Professional Documents
Culture Documents
CHAPTER 18
GOVERNMENTAL ENTITIES: SPECIAL FUNDS AND
GOVERNMENT-WIDE FINANCIAL STATEMENTS
ANSWERS TO QUESTIONS
Q18-1 A governmental entity would use a special revenue fund rather than a
general fund when the resources earmarked for the fund, such as federal or state
government grants or special tax levies, are restricted for specific purposes.
Q18-2 Operating budgets are prepared for the general fund, special revenue funds,
and debt service fund. Capital budgets are prepared for the capital projects fund.
Q18-3 Interest on long-term debt is accounted for in the debt service fund for only
the interest that is due and legally payable as an expenditure. Interest is not accrued
on the outstanding balance of the long-term debt.
Q18-4 The major differences between a special revenue fund and an enterprise
fund are
Special Revenue
Fund
Enterprise
Fund
Measurement focus
Economic resources
Accounting basis
Modified accrual
Accrual
Budgetary basis
Operating budget
None required
Long-term assets
No
Yes
Long-term debt
No
Yes
Encumbrances
Yes
No
Financial statements
Governmental type
Commercial type
Q18-5 The basis of accounting used in the proprietary funds is the accrual basis
because the focus of the governmental entity is on capital maintenance and income
determination rather than budgetary spending authority.
Q18-6 The financial statements that must be prepared for the governmental funds
are the balance sheet and the statement of revenues, expenditures, and changes in
fund balances. The financial statements that must be prepared for the enterprise
funds are the statement of net assets, the statement of revenues, expenses, and
changes in fund net assets, and the statement of cash flows.
18-1
Q18-7 Proceeds from a bond issue are accounted for as an other financing source
in the fund that issued the bonds. However, some governments have a policy that the
capital projects fund may not keep any bond premium, in which case the bond
premium is typically transferred to a debt service fund. Other financing sources and
uses are reported separately below operations, but above special items, on the
governmental funds statement of revenues, expenditures, and changes in fund
balance.
Q18-8 A permanent fund is a governmental fund for which the principal is
maintained, but the income in the fund can be used by the government for its
programs that benefit all of its citizens. The basis of accounting in permanent funds is
the modified accrual method. Private-purpose trust funds are established to benefit
specific individuals or organizations, as specified by the donor. These private-purpose
trust funds may have an expendable principal, or the principal may be nonexpendable. The accrual basis of accounting is used for private-purpose funds. Thus,
a major difference between these funds is the specificity of who the beneficiaries of
the fund are.
Q18-9 GASB 34 specifies that only governmental and enterprise funds determined
to be major funds need to be separately disclosed in their own columns in the fund
financial statements. There are two tests to determine which individual governmental
and enterprise funds are considered major if they meet both tests. First, the general
fund is always considered a major fund. The first test is total assets, liabilities,
revenues, or expenditures/expenses of that individual fund are at least 10 percent or
more of the governmental or enterprise category. The second test is that total assets,
liabilities, revenues, or expenditures/expenses of the individual governmental or
enterprise fund are at least 5 percent of the total for all governmental and enterprise
funds combined. Any individual funds that are not considered major are aggregated
and presented in a single column. Management may, at any time, separately disclose
even those non-major funds for which they feel the additional disclosure will provide
information valuable to the readers of the financial statements.
Q18-10 Because the measurement focus of the governmental funds is on current
financial resources, revenue would be recognized in the governmental funds only if
the donated items are available to finance expenditures of the current period, For
example, donated land would be included in contribution revenue of a governmental
fund if the land was sold, or the government has entered into a contract to sell the
land, and that the proceeds from the sale will be available to finance expenditures of
the current period. However, a donation to a governmental fund, in the form of
financial resources or capital assets, that has a restriction imposed by the donor
which makes the donation unavailable to finance current expenditures, is not
included in the governmental funds financial statements. Of course, on the
government-wide statement of activities, all donations would be shown, at fair value
on a separate line below general revenues. Specifically, endowment and permanent
fund principal donations are reported below general revenues and above special and
extraordinary items.
On the governmental funds financial statements, special and extraordinary items
are reported below operations, but above the net change in fund balance line, in the
statement of revenues, expenditures, and changes in fund balance. Special items are
those significant transactions within the control of management that are either
unusual in nature or infrequent in occurrence. Extraordinary items are transactions or
events that are both unusual and infrequent in occurrence.
