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Solution Manual For Essentials of Accounting for Governmental and Not-for-Profit Organizations, 14th Edition

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    Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1-1 I NSTRUCTOR ’ S M ANUAL TO A CCOMPANY E SSENTIAL S OF A CCOUNTING FOR G OVERNMENTAL AND N OT - FOR - P ROFIT O RGANIZATIONS : 1 4 TH E DITION P REPARED BY : P AUL A. C OPLEY M ARY L ORETTA M ANKTELOW

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    Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1-2 C HAPTER 1 Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1 - 1. T HE SOLUTION TO THIS AND THE FIRST EXERCISE OF C HAPTERS 2 THROUGH 9 WILL DIFFER FROM STUDENT TO STUDENT ASSUMING EACH HAS A DIFFERENT CAFR. 1 - 2. 1) O RGANIZATIONAL P URPOSES : W HILE THE PURPOSE OF A COMMERCIAL BUSINESS IS TO GENERATE A PROFIT FOR THE BENEFIT OF ITS OWNERS , GOVERNMENTS EXIST FOR THE WELL BEING OF CITIZENS BY PROVIDING PUBLIC SERVICES – WHETHER OR NOT THE SERVICES ARE PROFITABLE UNDERTAKINGS . 2) S OURCES OF R EVENUES : G OVERNMENTS DERIVE MANY OF THEIR RESOURCES FROM TAXES . I NDIVIDUALS AND BUSINESSES PAY TAXES TO AVOID PENALTY , NOT VOLUNTARILY BECAUSE THEY PERCEIVE GOVERNMENT SERVICES TO BE OF VALUE AND FAIRLY PRICED . S INCE TAXES DO NOT INVOLVE AN EARNINGS PROCESS , THE TIMING OF THE RECOGNITION OF TAX REVENUE IS NOT ALWAYS CLEAR . 3) P OTENTIAL FOR L ONGEVITY : B ECAUSE THE U.S. AND STATE CONSTITUTIONS GRANT STATE AND LOCAL GOVERNMENTS THE ABILITY TO TAX , GOVERNMENTS VERY RARELY GO OUT OF BUSINESS . T HIS LONG - TERM VIEW OF OPERATIONS CHANGES THE FOCUS OF ACCOUNTING FROM ONE OF NEAR - TERM RECOVERY OF AMOUNTS INVESTED IN ASSETS TO A LONGER - TERM FOCUS ON THE SUSTAINABILITY OF SERVICES AND THE ABILITY TO MEET FUTURE DEMAND . 4) R ELATIONSHIP WITH S TAKEHOLDERS : T AXES ARE CREATED THROUGH THE LEGISLATIVE PROCESS BY OFFICIALS ELECTED BY THE CITIZENS . B ECAUSE CITIZENS AND BUSINESSES ARE THEN REQUIRED TO PAY THESE TAXES , GOVERNMENTS HAVE AN OBLIGATION TO DEMONSTRATE ACCOUNTABILITY FOR THESE PUBLIC FUNDS . 5) R OLE OF THE B UDGET : G OVERNMENT BUDGETS ARE EXPRESSIONS OF PUBLIC POLICY AND OFTEN CARRY THE AUTHORITY OF LAW , PREVENTING PUBLIC OFFICIALS FROM SPENDING OUTSIDE THEIR BUDGETARY AUTHORITY . T HE INCREASED IMPORTANCE OF BUDGETS IS REFLECTED IN GOVERNMENT FINANCIAL REPORTS BY A REQUIRED REPORT COMPARING BUDGETED AND ACTUAL AMOUNTS . 1 - 3. T HE THREE STANDARDS SETTING BODIES IN QUESTION ARE THE F EDERAL A CCOUNTING S TANDARDS A CCOUNTING A DVISORY B OARD (FASAB), THE G OVERNMENTAL A CCOUNTING S TANDARDS B OARD (GASB), AND THE F INANCIAL A CCOUNTING S TANDARDS B OARD (FASB). T HE FASAB ESTABLISHES ACCOUNTING AND REPORTING STANDARDS FOR THE FEDERAL GOVERNMENT AND ITS AGENCIES UNLESS OBJECTED TO BY ONE OF THE " PRINCIPALS " ( THE DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET , THE COMPTROLLER GENERAL OF THE UNITED STATES (GAO) , AND THE SECRETARY OF THE TREASURY ). W HEN THE " PRINCIPALS " APPROVE , THE FASAB STANDARDS BECOME GAAP. T HE GASB SETS ACCOUNTING AND FINANCIAL REPORTING STANDARDS FOR STATE AND LOCAL GOVERNMENTAL ORGANIZATIONS , INCLUDING THOSE NOT - FOR - PROFIT ORGANIZATIONS THAT ARE DETERMINED TO BE STATE AND LOCAL GOVERNMENTS . T HE FASB SETS ACCOUNTING AND FINANCIAL REPORTING STANDARDS FOR PROFIT SEEKING BUSINESSES AND FOR NONGOVERNMENTAL , NOT - FOR - PROFIT ENTITIES .

