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For the part 1 homework assignment, the starting equation is given along with the transactions. Assume the problem is for the general fund and that the budget entries are skipped. Put in the correct values for each transaction and be sure the correct values are placed under the right element - asset, liability or fund balance. Remember that fund balance covers revenues and expenditures. Use a negative sign or a set of parentheses () for outflows or decreases. Do not worry about or bother to include encumbrances. Consider or try the problem using a spreadsheet.
? are placed where the answers would go and the answers are given for the entire set of problems in part 1 via this answer button and the one at the end of part 1. In some case the first problem is solved in order to show the format.
In this first problem, the beginning equation is given for the general fund. The unit has assets of $7,000 and that is balanced by liabilities of $3,500 and fund balance of $3,500. The fund would appear to be in decent condition. What happens at the period transpires?
For subsequent equations (transactions), although three question marks (?) are presented, not all three need to be filled. Most if not all transaction require only two entries. Although filling in the equations is mechanical the transactions are determining the success and conditions of the fund.
Beginning equation and conditions:
A = L + FB
7000 3500 3500
1.a. The fund collects $5000 in sales tax.
A = L + FB
? ? ?
1.b. In accord with the authorization, the fund pays $4000
in salaries
A = L + FB
? ? ?
1.c The fund collects $10000 in property tax.
A = L + FB
? ? ?
1.d. The fund pays $2000 of the $3500 it owed as shown in the initial
equation.A = L + FB ? ? ?1.e. Using the proper authorization, the fund buys all its supplies for $2000 and will pay in 15 days.
A = L + FB
? ? ?
1.f. The bill for the supplies is paid. A = L + FB ? ? ?
1.g. Give the correct values for the ending equation
A = L + FB
? ? ?
1.h. Discuss
whether the fund is better or worse off financially than when
it started. In your discussion of why you think the fund is
better or worse off offer details drawn from the transactions.
Remember that the words financial success and conditions
are important to judging whether fund is better or worse off. Answers for part 1.
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Simple journal entries can be reviewed in lesson 1 of this chapter 5. Here is an example of the guided problem. Correctly fill in the missing element, i.e., whereever there is a ? put the answer in its place. In some cases an explanation is given for the answer.
The fund collects $10,000 in fees.
dr cr
cash ?
? ?
answer:
cash 10000
revenue - fees 10000
In this case the debit account is given, i.e., cash, but
it is necessary to fill in the debit amount, the credit account,
and the credit amount.For answers to Part 2 use this button.
Actual problem: Assume this is a special revenue fund with zeros in all the starting balances. The budget authorization is given below.
The legislature approves $500,000 in revenues with $300,000 coming from property tax and $200,000 from fees. Since this is a special revenue fund, both these revenues are earmarked for the fund. It also allows for spending of an amount equal to incoming revenue with $250,000 for salaries and $250,000 for supplies.
The following are all the decisions and transactions that require journalizing. This initial one is to enter the authorization into the budgetary accounts. One debit account is given but one is missing. The same for the credits. None of the amounts are given.
2.a.
dr cr
estimated revenue - property tax ?
? ?
appropriations - salaries ?
? ?
Hint: Notice that since estimated revenues equal appropriations there
is no fund balance or to be technically correct no
budgetary fund balance.
2.b.
The fund administrator accrues all the property tax.
dr cr
property tax receivable ?
revenue - property tax ?
2.c. The fund collects all the property tax. cash ? ? ?Hint: The asset cash is debited since cash is increased while the asset property tax receivable is credited since it is decreased, ie, it is no longer an asset -- the receivable was collected.
2.d. The fund manager invests $100,000 in a short term investment account that will pay $500 interest. short term investment ? ? $100,0002.e. The fund pays 1/2 of the salaries. salaries expenditure $125,000 cash ?2.f. The financial institution offering the short term investment to the fund notifies the fund manager that the investment has matured and that both the originial principal and interest were credited to the fund's cash account.
? $100,500 revenue- interest $500 ? ?Hint: The asset cash increases so it is debited. Any increase in fund balance merits a credit; thus since revneue - interest is part of fund balance it is credited since the revenue increased. The asset, short term investment, is now removed since the original cash was returned.
2.g. The fund collects all but 500 of the fees expected. dr cr cash ? revenue - fees $199,500Hint: The fund simply did not collect the entire 200000 in fees that it expected. Since the original was an estimate some variance is expected.
2.h. Fund managers order all supplies dr cr encumbrance - supplies ? ? $250,0002.i. The supplies arrive and the invoice (payable in 15 days) is for the exact amount encumbered. Assume that the supplies were paid for on time and before the end of the period. dr cr reserve for encumbrance ? ? $250,000 supplies expenditure $250,000 ? ? vouchers payable ? cash ?Hint: Recall that governments often go through a careful process to make sure that expenditures are properly approved and enough money is available to pay for those expenditures.
