Prepare Journal Entries In The General Fund Of Brownville

Prepare journal entries in the General Fund of the Brownville School District

The District had outstanding encumbrances of $13,000 for band instruments from the previous year. It is the District’s policy to re-establish those encumbrances in the subsequent year.

The District ordered textbooks at an estimated cost of $87,000.

The band instruments arrived at an invoice price of $12,500 plus $225 shipping.

Textbooks originally estimated to cost $77,000 were received with an invoice price of $76,900. The remaining portion of the order is backordered.

A contract was signed with a CPA to provide the annual audit in the amount of $11,000.

Paper For Above instruction

The following paper provides detailed journal entries for the Brownville School District’s General Fund transactions corresponding to the specified accounting events. These entries reflect standard governmental accounting principles, particularly those relevant to fund-based accounting used in school districts. The transactions include re-establishing prior-year encumbrances, recording new encumbrances for current-year purchases, recognizing actual receipts of goods and services, and accounting for the associated expenditures or liabilities.

Re-establishment of Outstanding Encumbrances

In governmental accounting, encumbrances are commitments related to unperformed contracts for goods and services. Since Brownville School District re-establishes prior-year encumbrances, the initial entry involves reinstating these commitments at the start of the new fiscal year. The journal entry is as follows:

Dr. Encumbrances $13,000


Cr. Encumbrances Outstanding $13,000

This entry re-establishes the encumbrance, which is essential for budgetary control and accountability, preventing overspending of allocated funds.

Order of Textbooks at Estimated Cost

Upon ordering textbooks, the district records an encumbrance based on the estimated cost. This reflects the commitment of funds for the purchase, although the actual receipt and invoice may differ. The entry is:

Dr. Encumbrances $87,000


Cr. Budgetary Fund Balance – Reserved for Encumbrances $87,000

This preserves the estimated amount of funds committed for the textbooks and aligns with the district’s policy of encumbering upon ordering.

Arrival of Band Instruments

The instruments arrived with an invoice of $12,500 plus $225 shipping. The total cost is $12,725. The appropriate journal entries are:

Dr. Expenditures – Supplies (or Equipment) $12,725


Cr. Accounts Payable $12,725

This recognizes the liability for the instruments once received and the obligation to pay the invoice. If a separate inventory account is used for equipment, the entry might specify that account accordingly.

Receipt of Textbooks

The textbooks, initially estimated at $77,000, were received at an invoice cost of $76,900, indicating a slight favorable variance. The ordered amount was encumbered previously. The entry is:

Dr. Expenditures – Instructional Supplies or Textbooks $76,900


Cr. Accounts Payable $76,900

Given the remaining order is backordered, no expense or liability is recorded for the undelivered portion until the textbooks are actually received and invoiced.

Contract with CPA for Annual Audit

The district signed a contract to pay $11,000 for the annual audit. The entry to record the contractual obligation, once the audit is performed and invoice received, is:

Dr. Expenditures – Professional Services $11,000


Cr. Accounts Payable $11,000

When payment is made, the following entry is recorded:

Dr. Accounts Payable $11,000


Cr. Cash $11,000

These entries ensure proper recognition of expenses and liabilities in accordance with governmental accounting standards, specifically GASB guidelines for school district fund accounting.

Conclusion

The journal entries outlined above represent proper accounting treatment for the transactions encountered by the Brownville School District’s General Fund. Each transaction — from encumbrance re-establishment and recognition to receipt of goods and contractual commitments — aligns with governmental accounting standards, emphasizing transparency, accountability, and fiscal responsibility.

References

  • Governmental Accounting Standards Board (GASB). (2021). Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions.
  • Governmental Accounting Standards Board (GASB). (2020). Statement No. 84, Fiduciary Activities.
  • District of Columbia Office of the State Superintendent of Education. (2016). School District Accounting Policies and Procedures.
  • Kaufman, J. (2017). Governmental Accounting, Auditing, and Financial Reporting. Cengage Learning.
  • Financial Accounting Standards Board (FASB). (2022). ASC 958, Not-for-Profit Entities.
  • Public School Finance. (2019). Principles of School District Budgeting and Accounting.
  • Jones, M. (2018). Governmental and Nonprofit Accounting: Theory and Practice. Routledge.
  • Government Finance Officers Association (GFOA). (2020). Best Practices in Financial Documentation and Reporting.
  • Yegon, K. (2019). Practical Guide to Fund Accounting for Educational Institutions. Routledge.
  • U.S. Department of Education. (2021). Financial Accountability and Standards for School Districts.

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