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    Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1-3 1 - 4. T HE DEFINITION OF A GOVERNMENT , AS AGREED TO BY THE FASB AND THE GASB IS AS FOLLOWS : “P UBLIC CORPORATIONS AND BODIES CORPORATE AND POLITIC ARE GOVERNMENTAL ORGANIZATIONS . O THER ORGANIZATIONS ARE GOVERNMENTAL ORGANIZATIONS IF THEY HAVE ONE OR MORE OF THE FOLLOWING CHARACTERISTICS : 1. P OPULAR ELECTION OF OFFICERS OR APPOINTMENT ( OR APPROVAL ) OF A CONTROLLING MAJORITY OF THE MEMBERS OF THE ORGANIZATION ’ S GOVERNING BODY BY OFFICIALS OF ONE OR MORE STATE OR LOCAL GOVERNMENTS ; 2. T HE POTENTIAL FOR UNILATERAL DISSOLUTION BY A GOVERNMENT WITH THE NET ASSETS REVERTING TO A GOVERNMENT , OR 3. T HE POWER TO ENACT AND ENFORCE A TAX LEVY . F URTHERMORE , ORGANIZATIONS ARE PRESUMED TO BE GOVERNMENTAL IF THEY HAVE THE ABILITY TO ISSUE DIRECTLY ( RATHER THAN THROUGH A STATE OR MUNICIPAL AUTHORITY ) DEBT THAT PAYS INTEREST EXEMPT FROM FEDERAL TAXATION .

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    Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1-4 1 - 5. T HE SOURCES OF AUTHORITATIVE GAAP FOR STATE AND LOCAL GOVERNMENTS ARE : − C ATEGORY A: GASB S TATEMENTS ( AND I NTERPRETATIONS ) − C ATEGORY B: GASB I MPLEMENTATION G UIDES , GASB T ECHNICAL B ULLETINS AND LITERATURE OF THE A MERICAN I NSTITUTE OF C ERTIFIED P UBLIC A CCOUNTANTS (AICPA) SPECIFICALLY CLEARED BY THE GASB I F THE ACCOUNTING TREATMENT FOR A GIVEN TRANSACTION IS NOT SPECIFIED BY A STATEMENT IN C ATEGORY A, A STATE AND LOCAL GOVERNMENT SHOULD CONSIDER WHETHER IT IS COVERED BY ONE OF THE SOURCES IDENTIFIED IN C ATEGORY B. I F THE ACCOUNTING TREATMENT IS NOT SPECIFIED WITHIN ONE OF THESE AUTHORITATIVE SOURCES , THE GOVERNMENT SHOULD CONSIDER WHETHER THE TRANSACTION IS SUFFICIENTLY SIMILAR TO ONES COVERED BY ONE OF THE AUTHORITATIVE SOURCES THAT A SIMILAR ACCOUNTING TREATMENT CAN BE APPLIED . I F NOT , THE GOVERNMENT MAY USE NON - AUTHORITA TI VE SOURCES FOR GUIDANCE , INCLUDING : − GASB C ONCEPT S TATEMENTS , − FASB, FASAB, OR I NTERNATIONAL S TANDARDS B OARD PRONOUNCEMENTS , − AICPA LITERATURE NOT SPECIFICALLY CLEARED BY THE GASB, − O THER SOURCES PROVIDED BY PROFESSIONAL ORGANIZATIONS , REGULATORY AGENCIES , TEXTBOOKS , AND PUBLISHED ARTICLES , OR − P REVALENT PRACTICES THAT EVOLVED AMONG GOVERNMENTS WITHOUT SPECIFIC AUTHORITATIVE ACTION .