2.j. The other 1/2 of the salary expenditure is paid. ? $125,000 cash ?2.k. The preclosing trial balance shows: dr cr cash 0 investments 0 accounts payable 0 reserve for encumbrance 0 revenue- property tax 300000 revenue- fees 199500 revenue- interest 500 expenditures- salaries 250000 expenditures- supplies 250000 total ? ?2.l. Do a statement of revenues and expenditures -- actual and budget.The format for this budget v. actual statement can be reviewed by going to lesson 3 in chapter 2.
Statement of revenues and expenditures Special Revenue Fund for the period ended 12/31/x0 Actual Budget Variance ? ? ? ?Hint: Statement of revenues and expenditures Special Revenue Fund for the period ended 12/31/x0 Actual Budget Variance Revenue: negative or () unfavorable property tax fees interest total revenue Expenditures salary supplies total expenditures Excess(deficiency) of revenues over (under) expenditures 0 0 0This situation, were almost every actual is equal the budgeted in unlikely to occur in practice, but doing the statement provides practice with the format.
Complete the closing entries:Hint: Notice there is no fund balance since the budgetary and actual entries equalled each other on the inflow and outflow sides.dr cr Closing entries: revenue- property ? revenue- fees ? revenue- interest ? appropriations - salary ? ? ? expenditures - salaries ? ? ? est revenue - property tax 300000 ? ?
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Answers for part 2.
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Part 3. Explore computers for the accounting cycle
Do either of these assignments, A or B.Answers for part 3.
A) Assume you are part of a team that will add a vouchers payable package to the current software. Design what this module might look like considering these items: What items should go on the data entry screen and how should the data entry screen look? What database items should be included for vouchers payable? Give chart of account codes to three items. B) Contact a local government and find what software they use for their governmental accounting. Describe any one of the modules, the data entry screens, and the database items for that module. Also, what are the chart of account codes used for three of the items?Return to the menu for homework parts.Answers for part 3.
Answers to the Homework Questions
Answers to part 1. 1.a. The fund collects $5000 in sales tax. A = L + FB ? ? ? A = L + FB 5000 50001.b.In accord with the authorization, the fund pays $4000 in salaries A = L + FB ? ? ? -4000 -40001.cThe fund collects $10000 in property tax. A = L + FB ? ? ? 10000 100001.dThe fund pays $2000 of the $3500 it owed as shown in the initial equation. A = L + FB ? ? ? -2000 -20001.e Using the proper authorization, the fund buys all its supplies for $2000 and will pay in 15 days. A = L + FB ? ? 12000 -120001.f. The bill for the supplies is paid. A = L + FB ? ? -12000 -120001.g. Give the correct values for the ending equation A = L + FB ? ? ? 4000 1500 25001.h. Discuss whether the fund is better or worse off financially than when it started. In your discussion of why you think the fund is better or worse off offer details drawn from the transactions. Remember that the words financial {success} and {conditions} are important to judging whether fund is better or worse off.Answer: Since there is a positive fund balance in both the beginning and ending equation, the fund is in good condition at both points. The ratio of assets to liabilities can also be examined to make judgments about the two states of the fund. At the beginning the ratio of assets to liabilities was 2 Now is it 2.67 Thus, while all values, including fund balance, have fallen the fund has a better cushion of assets to liabilities. In addition the fund was able to pay 2000 of liabilities owed from last period with revenues collected this period suggesting that either its revenue situation was strong or current expenditures were cut. Which is the case may be revealed with further analysis. In general, conditions, or ability to pay debt, seem to be good by these various accounts. The analysis for sucess, that is, revenues over expenditures, gives a slightly different picture than those for conditions. In all, the fund collected 15000 in revenues and paid 16000 which suggests that something other than strong revenue collection produced the good financial conditions. In other words, the fund collected 1000 less in revenues than it laid out in expenditures. It seems, then that the good conditions are a carry over from the large amount of assets the fund had at the start of the cycle. Thus prudent administration would suggest that the fund take care in the future by balancing expenditures with revenues. Otherwise the lack of success in operations (more expenditures than revenue) will cause a deterioration in conditions (assets compared to liabilities).
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Actual problem: Assume this is a special revenue fund with zeros in all the starting balances. The budget authorization is given below.
The legislature approves $500,000 in revenues with $300,000 coming from property tax and $200,000 from fees. Since this is a special revenue fund, both these revenues are {earmarked} for the fund. It also allows for spending of an amount equal to incoming revenue with $250,000 for salaries and $250,000 for supplies.
