Recording General Fund Operating Budget And Operating Transa ✓ Solved

3 22 Recording General Fund Operating Budget And Operating Transactio

Prepare the journal entry (or entries), including subsidiary ledger entries, to record the Town of Bedford Falls's General Fund operating budget on July 1, 2016, the beginning of the Town's 2017 fiscal year. Additionally, prepare journal entries to record transactions during July 2016, which include the collection of revenues and ordering supplies by various functions.

Sample Paper For Above instruction

The accounting process for government funds, especially the General Fund, involves meticulous recording of budgets, revenue collections, and expenditure appropriations. For the Town of Bedford Falls, the initial step in the fiscal year 2017 is to record the approved operating budget, followed by documenting actual financial activities during July 2016. This process ensures transparent financial management and compliance with budgeting standards established for governmental entities.

Recording the Budget at the Beginning of the Fiscal Year

On July 1, 2016, the Town of Bedford Falls adopted its budget for fiscal year 2017, projecting revenues of $2,700,000 and appropriations amounting to $2,650,000. In governmental accounting, the budget is recorded through budgetary journal entries that set up estimated revenues and appropriations. The typical entry will debit estimated revenues and credit appropriations to reflect the anticipated funds allocated for each function.

The journal entry to record the budget would be as follows:

Dr. Estimated Revenues $2,700,000


Cr. Budgetary Fund Balance $2,700,000


(To record the estimated revenues for the fiscal year)


Dr. Budgetary Fund Balance $2,650,000


Cr. Appropriations $2,650,000


(To record the appropriations authorized for the fiscal year)

This set of entries establishes the planned inflows and outflows, aligning fund balances with the approved budget, providing a basis for controlling actual revenues and expenditures.

Recording Revenues Collected in July 2016

During July 2016, the Town collected cash revenues of $31,000 from licenses and permits and $12,000 from fines and forfeits. These receipts need to be recorded to reflect actual inflows, which affect the fund balances. The entries are straightforward, debiting cash and crediting the respective revenue accounts:

Dr. Cash $43,000


Cr. Licenses and Permits Revenues $31,000


Cr. Fines and Forfeits Revenues $12,000

This captures the actual revenue collection, which will be used to monitor fiscal performance against budget estimates and support financial reporting.

Ordering Supplies by Functions

The town ordered supplies across various functions, totaling $29,900, estimated as follows: General Government ($7,400), Public Safety ($11,300), Public Works ($6,100), Culture and Recreation ($4,200), and Miscellaneous ($900). In government accounting, ordering supplies is a commitment of funds and is recorded as encumbrances, which prevent overspending before actual goods are received and expenses are recognized.

The journal entries to record these encumbrances are:

Dr. Encumbrances - General Government $7,400


Dr. Encumbrances - Public Safety $11,300


Dr. Encumbrances - Public Works $6,100


Dr. Encumbrances - Culture and Recreation $4,200


Dr. Encumbrances - Miscellaneous $900


Cr. Fund Balance - Reserve for Encumbrances $29,900

These entries indicate that the town has committed funds for expected supplies, which will later be adjusted upon receipt and payment of actual invoices, ensuring prudent fiscal control.

Conclusion

The initial recording of the government’s budget and subsequent transactions is fundamental to maintaining accountability and ensuring funds are utilized appropriately. Proper application of governmental accounting principles represented by these journal entries enables transparent fiscal management and compliance with statutory and regulatory frameworks. Through these standard procedures, Bedford Falls ensures that its financial activities are accurately recorded, monitored, and reported in adherence to government accounting standards (GASB).

References

  • GASB. (2020). Statement No. 34, Basic Financial Statements—and Management's Discussion and Analysis—for State and Local Governments. Governmental Accounting Standards Board.
  • Jordan, L., & Lieb, E. (2014). Governmental Accounting & Financial Reporting. McGraw-Hill Education.
  • Loftus, J. (2016). Governmental Accounting, Auditing, and Financial Reporting. Cengage Learning.
  • Schwartz, R. (2018). Financial Management for Local Government. Wiley.
  • Wright, N. (2020). Fundamentals of Governmental Accounting. Routledge.
  • Government Finance Officers Association. (2018). Best Practices in Budgeting and Fiscal Oversight. GFOA Publications.
  • ONA, U. (2019). Introduction to Governmental and Not-for-Profit Accounting. Routledge.
  • Henry, J. (2017). Municipal Budgeting and Financial Management. Springer.
  • Mock, R., & Wright, L. (2015). Public Sector Budgeting: Politics, Process, and Economics. Routledge.
  • Bruce, N. (2019). Budgeting, Financial Reporting, and Auditing for Local Governments. Routledge.

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