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    Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1-5 1 - 6. A. C ONCEPTUALLY , THE MEASUREMENT FOCUS DETERMINES WHAT IS MEASURED ; THE BASIS OF ACCOUNTING DETERMINES WHEN SOMETHING IS MEASURED . T HE ECONOMIC RESOURCES MEASUREMENT FOCUS MEASURES ALL ECONOMIC RESOURCES , INCLUDING CAPITAL ASSETS AND LONG - TERM DEBT . T HE CURRENT FINANCIAL RESOURCES MEASUREMENT FOCUS MEASURES PRIMARILY FINANCIAL RESOURCES AND DOES NOT RECOGNIZE LONG - TERM ASSETS AND LIABILITIES . T HESE RESOURCES ARE GENERALLY RESTRICTED TO CURRENT ASSETS , INVESTMENTS , AND SHORT - TERM LIABILITIES T HE ACCRUAL BASIS OF ACCOUNTING RECOGNIZES REVENUES WHEN EARNED AND EXPENSES WHEN INCURRED . T HE MODIFIED ACCRUAL BASIS OF ACCOUNTING IS SOMEWHERE BETWEEN THE CASH AND ACCRUAL BASES OF ACCOUNTING AND RECOGNIZES REVENUES WHEN MEASURABLE AND AVAILABLE TO FINANCE EXPENDITURES OF THE CURRENT PERIOD . T HE MODIFIED ACCRUAL BASIS OF ACCOUNTING RECOGNIZES EXPENDITURES GENERALLY WHEN THE FUND LIABILITY IS INCURRED ( I . E . GOODS AND SERVICES ARE RECEIVED ) . B. U NDER ACCRUAL ACCOUNTING REVENUES BASED ON EXCHANGE TRANSACTIONS ARE RECOGNIZED WHEN EARNED . U NDER MODIFIED ACCRUAL ACCOUNTING , REVENUE RECOGNITION IS MODIFIED TO REQUIRE THAT THE AMOUNT BE MEASURABLE AND AVAILABLE TO FINANCE EXPENDITURES OF THE CURRENT PERIOD . C. U NDER ACCRUAL ACCOUNTING , EXPENSES ARE RECOGNIZED WHEN GOODS OR SERVICES ARE USED . E XPENSES ARE OFTEN MATCHED WITH THE REVENUES THOSE EXPENSES GENERATE , IN THE CASE OF EXCHANGE TRANSACTIONS . A CCRUALS ARE REQUIRED FOR INTEREST AND OTHER EXPENSES , REGARDLESS OF WHEN CASH IS TO BE TRANSFERRED . U NDER MODIFIED ACCRUAL ACCOUNTING , EXPENDITURES ( NOT EXPENSES ) ARE RECORDED GENERALLY WHEN GOODS OR SERVICES ARE RECEIVED . (T O THE INSTRUCTOR : T HIS ANSWER IS BASED ON THE INFORMATION GIVEN IN C HAPTER 1; MORE SOPHISTICATION IS INTRODUCED IN LATER CHAPTERS .) D. U NDER THE ECONOMIC RESOURCES MEASUREMENT FOCUS AND ACCRUAL ACCOUNTING , FIXED ASSETS ARE CAPITALIZED AND DEPRECIATED ( EXCEPT FOR INFRASTRUCTURE ASSETS USING THE MODIFIED APPROACH ). U NDER THE CURRENT FINANCIAL RESOURCES MEASUREMENT FOCUS AND MODIFIED ACCRUAL ACCOUNTING , FIXED ASSETS ARE NOT CAPITALIZED OR DEPRECIATED ; RATHER FIXED ASSETS ARE CHARGED TO EXPENDITURES WHEN RECEIVED . E. U NDER THE ECONOMIC RESOURCES MEASUREMENT FOCUS AND ACCRUAL ACCOUNTING , LONG - TERM DEBT IS RECORDED AS A LIABILITY . U NDER THE CURRENT FINANCIAL RESOURCES MEASUREMENT FOCUS AND MODIFIED ACCRUAL ACCOUNTING , LONG - TERM DEBT IS NOT RECORDED AS A LIABILITY . (L ATER CHAPTERS WILL INDICATE THAT THE ISSUANCE OF DEBT RESULTS IN AN “ OTHER FINANCING SOURCE ” IN THE GOVERNMENTAL FUND STATEMENTS AND THAT THE REPAYMENT OF DEBT WILL RESULT IN AN EXPENDITURE IN THE GOVERNMENTAL FUND STATEMENTS .)

