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Governmental accounting CH 3

Terms in this set (7)

Budgetary accounting
In most state and local governments, there are five types of budgetary journal entries:
1. To record the budget;
2. To record changes to the budget;
3. To record encumbrances— the placing of purchase orders or contracts;
4. To reverse the encumbrance entry when items ordered are received; and
5. To close budget entries at year end.
1. Record the adopted budget
Estimated revenues—property taxes . . 500K
Appropriations—police personal................................450K
Appropriations police-other
than personal..........................................................................40K
Budgetary fund balance . . . . ............................... . . . . 10K
1. Record the adopted budget (cont..)
Use of existing fund balance to cover revenue shortfall

Estimated revenues—
property taxes . ............. . 480K.
Budgetary fund balance.. 10K
............................Appropriations—police
............................personal services ........ . . 450K
...........................Appropriations—police other-than-
.............................personal services . . . ....... 40K
2. Recording Budgetary Interchanges and Other Revision
A budgetary interchange will authorize the department to spend an additional $8,000 for salaries and simultaneously reduce the spending
authorization for other‑than‑personal services.

Appropriations—police other-than-personal services. . . . .8,000
Appropriations—police personal services . . . . . . . . . .. . . . . . 8,000
To record budgetary interchange.
2. Recording Budgetary Interchanges and Other Revision (cont...)
if the police department were unable to finance its additional salary needs by reducing one of its other appropriations, the City might need to make a budgetary revision

Budgetary fund balance . . . . . 8,000
Appropriations—police personal . . . . . . . . . . 8,000
3. Encumbrances
The other basic element of budgetary accounting involves recording encumbrances against the
amounts available for appropriation. Encumbrances reduce the amounts available for appropriation for items ordered but not yet received. 4 JE's The first entry encumbers the appropriation for the cost of an order placed with a supplier, a second records the liability for the purchase, and a third records payment of the liability.

Encumbrances . . . . . 1,000
Budgetary fund balance reserved for encumbrances ............ . 1,000
To record encumbrance for purchase order.

Budgetary fund balance reserved for encumbrances. .1,000
Encumbrances . . . . . . . . . . . . . . .................................................... . . . 1,000
To reverse encumbrances.

Expenditures. . . . . . . . 1,000
Vouchers payable (or Cash) . . . . . . . . . . . 1,000
To record expenditure for purchased materials.

Salaries generally are not encumbered because budgetary control is maintained through a separate "vacancy control" procedure, whereby all the positions covered by the budget are listed
Recording Differences between Purchase Order and
Invoice
If the amount of the invoice differs from the amount of the purchase order and the amount billed is acceptable to the department, the expenditure obviously will be either greater or smaller than the amount encumbered when the order was placed. The key thing to remember is that the journal entry to reverse the encumbrance must be in the same amount as the amount originally encumbered.

Budgetary fund balance reserved for encumbrances. . . .1,000
Encumbrances . . . . . . . . . . . . . . ................................................... . . . . . . 1,000
To reverse encumbrances.

Expenditures. . . . . . . . . . 1,050
Vouchers payable (or Cash ) . . . . . . 1,050
To record expenditure for purchased materials.
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