Q18-11 Agency funds must be self-balancing with assets equalling liabilities.
Therefore, agency funds do not have a net fund balance.
18-2
Q18-12 Component units are separate government entities for which the primary
government is financially accountable. The financial presentation of these component
units is dependent on the separability from the primary government. If the component
unit is virtually inseparable, then the component units financial information is blended
into the primary governments financial statements. However, if the component unit is
distinguishable, and has its own taxing authority, then the component units financial
information is presented in a separate column in the government-wide financial
statements.
Q18-13 Two reconciliation schedules are required by GASB 34. The first reconciles
the fund balances reported in the governmental funds to the net assets of
governmental activities reported on the government-wide financial statements. For
example, internal service funds are not a governmental fund, but the accounts for
internal service funds are blended into the governmental activities that are reported
on the government-wide financial statements. The second reconciliation schedule
reconciles the net change in fund balances reported in the governmental funds
statements to the change in net assets reported in the government-wide financial
statements. These two reconciliation schedules are required by GASB 34 to be
presented either on the face of the fund financial statements or in a separate
schedule immediately following the fund financial statements.
Q18-14 The budgetary comparison schedule reports, for the general fund and any
other governmental fund that has a legally adopted budget, the initially approved
budget, the final budget of the year, and the actual amounts, for each line item in the
statement of revenues, expenditures, and changes in fund balance. A variance
column may also be used to compare the actual against the final budget. This
budgetary comparison schedule is part of the required supplementary information
(RSI) required by GASB 34. GASB 41 amended GASB 34 for those governments
that do not use the general fund and special revenue fund structure specified in
GASB 34 for their budgetary purposes. GASB 41 specified that those governments
with significant perspective differences should provide a budgetary comparison
schedule in the RSI based on the structure the government used for its legally
adopted budget.
Q18-15 The government-wide financial statements present the infrastructure assets,
such as roads, bridges, tunnels, sewer and water systems, etc., and other long-term
assets of the government entity, such as buildings, equipment, vehicles, etc. The
capital assets should be reported at historical cost or fair value at the time of
donation, if donated. Because the basis of accounting for the government-wide
financial statements is the accrual method, depreciation is recorded on the other
long-term assets and these are reported net of depreciation. For infrastructure assets,
the governmental entity may elect to use a modified approach in which depreciation is
not recorded. The modified approach requires an assessment of the current condition
of the infrastructure assets and an estimate of the annual amount required to
maintain and preserve the infrastructure assets. In addition, the government-wide
financial statements present the general long-term debt obligations of the
governmental entity at the present value of the debt principal and future interest, just
as computed under the accrual basis of accounting that is used for commercial
entities.
18-3
SOLUTIONS TO CASES
C18-1 Basis of Accounting and Reporting Issues
a. In the accrual basis of accounting, revenue should be recognized in the
accounting period in which it is earned and becomes measurable.
In the modified accrual basis of accounting, revenue should be recognized in the
accounting period in which it becomes both measurable and available to finance
expenditures of the fiscal period. "Available" means collectible within the current
period or soon enough thereafter to be used to pay current period liabilities.
b. For the general fund, the modified accrual basis of accounting should be used
because it is a governmental fund, which is, in essence, an accounting segregation of
financial resources.
For the special revenue fund, the modified accrual basis of accounting should be
used because it is a governmental fund, which is, in essence, an accounting
segregation of financial resources.
For the enterprise fund, the accrual basis of accounting should be used because it is
a proprietary fund, with activities similar to those in the commercial, profit-seeking
sector.
18-4
18-5
2.
3.
The Comptroller General of the United States heads the General Accountability
Office (GAO) who is the auditor for the U.S. government. For several years, the
Comptroller General has disclaimed an opinion on the consolidated financial
statements because of the material deficiencies in the governments systems,
recordkeeping, documentation, and financial reporting.
The material
deficiencies are listed in the auditors report.
4.
The following five statements are presented: (1) Statements of Net Cost,
(2) Statements of Operations and Changes in Net Position, (3) Reconciliations
of Net Operating Revenue (Cost) to the Budget Surplus (unaudited), (4)
Dispositions of the Budget Surplus (unaudited), and (5) Balance Sheets.
5.
The Statements of Net Cost present the costs and revenue for the major
departments, agencies, commissions, and other units of the federal
government.
6.
7.
8.