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    Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1-6 1 - 7. P RIVATE SECTOR ORGANIZATIONS ARE ORGANIZATIONS THAT ARE NOT OWNED OR CONTROLLED BY GOVERNMENTS AND INCLUDE BUSINESSES AS WELL AS PRIVATE NOT - FOR - PROFIT ORGANIZATIONS . P UBLIC SECTOR ORGANIZATIONS ARE GOVERNMENTS OR ORGANIZATIONS OWNED OR CONTROLLED BY GOVERNMENTS . 1 - 8 . A CCORDING TO THE WEB SITE , “T HE MISSION OF THE G OVERNMENTAL A CCOUNTING S TANDARDS B OARD IS TO ESTABLISH AND IMPROVE STANDARDS OF STATE AND LOCAL GOVERNMENTAL ACCOUNTING AND FINANCIAL REPORTING THAT WILL : * R ESULT IN USEFUL INFORMATION FOR USERS OF FINANCIAL REPORTS AND * G UIDE AND EDUCATE THE PUBLIC , INCLUDING ISSUERS , AUDITORS , AND USERS OF THOSE FINANCIAL REPORTS .” 1 - 9 . T HE APPROPRIATE FUND S ARE : a) C APITAL PROJECTS FUND : T HESE FINANCIAL RESOURCES ARE TO BE USED TO FINANCE CONSTRUCTION OF A CAPITAL ASSET . S INCE THE JAIL IS UNLIKELY TO CHARGE FOR ITS SERVICES , IT WOULD NOT BE PART OF A PROPRIETARY FUND . b) S PECIAL REVENUE FUND : S INCE THE TAX REVENUE IS RESTRICTED BY STATE LAW FOR A PURPOSE OTHER THAN CAPITAL PROJECT OR DEBT SERVICE , THESE AMOUNTS WOULD BE REPORTED IN A SPECIAL REVENUE FUND . c) E NTERPRISE FUND : A LTHOUGH THIS REPRESENTS A CAPITAL PROJECT , WATER DEPARTMENTS ARE TYPICALLY REPORTED AS ENTERPRISE FUNDS . d) P RIVATE - PURPOSE TRUST FUND : T HIS IS A TRUST FUND IN WHICH THE INCOME BENEFITS INDIVIDUALS . I F THE PURPOSE OF THE FUND WAS TO BENEFIT THE GOVERNMENT OR ITS CITIZENRY ( BROADLY ), THEN IT WOULD BE APPROPRIATE TO REPORT THESE RESOURCES IN A PERMANENT FUND . e) S PECIAL REVENUE F UND : A LTHOUGH THE LIBRARY BENEFITS THE CITIZENRY IN GENERAL , THE ABSENCE OF A REQUIREMENT THAT PRINCIPAL BE MAINTAINED PRECLUDES THE RESOURCES BEING REPORTED IN A PERMANENT FUND . S INCE THE RESOURCES ARE RESTRICTED BY THE DONOR , THEY WOULD BE REPORTED IN A SPECIAL REVENUE FUND . f) G ENERAL F UND : T HE RESOURCES ARE NEITHER FIDUCIARY NOR PROPRIETARY . S INCE THE RESOURCES ARE NOT RESTRICTED OR COMMITTED TO A PARTICULAR

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    Chapter 01 - Introduction to Accounting and Financial Reporting for Governmental and Not - for - Profit Organizations 1-7 PURPOSE , THE G ENERAL F UND WOULD BE THE APPROPRIATE FUND FOR REPORTING THE PROCEEDS OF THE SALE OF THE EQUIPMENT . g) S EVERAL FUNDS WILL BE AFFECTED : – G ENERAL F UND – C ONTRIBUTIONS ON BEHALF OF THE TEACHERS AND P UBLIC S AFETY E MPLOYEES WILL BE PAID BY THE G ENERAL F UND WHICH INCLUDES DEPARTMENTS WHERE THESE EMPLOYEES WORK . – E NTERPRISE F UND - W ATER DEPARTMENTS ARE TYPICALLY REPORTED IN ENTERPRISE FUNDS AND C ONTRIBUTIONS ON BEHALF OF WATER DEPAR T MENT E MPLOYEES WILL BE PAID BY THIS FUND . – P ENSION T RUST F UND – T HE AMOUNTS CONTRIBUTED BY THE G ENERAL AND E NTERPRISE FUNDS WILL BE RECEIVED BY THE PENSION TRUST FUND FOR INVESTMENT .

