Governmental Accounting Other Funds Summer I 2009

Governmental Accounting Other Funds Summer I 2009 -...

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Accounting 401 Advanced Accounting Governmental Accounting and Reporting – Funds Other than the General Fund Summer I 2009 A. Special Revenue Funds 1. Sometimes revenues are collected for a specific purpose that will provide benefits to the public. These are activities funded by legally restricted revenue sources. Examples may include a special property tax levy to help provide for additional trash pickups or a levy to help fund a public transportation system. 2. If the resources involved are expendable – both principal and interest may be spent – the activities are recorded in special revenue funds. You remember that special revenue funds are a type of governmental fund. Accounting for special revenue funds is similar to the accounting for the general fund. 3. If the resources involved are nonexpendable – only income may be spent – the activities are recorded in permanent funds. The accounting for these funds is similar to the accounting for proprietary funds. Accounts related to income or principal should be separated, since spending will occur from income only. 4. Illustration of permanent fund accounting – Suppose that a consortium of residents donate $3,500,000 for the operation of Lacrosse, Wisconsin’s public high schools. The money is put in trust for that purpose. The trust specifies that income is to be used to purchase books and supplies for all of the laboratories and classrooms. The high school fund is created to account for the activities of the trust. The $3,500,000 is immediately invested in U.S. government bonds. High School Fund Entries: Cash – Principal 3,500,000 Fund balance – reserve for trust principal 3,500,000 Investment in U.S. government securities 3,500,000 Cash – Principal 3,500,000 Suppose that $70,000 in cash interest is received on the investments. Cash – Income 70,000 Investment income 70,000
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Purchased classroom and lab supplies at a cost of $60,000: Expenditures 60,000 Cash – Income 60,000 Closing Entries for the High School Fund: Investment income 70,000 Expenditures 60,000 Fund balance – reserve for acquisition of lab and classroom supplies 10,000 Note: On the governmental funds balance sheet, the fund balance for the permanent fund is divided between $3,500,000 principal and $10,000 available for acquisitions of supplies. Trust assets must be reported as principal and income assets so that acquisitions may be restricted to the use of income assets only. B. Capital Projects Funds 1. These funds are used to account for the resources utilized by some governmental unit to acquire or construct major capital facilities. For example, buildings, streets and highways, sewer systems, special events centers, city hall, etc. 2.
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Governmental Accounting Other Funds Summer I 2009 -...

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