The Dispositions of the Budget Surplus presents the changes in assets and
liabilities during the years reported.
9.
The Balance Sheets present the assets, by major type, the liabilities, by major
type, and reconciles to the net position of the U.S. government.
10.
Major footnotes include a stewardship report on the resources held by the U.S.
government, and a large number of notes to the financial statements that report
on specific items related to agencies, commissions, and other entities within
the federal government.
18-6
18-7
C18-4 (continued)
h. The purpose of this question is for students to become acquainted with the balance
sheet equation for the governmental funds: Assets = Liabilities + Fund Balance. Another
goal for this question is for students to see that fund balance is separated into two
components: (1) reserved and (2) unreserved.
i. The purpose behind questions i - l is to help students understand the format of the
statement of revenues, expenditures, and changes in fund balance. The first section
deals with revenues, which are reported according to source. Students will discover that
taxes are generally not the only source of revenue.
j. The objective of this question is to get students to understand how governments report
expenditures. Students may expect governments to report expenditures by object;
however, expenditures are not reported this way on the statement of revenues,
expenditures, and changes in fund balance.
k. The purpose of this question is to have students examine the items reported in other
financing sources and uses. This should reinforce what they learn in the text when they
read the section dealing with interfund transfers.
l. This question covers the last items reported on the statement of revenues,
expenditures, and changes in fund balance: special items, the change in fund balance for
the year, and the ending fund balance at the end of the most recent year. Students
should not expect to see any special items since their occurrence is rare. However,
students should see the change in fund balance for the year being added to the
beginning fund balance to produce ending fund balance.
18-8
18-9
SOLUTIONS TO EXERCISES
E18-1 Multiple-Choice Questions on Government Financial Reporting
1. a
2. d
3. b
4. a
5. a
6. b
7. a
8. c
9. c
10. a
(answers b, c, and d each include a fiduciary fund which is not a major fund)
11. d
12. c
18-10
18-11
The additions - investment earnings include the $50,000 of dividends and the
$35,000 of interest earned. The contribution is reported as an addition contributions.
2.
The entries in the trust fund to record the resources spent would appear as
follows:
3.
4.
Deductions - Benefits
Vouchers Payable
75,000
Vouchers Payable
Cash
75,000
75,000
75,000
5.
$100,000
(45,000)
(40,000)
(5,000)
$ 10,000
$ 96,000
7,000
610,000
$713,000
6.
7.
8.
The net assets would be for the $600,000 transfer in plus the $10,000 of
income for the period.
18-12
6. d
7. c
8. d
18-13
18-14
50,000
50,000
156,000
150,000
6,000
6,000
6,000
182,000
182,000
182,000
182,000
189,000
189,000
5,500
5,500
189,000
5.500
194,500
50,000
150,000
6,000
206,000
E18-6 (continued)
Fund Balance Unreserved
Expenditures
Other Financing Uses Transfer
Out to Debt Service Fund
4. Transfer of ending balance and close transfer account:
Other Financing Uses Transfer
Out to Debt Service Fund
Cash
Record transfer of remainder to Debt Service.
Fund Balance Unreserved
Other Financing Uses Transfer
Out to Debt Service Fund
Close transfer out against unreserved
fund balance.
200,500
194,500
6,000
5,500
5,500
5,500
5,500
b.
City of Waterman
Capital Projects Fund
Statement of Revenues, Expenditures,
and Changes in Fund Balance
For Fiscal Year Ended December 31, 20X2
Revenue:
County Grant
Expenditures:
Capital Outlay
Deficiency due to excess of Expenditures over
Revenue
Other Financing Sources (Uses):
Proceeds of Bond Issue
Transfer Out to Debt Service Fund--Premium
Transfer Out to Debt Service Fund--Remainder
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance, January 1, 20X2
Fund Balance, December 31, 20X2
18-15
$ 50,000
194,500
$(144,500)
$156,000
(6,000)
(5,500)
144,500
-0-0$
-0-
2.
3.
35,000
40,000
Cash
Property Taxes Receivable
Record tax collections.
35,000
5,000
34,000
6,000
4,000
36,000
35,000
5,000
4,000
Cash
Other Financing Sources Transfer
in from Capital Projects Fund
Receive bond premium.
6,000
5,000
1,000
3,000
6,000
Expenditures
Matured Bonds Payable ($150,000 x 1/10 due)
Matured Interest Payable ($150,000 x .10
interest)
Record matured principal and interest.