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-1 C HAPTER 2 Overview of Financial Reporting for State and Local Governments 2 - 1. T HE SOLUTION TO THIS AND THE FIRST EXERCISE OF C HAPTERS 1 AND 3 THROUGH 9 WILL DIFFER FROM STUDENT TO STUDENT ASSUMING EACH HAS A DIFFERENT CAFR. 2 - 2. A. A FINANCIAL REPORTING ENTITY IS THE PRIMARY GOVERNMENT TOGETHER WITH ITS COMPONENT UNITS . C OMPONENT UNITS ARE ORGANIZATIONS FOR WHICH THE PRIMARY GOVERNMENT IS FINANCIALLY ACCOUNTABLE , AND OTHER ORGANIZATIONS FOR WHICH THE NATURE AND SIGNIFICANCE OF THEIR RELATIONSHIP WITH THE PRIMARY GOVERNMENT ARE SUCH THAT EXCLUSION WOULD CAUSE THE REPORTING ENTITY ' S FINANCIAL STATEMENTS TO BE MISLEADING OR INCOMPLETE . B. A PRIMARY GOVERNMENT IS A STATE GOVERNMENT , GENERAL PURPOSE LOCAL GOVERNMENT , OR SPECIAL PURPOSE GOVERNMENT . A N EXAMPLE OF A PRIMARY GOVERNMENT WOULD BE ANY STATE , MUNICIPALITY , OR COUNTY ( GENERAL PURPOSE GOVERNMENTS ) AND ANY SPECIAL - PURPOSE GOVERNMENT THAT MEETS THE CERTAIN CRITERIA . C. A COMPONENT UNIT IS A LEGALLY SEPARATE ORGANIZATION FOR WHICH THE ELECTED OFFICIALS OF THE PRIMARY GOVERNMENT ARE FINANCIALLY ACCOUNTABLE . I N ADDITION , A COMPONENT UNIT CAN BE ANOTHER ORGANIZATION FOR WHICH THE NATURE AND SIGNIFICANCE OF ITS RELATIONSHIP WITH A PRIMARY GOVERNMENT ARE SUCH THAT EXCLUSION WOULD CAUSE THE REPORTING ENTITY ' S FINANCIAL STATEMENTS TO BE MISLEADING OR INCOMPLETE . D. T HE TWO PRIMARY METHODS FOR REPORTING COMPONENT UNITS IN THE FINANCIAL STATEMENTS OF A PRIMARY GOVERNMENT ARE BLENDING AND DISCRETE PRESENTATION . B LENDING REPORTS THE COMPONENT UNIT AS ONE OF THE FUNDS OF THE PRIMARY GOVERNMENT , WHICH THEN RESULTS IN INCLUDING THE COMPONENT UNIT AS PART OF THE BASIC FINANCIAL STATEMENTS . B LENDING IS USED WHEN COMPONENT UNITS ARE SUFFICIENTLY INTERTWINED WITH THE PRIMARY GOVERNMENT THAT THEY ARE , IN SUBSTANCE , THE SAME AS THE PRIMARY GOVERNMENT . B LENDING IS ALSO USED IF THE COMPONENT UNIT PROVIDES SERVICES SOLELY TO THE PRIMARY GOVERNMENT OR IF THE COMPONENT UNIT ’ S DEBTS ARE EXPECTED TO BE PAID BY THE PRIMARY GOVERNMENT . D ISCRETE PRESENTATION INVOLVES REPORTING THE COMPONENT UNIT IN A COLUMN TO THE RIGHT OF THE PRIMARY GOVERNMENT IN THE GOVERNMENT - WIDE FINANCIAL STATEMENTS OF THE REPORTING ENTITY .

