ACCT 5390 Ch. 5 Lecture Notes WQ2019.docx

Supplies inventory example below also applicable to

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Supplies inventory example, below, also applicable to prepaid items There is no difference in the year-end B/S balances between the consumption and purchase methods. Purchase method is commonly used at the fund-level Consumption method is required at the government-wide level Year-end JE, below, only needed if amount is material E5-35
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I NTERFUND T RANSFERS Most common interfund activity; e.g. - General fund subsidizing another fund Transfers displayed on operating statement as - Other Financing Sources/Uses Example: general fund subsidy of a debt service fund - Transfer-out – Debt Service Fund 100,000 Cash 100,000 Cash 100,000 Transfer in – General Fund 100,000 I NTERFUND L OANS < 1 year: “due to/from other funds” General Fund (Lender) Due from Solid Waste Fund 75,000 Cash 75,000 Solid Waste Fund (Borrower) Cash 75,000 Due to General Fund 75,000 >1 year: “advance to/from other funds” General Fund (Lender) Advance to Solid Waste Fund 75,000 Cash 75,000 Unassigned Fund Balance 75,000 Nonspendable Fund Balance 75,000 Solid Waste Fund (Borrower) Cash 75,000 Advance from General Fund 75,000 Sales and purchases between funds at external pricing. Accounted for as revenue and expenditure transactions. “Due from” account = receivable “Due to” account = payable No exchange of equivalent value Non-reciprocal interfund activity Reciprocal interfund activity GF J/E DSF J/E Reciprocal interfund activity Long-term loans cause an anomaly; i.e., a noncurrent asset in a fund that is supposed to have only current assets. Therefore, an additional J/E is needed to indicate that a portion of the fund balance is not available for spending.
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In-Class Group Exercises as time permits: E5-28, E5-31, E5-33, E5-37, E5-34, E5-35, and E5-36 Dr, Budgetary FB - Encumbrances 100K Cr, Encumbrances 100K To reverse original encumbrance at year-end Assign FB to support payment of outstanding encumbrances in the following year Dr, Encumbrances 100K Cr, Budgetary FB - Encumbrances $100K To re-establish original encumbrance at beginning of following year-end JE reversed at the beginning of the following year E5-37
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