30,000
15,000
15,000
15,000
15,000
30,000
Expenditures
Vouchers Payable
Record other expenditures.
1,700
Vouchers Payable
Cash
Pay approved vouchers.
1,200
1,700
1,200
18-16
E18-7 (continued)
4.
5.
b.
Cash
Other Financing Sources Transfer
In From Capital Projects Fund
Record transfer of unspent funds in
capital projects fund to debt service fund.
5,500
5,500
APPROPRIATIONS CONTROL
BUDGETARY FUND BALANCE
ESTIMATED REVENUES CONTROL
ESTIMATED OTHER FINANCING
SOURCES TRANSFER IN
Close budgetary accounts.
34,000
6,000
39,000
35,000
5,000
11,500
18,800
31,700
City of Waterman
Debt Service Fund
Balance Sheet
December 31, 20X2
Assets:
Cash
Property Tax Receivables (net)
Total Assets
Liabilities:
Vouchers Payable
Fund Balance:
Reserved for Debt Service
Total Liabilities and Fund Balance
c.
City of Waterman
Debt Service Fund
Statement of Revenues, Expenditures,
and Changes in Fund Balance
For Fiscal Year Ended December 31, 20X2
Revenue:
Property Taxes
Expenditures:
Principal Retirement
Interest
Miscellaneous
Total Expenditures
Excess of Revenue over Expenditures
Other Financing Sources (Uses):
Transfers In From Capital Projects Fund
Net Change in Fund Balance
Fund Balance, January 1, 20X2
Fund Balance, December 31, 20X2
18-17
$15,300
4,000
$19,300
$
500
18,800
$19,300
$39,000
$15,000
15,000
1,700
31,700
$ 7,300
11,500
$18,800
-0$18,800
2.
3.
4.
5.
Accounts Receivable
Revenue
Record charges to customers.
420,000
Cash
Accounts Receivable
Record collections on account.
432,000
Cash
Due to General Fund
Receive loan from general fund.
30,000
75,000
Contracts Payable
Cash
Record payment for extended lines.
75,000
420,000
432,000
30,000
75,000
75,000
Inventory of Supplies
Operating Expenses
Interest Expense
Due to Central Stores Fund
Vouchers Payable
Interest Payable
Record expenses.
12,400
328,000
30,000
12,400
325,000
30,000
Revenue
Allowance for Uncollectibles
Reduce revenue for uncollectible accounts.
12,400
328,000
30,000
367,400
6,300
6,300
Depreciation Expense
Accumulated Depreciation
Adjust for depreciation for period.
32,000
Supplies Expense
Inventory of Supplies
Adjust for supplies on hand.
15,200
18-18
32,000
15,200
E18-8 (continued)
Closing entries:
Revenue
Operating Expenses
Interest Expense
Depreciation Expense
Supplies Expense
Profit and Loss Summary
Close nominal accounts.
413,700
328,000
30,000
32,000
15,200
8,500
b.
8,500
8,500
43,000
43,000
Augusta
MUD Enterprise Fund
Statement of Net Assets
December 31, 20X1
Assets:
Cash
Accounts Receivable
Less: Allowance for Uncollectibles
Inventory of Supplies
Land
Plant and Equipment
Less: Accumulated Depreciation
Total Assets
$111,600
$ 13,000
(6,300)
$555,000
(112,000)
6,700
5,200
120,000
443,000
$686,500
Liabilities:
Vouchers Payable
Due to General Fund
Bonds Payable, 6%
Total Liabilities
$ 18,000
30,000
500,000
$548,000
Net Assets:
Invested in Capital Assets, net of Related Debt
Unrestricted
Total Net Assets
$ 63,000
75,500
$138,500
18-19
E18-8 (continued)
c.
Augusta
MUD Enterprise Fund
Statement of Revenue, Expenses, and
Changes in Fund Net Assets
For Fiscal Year Ended December 31, 20X1
Revenue:
Revenue from Services
Expenses:
Operating
Depreciation
Supplies
Operating Income
Nonoperating Expense:
Less: Interest on Capital-Related Debt
Change in Net Assets
Net Assets, January 1
Net Assets, December 31
$413,700
$328,000
32,000
15,200
18-20
375,200
$ 38,500
30,000
$ 8,500
130,000
$138,500
E18-8 (continued)
d.
