Kế toán, kiểm toán - Chapter sixteen: Accounting for state and local governments

Chapter SixteenAccounting for State and Local Governments, Part I Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinImportance of Governmental AccountingAbsence of profit motive removes an important internal controlAllocation of limited resources to unlimited needs creates public debateFocus on sources and uses of fundsNeed to inform public (stewardship)MassiveFederal government50 State governmentsThousands of local governmental unitsWhy is it different than “for profit” businesses?LO 116-*Governmental Accounting Governmental Accounting Standards Board (GASB) generates primary standards.Focuses on financial reporting for non-profit governmental agencies.Many concepts are similar to financial accounting, but terminology and procedures differ.Requires two sets of financial statements16-*Government-wide Financial StatementsGASB Statement No. 34Requires the production of two sets of financial statements:Fund Financial StatementsReport all revenues and costs with a long term focus. Of interest to creditors, to assess the likelihood of being paid.Show restrictions on the use of resources, and report current revenues and expenditures from certain activities. LO 216-*Reporting Diverse Governmental Activities - Fund AccountingGovernmental units have many different types of activities.No common motivation links these activities.Each activity operates a quasi-independent, self-balancing set of accounts called “funds.”Examples include:Public SafetySanitationHealth & WelfareEducationParks & RecreationJudicial SystemWater and SewerEmployee PensionsLO 316-*Governmental FundsAccounting for activities related to serving the public.Proprietary FundsAccounting for business-type activities.Fiduciary FundsAccounting for financial resources held for others as trustee.Fund Accounting ClassificationAll funds fall into one of three broad classifications.LO 416-*Government-Wide Financial StatementsTwo statements are required:Statement of Net AssetsStatement of ActivitiesReporting is separated into governmental activities (government funds and most internal service funds) and business-type activities (enterprise funds and remaining internal service funds).LO 516-*Fund Financial StatementsFund-Based statements will include information on fiduciary funds.Two statements are required:Balance SheetStatement of Revenues, Expenditures, and Changes in Fund Balance16-*Procedures –Importance of BudgetsThe budget serves several purposes:Expresses public policy Expresses financial intentProvides spending limitsCompares actual results to the budget as a means of evaluating performanceIndicates proposed deficitsThe budget is recorded in the books as a DEBIT to estimated revenues, and a CREDIT to each “appropriation” approved.LO 616-*Procedures – Fixed Assets The expenditure for fixed assets is recorded in the General Fund for fund-based statements.But, depreciation is not recorded in the governmental fund, since net income is not a concept relevant to governmental units. However, GASB requires a record of ALL capital assets in the Statement of Net Assets in government-wide statements. And, depreciation expense is recorded.LO 716-*Procedures – Recognition of Revenues ClassificationsDerived Tax RevenuesImposed Nonexchange RevenuesGovernment-mandated Nonexchange TransactionsVoluntary Nonexchange TransactionsFor Government-Wide Statements, record the revenues when “eligibility requirements have been met”.For Fund Statements, record the revenues when they become “available for recognition”.LO 816-*Procedures –Issuance of BondsThe town of Ruark issues $9 million in bonds for the construction of new school building. The following journal entry is prepared to reflect the sale of the bonds.LO 916-*Interfund TransactionsCommonly used, particularly monetary transfers from the General FundNormally reported as “other financing source” and “other financing use” within the fund-based financial recordsMany of these are not reported in the government-wide financial statements because they create no net impact (intra-activity transactions)Interactivity transactions occur between governmental and enterprise funds and are reported on government-wide financial statementsLO 1016-*