Balance Fund GAAP Budgets Budgets • In businesses – management plans • In governments – management plans AND In creates laws creates – Control the activities authorized to carry out Control plans plans – Prepare statement that permit comparison of Prepare actual results with budget and evaluation of variances variances GASB Principles Address Budgeting Budgeting • Annual budget(s) be adopted by every Annual governmental unit governmental • Accounting system provide basis for Accounting appropriate budgetary control appropriate • Budgetary comparison statements (basic Budgetary financial statements) or schedules (other RSI) be presented for RSI) – General Fund – Major Special Revenue Funds with legally Major adopted budgets adopted Recording the budget [Page 123] [Page The Board approved a budget with $423,000 in The appropriations and estimated revenues of $427,000. appropriations Estimated Revenues Appropriations Unreserved Fund Balance 427,000 423,000 4,000 As in the previous chapter, this entry is at summary level. To control revenues and expenditures, detail must be maintained in the subsidiary ledger (as in Chapter 3). Unassigned Fund Balance pre GASB 54? Recording the Budget: Recording Posting the “Out-of-Balance” amount • This textbook uses “Unreserved” Fund Balance – Advantages • Easier • Focuses attention on target ending fund balance Focuses ending – Disadvantage – implies there are spendable Disadvantage resources when, in fact, there aren’t resources • Another textbook uses Fund Balance – same Another issues as above issues • Third textbook uses Budgetary Fund Balance – Third avoids disadvantage from above but adds another account; this is the account used on CPA Exam questions CPA • Just be aware that there are options in practice Revenues Ledger Format Revenues Illustration 4-1,2 Taxes Dr. Date (Cr.) Estimated Revenues Revenues Dr. (Cr.) Balance Expenditures Ledger Format Expenditures Illustrations 4-4 General Government Dr. (Cr.) Dr. (Cr.) (Cr.) Unencumbered Dr. Date Encumbrance Expenditures Appropriation Balance s s Adjusting the Budget [Page 126] [Page Estimated revenues were increased for one department, Estimated appropriations were decreased for another department, and appropriations were increased for a third department. and Estimated Revenues Appropriations Appropriations Unreserved Fund Balance 4,000 3,000 6,000 1,000 Some may be bothered by having the Appropriations account being both a debit and a credit. However, you must consider the subsidiary ledger effects demonstrated in the textbook. Some appropriations were increased; others were decreased. That is why both the debit and credit are required. #3 Recording Encumbrances [Page #3 128] 128] Encumbrances Reserve for Encumbrances 30,000 30,000 Remember Chapter 3 journal entries? When we ordered we did not record a transaction (The Modified Accrual basis). On the Encumbrance basis, we will record an entry when we order goods and equipment. #4 Receipt of order [Pages 128-129] [Pages #4a Reverse estimate Reserve for Encumbrances Encumbrances Encumbrances 30,000 #4b Record the actual Expenditures Vouchers Payable 29,900 Look at Illustrations 4-1,3,4 30,000 29,900 Budgetary Bases Budgetary • Used to prepare budget & maintain accounting Used records records – Modified accrual basis (GAAP) – Cash basis • Revenues recognized when received • Expenditures recognized when paid – Encumbrances basis – treat encumbrances Encumbrances as expenditures as • If non-GAAP basis used to maintain accounting If records, adjustments necessary at year-end for reporting purposes reporting Budgetary Reporting in CAFR: Budgetary Columns Used in Presentation • • • Illustration 4-8 Original budget Final budget Actual on a budgetary basis (if not GAAP, Actual reconciliation must be included in notes (if BFS) or with schedule (if RSI) BFS) • Most governments include optional Variance Most column column Budget Types Budget • • • • • Capital or Current Tentative or Enacted General or Special Fixed or Flexible Executive or Legislative Budgetary Preparation Process Budgetary Illustration 4-13 • Overview – process starts with calendar to assure that budget is prepared on time assure • Preliminary estimates – overall budgetary outlook & plans for increases or decreases based on revenue growth or decline based • Prepare actual budget – examine budgetary requests, compare to available resource projections, make necessary adjustments, & then prepare actual budget then ...
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