Augusta
MUD Enterprise Fund
Statement of Cash Flows
For the Year Ended December 31, 20X1
Cash Flows from Operating Activities:
Cash Received from Customers
Cash Payments for Goods and Services
Cash Paid to Internal Service Fund for Supplies
Net Cash Provided by Operating Activities
Cash Flows from Noncapital Financing Activities:
Cash Received from General Fund for Noncapital Loan
Net Cash Provided by Noncapital
Financing Activities
Cash Flows from Capital and Related Financing
Activities:
Interest on Capital-Related Debt
Extension of Service Lines
Net Cash Used for Capital and
Related Financing Activities
$ 432,000
(325,000)
(12,400)
$ 94,600
$ 30,000
30,000
$(30,000)
(75,000)
(105,000)
-0-
$ 19,600
92,000
$111,600
$ 38,500
$ 32,000
2,800
18,300
3,000
56,100
$ 94,600
[Note that interest paid on capital-related debt is reported in cash flows from capital
and related financing activities and not in the operating activities.]
18-21
a.
b.
2.
3.
a.
b.
a.
b.
4.
a.
b.
12,000
12,000
12,000
12,000
8,000
8,000
2,400
2,400
2,400
2,400
825
825
825
825
825
825
18-22
E18-9 (continued)
Other Fund
1.
b.
2.
12,000
12,000
12,000
8,000
8,000
b.
4.
12,000
3.
2,400
2,400
2,400
2,400
b.
825
825
825
825
18-23
825
825
2.
Inventory of Supplies
Furniture and Equipment
Vouchers Payable
Record acquisitions of supplies,
furniture, and office equipment.
96,000
4,700
100,700
292,000
Cash
Due from Other Funds
Record collections on billings.
287,300
204,000
38,000
Depreciation Expense
Accumulated Depreciation
Record depreciation for period.
Vouchers Payable
Cash
Pay approved vouchers.
292,000
287,300
92,400
149,600
23,000
23,000
243,000
243,000
Closing entries:
Billings to Departments
Costs of Printing Jobs
Operating Expenses
Depreciation Expense
Profit and Loss Summary
Close nominal accounts.
Profit and Loss Summary
Net Assets Unrestricted
Close profit and loss summary.
Net Assets Invested in Capital Assets,
Net of Related Debt
Net Assets - Unrestricted
Reclassify net assets as of end of period:
$18,300 = (ending balance of $191,700 net
capital assets less $0 related debt ) less
$210,000 beginning balance in net assets invested.
18-24
292,000
204,000
38,000
23,000
27,000
27,000
27,000
18,300
18,300
E18-10 (continued)
b.
Bellevue
Printing Shop Fund
Statement of Net Assets
December 31, 20X2
Assets:
Cash
Due from Other Funds
Inventory of Supplies
Furniture and Equipment
Less: Accumulated Depreciation
Total Assets
$ 68,900
20,300
13,400
$264,700
(73,000)
191,700
$294,300
Liabilities:
Vouchers Payable
Total Liabilities
$ 19,300
$ 19,300
Net Assets:
Invested in Capital Assets, Net of Related Debt
Unrestricted
Total Net Assets
$191,700
83,300
$275,000
c.
Bellevue
Printing Shop Fund
Statement of Revenue, Expenses, and
Changes in Fund Net Assets
For Fiscal Year Ended December 31, 20X2
Revenue:
Billings to Departments
Expenses:
Costs of Printing Jobs
Operating
Depreciation
Income
Net Assets, January 1
Net Assets, December 31
$292,000
$204,000
38,000
23,000
18-25
265,000
$ 27,000
248,000
$275,000
E18-10 (continued)
d.
Bellevue City
Internal Service Fund Printing Shop
Statement of Cash Flows
For the Year Ended December 31, 20X2
Cash Flows from Operating Activities:
Cash Received from Customers
Cash Payments for Printing Jobs
Net Cash Provided by Operating Activities
$ 287,300
(238,300)
$49,000
-0-
$ (4,700)
(4,700)
-0-
$44,300
24,600
$68,900
$27,000
18-26
$ 23,000
(4,700)
(3,600)
7,300
22,000
$49,000
($1,450,000 - $120,000)
2.
3.
4.
For the amount of the bond issue proceeds. Note that no repayments
of debt were made during the year.
5.
6.
7.
8.
9.
10.
18-27
SOLUTIONS TO PROBLEMS
P18-12 Adjusting Entries for General Fund [AICPA Adapted]
Adjusting entries to correct the general fund:
1.