The following are all the decisions and transactions that require journalizing. This initial one is to enter the authorization into the budgetary accounts. One debit account is given but one is missing. The same for the credits. None of the amounts are given.
2.a. dr cr estimated revenue - property tax ? ? ? appropriations - salaries ? ? ?answer: estimated revenue - property tax 300000 estimated revenue - fees 200000 appropriations - salaries 250000 appropriations - supplies 250000Notice that since estimated revenues equal appropriations there is no fund balance or to be technically correct no budgetary fund balance.
2.b. The fund administrator accrues all the property tax. property tax receivable ? revenue - property tax ?answer: property tax receivable 300000 revenue - property tax 3000002.c. The fund collects all the property tax. cash ? ? ?answer: cash 300000 property tax receivable 300000The asset cash is debited since cash is increased while the asset property tax receivable is credited since it is decreased, ie, it is no longer an asset -- the receivable was collected.
2.d. The fund manager invests $100,000 in a short term investment account that will pay $500 interest. short term investment ? ? $100,000answer: short term investment 100,000 cash 100,0002.e. The fund pays 1/2 of the salaries. salaries expenditure $125,000 cash ?answer: salaries expenditure 125000 cash 1250002.f. The financial institution offering the short term investment to the fund notifies the fund manager that the investment has matured and that both the originial principal and interest were credited to the funds cash account
? $100,500 revenue- interest $500 ? ?answer: cash 100500 revenue- interest 500 short term investment 100000The asset cash increases so it is debited. Any increase in fund balance merits a credit; thus since revneue - interest is part of fund balance it is credited since the revenue increased. The asset, short term investment, is now removed since the original cash was returned.
2.g. The fund collects all but 500 of the fees expected. cash ? revenue - fees $199,500answer: cash 199500 revenue - fees 199500The fund simply did not collect the entire 200000 in fees that it expected. Since the original was an estimate some variance is expected.
2.h. Fund managers order all supplies dr cr encumbrance - supplies ? ? $250,000answer: encumbrance - supplies 250000 reserve for encumbance 2500002.i. The supplies arrive and the invoice (payable in 15 days) is for the exact amount encumbered. Assume that the supplies were paid for on time and before the end of the period. dr cr reserve for encumbrance ? ? $250,000 supplies expenditure $250,000 ? ? vouchers payable ? cash ?answer: reserve for encumbrance 250000 encumbrance - supplies 250000 supplies expenditure 250000 vouchers payable 250000 vouchers payable 250000 cash 250000Recall that governments often go through a careful process to make sure that expenditures are properly approved and enough money is available to pay for those expenditures.
2.j. The other 1/2 of the salary expenditure is paid. ? $125,000 cash ?answer: salary expenditure 125000 cash 1250002.k. The preclosing trial balance shows: dr cr cash 0 investments 0 accounts payable 0 reserve for encumbrance 0 revenue- property tax 300000 revenue- fees 199500 revenue- interest 500 expenditures- salaries 250000 expenditures- supplies 250000 total ? ? Answer: 500000 5000002.l. Do a statement of revenues and expenditures -- actual and budget. The format for this budget v. actual statement can be reviewed by goint to lesson 3 in chapter 2.Statement of revenues and expenditures Special Revenue Fund for the period ended 12/31/x0 Actual Budget Variance ? ? ? ?answer: Statement of revenues and expenditures Special Revenue Fund for the period ended 12/31/x0 Actual Budget Variance Revenue: negative or () unfavorable property tax 300000 300000 0 fees 199500 200000 -500 interest 500 0 500 total revenue 500000 500000 0 Expenditures salary 250000 250000 0 supplies 250000 250000 0 total expenditures 500000 500000 0 Excess(deficiency) of revenues over (under) expenditures 0 0 0This situation, were almost every actual is equal the budgeted in unlikely to occur in practice, but doing the statement provides practice with the format.Complete the closing entries:
dr cr Closing entries: revenue- property ? revenue- fees ? revenue- interest ? appropriations - salary ? expenditures - salaries ? ? ? est revenue - property tax 300000 ? ?answers: dr cr Closing entries: revenue- property tax 300000 revenue- fees 199500 revenue- interest 500 appropriations - salary 250000 appropriations - supplies 250000 expenditures - salaries 250000 expenditures - supplies 250000 est revenue - property tax 300000 est revenues - fees 200000Notice there is no fund balance since the budgetary and actual entries equalled each other on the inflow and outflow sides.Return to part 2 of the homework.
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Answers for part 3.
under construction
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