No entry required.
2.
Expenditures
Buildings
Correct for state grant
expended for buildings.
300,000
300,000
Expenditures
Capital Outlays (equipment)
Correct for expenditures
for playground equipment.
3.
22,000
22,000
Bonds Payable
Buildings
Correct for bonds used
to construct buildings.
1,000,000
1,000,000
5.
130,000
130,000
ENCUMBRANCES
BUDGETARY FUND BALANCE RESERVED
FOR ENCUMBRANCES
Correct for unrecorded encumbrances.
2,800
Expenditures
Inventory of Supplies
Correct for supplies used in period.
4,950
6,500
18-28
2,800
4,950
6,500
2.
3.
Journal Entries
General
Fund
394,000
6,000
General
Fund
382,200
7,800
PrivatePurpose
Trust Fund
Investments
Contributions
50,000
50,000
Cash
Additions Interest
4.
5.
6.
General
390,000
Internal
Service
Fund
Cash
Transfer In from General Fund
Capital
Projects
Cash
Other Financing Sources Bond Issue
5,500
5,500
5,000
5,000
5,000
5,000
72,000
72,000
3,000
Debt
Service
Fund
24,000
General
3,000
24,000
3,000
3,000
General
Fund
3,000
Capital
Projects
Fund
Cash
Due from General Fund
3,000
Debt
Service
Fund
Cash
Special Assessments Receivable
18-29
3,000
3,000
24,000
24,000
P18-13 (continued)
Fund
7.
8.
9.
Capital
Projects
Fund
Journal Entries
ENCUMBRANCES
75,000
BUDGETARY FUND BALANCE RESERVED
FOR ENCUMBRANCES
75,000
75,000
Expenditures
Contracts Payable
75,000
Contracts Payable
Cash
75,000
11.
75,000
75,000
Internal
Service
Fund
Inventory of Supplies
Cash (or Vouchers Payable)
General
Fund
Cash
Taxes Receivable Current
Revenue Licenses and Fees
Allowance for Uncollectibles Current
Revenue Taxes
Estimate
$7,800
Actual
(4,000)
Correction
$3,800
10.
75,000
Capital
Projects
Fund
Cash
Other Financing Sources Bond Issue
General
Fund
1,900
1,900
393,000
386,000
7,000
3,800
3,800
500,000
500,000
15,000
15,000
15,000
15,000
18-30
General Fund
Adjusting entries:
1.
2.
3.
4.
5.
6.
2,200
2,200
27,000
27,000
8,800
Expenditures 20X0
Other Expenditures
Reclassify purchases of supplies
chargeable to prior year's appropriations.
Excess of $600 actual cost over estimate
is approved and charged to current year
expenditures.
8,800
ENCUMBRANCES
BUDGETARY FUND BALANCE RESERVED
FOR ENCUMBRANCES
Record encumbering of appropriations for
purchase orders outstanding on June 30, 20X1.
2,100
18-31
8,800
8,800
2,100
100,000
100,000
21,000
20,000
1,000
P18-14 (continued)
Closing entries:
APPROPRIATIONS CONTROL
ESTIMATED REVENUES CONTROL
BUDGETARY FUND BALANCE
UNRESERVED
BUDGETARY FUND BALANCE RESERVED
FOR ENCUMBRANCES
ENCUMBRANCES
310,000
38,000
2,100
2,100
2,100
Revenue
Fund Balance Unreserved
Other Expenditures
Expenditures Building Addition Constructed
Expenditures Serial Bonds Paid
306,000
31,200
348,000
2,100
271,200
50,000
16,000
8,800
8,800
18-32
100,000
100,000
1,000
1,000
Journal entries:
1.
CPF Cash
5,080,000
Other Financing Sources Bond Issue
Other Financing Sources Bond Premium
Other Financing Uses Transfer
Out to Debt Service Fund
Cash
2.
5,000,000
80,000
80,000
80,000
DSF Cash
Other Financing Sources Transfer
In from Capital Projects Fund
80,000
CPF Expenditures
Vouchers Payable
45,000
80,000
45,000
Vouchers Payable
Cash
45,000
45,000
4.
CPF ENCUMBRANCES
4,500,000
BUDGETARY FUND BALANCE RESERVED
FOR ENCUMBRANCES
4,500,000
2,000,000
Expenditures
Contracts Payable
Contracts Payable Retained
Percentage
CPF Contracts Payable
Cash
2,000,000
1,800,000
200,000
1,800,000
1,800,000
18-33
5,000,000
80,000
2,045,000
80,000
2,955,000
2,500,000
2,500,000
P18-15 (continued)
Fund Balance Unreserved
Fund Balance Reserved
for Encumbrances
b.
2,500,000
2,500,000
West City
Capital Projects Fund
Balance Sheet
June 30, 20X3
Assets
Cash
Total Assets
$ 3,155,000
$ 3,155,000
$
$2,500,000
455,000
200,000
2,955,000
$ 3,155,000
West City
Capital Projects Fund
Statement of Revenues, Expenditures,
and Changes in Fund Balance
For Fiscal Year Ended June 30, 20X3
Expenditures:
Capital Outlays:
Building Removal
Building Construction
Total Expenditures
Deficiency of Revenues over Expenditures
Other Financing Sources (Uses):
Proceeds of Serial Bonds
Transfer Out to Debt Service Fund
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balance, July 1, 20X2
Fund Balance, June 30, 20X3
18-34
45,000
2,000,000
$ 2,045,000
$(2,045,000)
5,080,000
(80,000)
$ 5,000,000
$ 2,955,000
-0$ 2,955,000
800,000
ENCUMBRANCES
BUDGETARY FUND BALANCE RESERVED
FOR ENCUMBRANCES
Contractors bid is accepted.
750,000
800,000
750,000
250,000
250,000
246,000
246,000
112,000
Cash
Revenues
Collected hotel room taxes.
109,000
Expenditures
Vouchers Payable
Incurred expenditures for general promotion
and motor vehicle.
103,000
Vouchers Payable
Cash
Paid expenditures.
103,000
108,000
4,000
109,000
103,000
103,000
18-35
P18-16 (continued)
3.
313,500
313,500
4.
313,500
Expenditures Interest
Matured Interest Payable
Record interest legally due and payable.
13,500
Expenditures Principal
Matured Bonds Payable
Record principal legally due and payable.
300,000
300,000
13,500
13,500
300,000
313,500
5.
313,500
83,000
83,000
83,000
83,000
18-36
3,000
3,000
2.
3.
4.
5.
6.
7.
8.
9.
10.
18-37
2. $17,000
3. $125,000
4. $236,000
5. $6,000
6. $104,500
7. $386,000
8. $100,000
9. $181,000
10. $190,000
18-38
P18-19
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
18-39
P18-20
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
18-40
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
B and J
12.
F and J
13.
C and J
14.
15.
B and J
16.
G and J
17.
18.
19.
I and J
20.
H and J
b.
18-41
Assets
$2,112,400
Liabilities
$951,300
Revenues
$5,790,000
2.00%
3.99%
1.68%
0.00%
0.00%
5.65%
7.94%
0.71%
5.72%
0.19%
Assets
$3,996,000
Liabilities
$2,900,700
Revenues
$618,000
66.07%*
33.93%*
62.08%*
37.92%*
46.76%*
53.24%*
18-42
Expenditures
$5,659,800
5.80%
7.39%
0.99%
5.12%
0.32%
Expenses
$543,000
45.12%*
54.88%*
P18-22 (continued)
Step 2: 5 percent criterion tests
The 5 percent criterion test is applied only to those funds that met the 10 percent criterion
test.
(For each of the four 5 percent tests, the denominator is the combined amount of that
item
from the governmental funds plus the enterprise funds.)
Computation of denominators for 5 percent governmental and enterprise fund types:
Expenditures/
Assets
Revenues
Expenses
Liabilities
Governmental fund types
$2,112,400
$ 951,300 $5,790,000
$5,659,800
Enterprise fund types
3,996,000
2,900,700
618,000
543,000
Combined
$6,108,400
$3,852,000 $6,408,000
$6,202,800
5 percent criterion tests:
Assets
Liabilities
Revenues
Expenditures/
Expenses
$6,108,400
$3,852,000
$6,408,000
$6,202,800
0.99%
0.00%
7.18%**
0.17%
6.74%**
0.29%
46.75%**
28.56%**
4.51%
5.13%**
3.95%
4.80%
7.37%(a)**
4.03%
43.22%**
22.20%**
(a)
18-43
18-44
$ 888,400
4,311,000
37,000
(460,000)
(5,000)
$4,771,400
P18-23 (continued)
b. Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund
Balances of Governmental Funds to the Statement of Activities:
City of Sycamore
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund
Balances of Governmental Funds to the Statement of Activities
Net change in fund balances governmental funds
Governmental funds report capital outlays as expenditures. However, in
the statement of activities, the costs of those assets is capitalized and
depreciated over their estimated useful lives. This is the amount by which
capital outlays in the governmental funds ($287,000) exceeded
depreciation of the governmental assets ($187,000)
Bond proceeds provide current financial resources for the governmental
funds. However, the issuance of debt increases long-term liabilities in the
statement of net assets. Bond proceeds of $460,000 are not reduced
because there is no repayment of principal during the year.
Revenues and expenses in the statement of activities are recorded on the
accrual basis. Interest in the governmental funds is recorded on the
modified accrual basis. Accrual interest revenue exceeded modified
accrual interest revenue recognized in the governmental funds by $1,000.
Accrual interest expense exceeded modified accrual interest expense
by $6,000 ($46,000 - $40,000). The net interest adjustment is $5,000.
Internal service funds are used by management to charge the costs of
certain services. The net revenue (expense) of the internal service
funds is reported with governmental activities.
Change in net assets of governmental activities
18-45
$509,400
100,000
(460,000)
(5,000)
9,000
$153,400
The budgetary comparison schedule requires both the initial budget and the
final budget.
2.
3.
4.
5.
The tests for a major governmental, or enterprise fund, for which separate
disclosure is required in the government-wide financial statements are: (a)
total assets, liabilities, revenues, or expenditures/expenses of that individual
governmental or enterprise fund are at least 10 percent or more of the
governmental or enterprise category, and (b) total assets, liabilities,
revenues, or expenditures/expenses of the individual governmental or
enterprise fund are at least 5 percent of the total for all governmental and
enterprise funds combined.
6.
7.
8.
9.
10.
11.
12.
13.
14.
Fiduciary funds are not part of the government-wide statement of net assets,
but would be separately reported in the fiduciary funds section of the fundbased financial statements.
15.
The internal service fund is blended into the governmental activities columns
of the government-wide financial statement of net assets and statement of
activities.
In the reconciliation schedule for the statement of revenues, expenditures,
and changes in fund balances, bond proceeds would be subtracted because
they were included as other financing sources in the governmental funds, but
are an addition to liabilities in the government-wide financial statements.
18-46
2.
4.
Items Tested
Liabilities
(5% test met)
Expenditures/expenses
(5% test met)
Totals for
Governmental and
Enterprise Funds
$37,000,000
Amount reported
by Special
Revenue Fund
$3,900,000 (10.5%)
82,000,000
6,500,000 ( 7.9%)
Conclusion:
The special revenue fund should be reported as a major fund on the financial
statements of the governmental funds for 20X2 because both its expenditures and
liabilities met the 10% and the 5% tests.
18-47
Assets
Cash and cash equivalents
Taxes receivable (net)
Accounts receivable (net)
Internal balances
Inventories
Investments
Capital assets:
Land
Infrastructure
Other depreciable assets (net)
Total assets
Liabilities
Vouchers payable
Accrued interest payable
Revenue bonds payable
General obligation bonds payable
Total liabilities
Net assets
Invested in capital assets,
net of related debt
Restricted
Unrestricted
Total net assets
Governmental
Activities
Business-type
Activities
$ 68,000
52,000
$ 28,000
12,000
5,000
7,000
15,000
(5,000)
10,000
25,000
100,000
60,000
75,000
$385,000
$ 32,000
1,500
50,000
45,000
$162,000
$
4,000
2,000
80,000
Total
$ 96,000
52,000
12,000
17,000
40,000
150,000
60,000
120,000
$547,000
60,000
$ 93,500
$ 86,000
$ 36,000
3,500
80,000
60,000
$179,500
$175,000*
55,000
61,500***
$291,500
$ 15,000**
5,000
56,000***
$ 76,000
$190,000
60,000
117,500
$367,500
Computation notes:
*
$235,000 of capital assets (net) minus $60,000 of general obligation bonds equals
$175,000.
**
$95,000 of capital assets minus $80,000 of revenue bonds equals $15,000.
*** The unrestricted net assets amount is plugged in to make the total net assets equal
assets minus liabilities.
The internal balances amount of $5,000 is the amount that the governmental activities owe to
business-type activities.
18-48