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-2 2 - 3. A. T HE THREE MAJOR SECTIONS OF THE C OMPREHENSIVE A NNUAL F INANCIAL R EPORT ARE THE INTRODUCTORY , FINANCIAL , AND STATISTICAL SECTIONS . B. T HE G OVERNMENT - W IDE F INANCIAL S TATEMENTS ARE THE S TATEMENT OF N ET POSITION AND THE S TATEMENT OF A CTIVITIES . G OVERNMENT - W IDE S TATEMENTS ARE PRESENTED USING THE ECONOMIC RESOURCES MEASUREMENT FOCUS AND THE ACCRUAL BASIS OF ACCOUNTING . C. T HE G OVERNMENTAL F UND S TATEMENTS ARE THE B ALANCE S HEET AND THE S TATEMENT OF R EVENUES , E XPENDITURES , AND C HANGES IN F UND B ALANCES . G OVERNMENTAL F UND S TATEMENTS ARE PRESENTED USING THE CURRENT FINANCIAL RESOURCES MEASUREMENT FOCUS AND MODIFIED ACCRUAL BASIS OF ACCOUNTING . D. T HE P ROPRIETARY F UND S TATEMENTS ARE THE S TATEMENT OF N ET POSITION ( OR B ALANCE S HEET ), S TATEMENT OF R EVENUES , E XPENSES , AND C HANGES IN F UND N ET POSITION , AND THE S TATEMENT OF C ASH F LOWS . T HE P ROPRIETARY F UND S TATEMENTS ARE PREPARED USING THE ECONOMIC RESOURCES MEASUREMENT FOCUS AND THE ACCRUAL BASIS OF ACCOUNTING . E. T HE F IDUCIARY F UND S TATEMENTS ARE THE S TATEMENT OF F IDUCIARY N ET POSITION AND THE S TATEMENT OF C HANGES IN F IDUCIARY N ET POSITION . F IDUCIARY F UND S TATEMENTS ARE PREPARED USING THE ECONOMIC RESOURCES MEASUREMENT FOCUS AND THE ACCRUAL BASIS OF ACCOUNTING . F. M ANAGEMENT ' S D ISCUSSION AND A NALYSIS (MD&A) IS CONSIDERED TO BE R EQUIRED S UPPLEMENTARY I NFORMATION (RSI) AND IS PRESENTED IN THE FINANCIAL SECTION AFTER THE AUDITOR ' S REPORT . T HE REMAINDER OF RSI IS GENERALLY PRESENTED AFTER THE NOTES TO THE FINANCIAL STATEMENTS AND INCLUDES ( A ) BUDGETARY COMPARISON SCHEDULES , ( B ) INFORMATION REGARDING INFRASTRUCTURE ASSETS WHEN USING THE MODIFIED APPROACH ( C ) SCHEDULES REQUIRED FOR DEFINED BENEFIT PENSION PLANS , AND ( D ) INFORMATION REQUIRED FOR EXTERNAL FINANCING POOLS .

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-3 2.4 T HE G ENERAL F UND IS ALWAYS CONSIDERED A MAJOR FUND . O THER GOVERNMENTAL FUNDS ARE CONSIDERED MAJOR WHEN BOTH OF THE FOLLOWING CONDITIONS EXIST : ( A ) TOTAL ASSETS , LIABILITIES , REVENUES , OR EXPENDITURES OF THAT INDIVIDUAL GOVERNMENTAL FUND CONSTITUTE 10 PERCENT OF THE TOTAL FOR THE GOVERNMENTAL FUNDS CATEGORY , AND ( B ) TOTAL ASSETS , LIABILITIES , REVENUES , OR EXPENDITURES OF THAT INDIVIDUAL GOVERNMENTAL OR ENTERPRISE FUND ARE 5 PERCENT OF THE TOTAL OF THE GOVERNMENTAL AND ENTERPRISE CATEGORIES , COMBINED . A DDITIONALLY , A GOVERNMENT MAY DESIGNATE ANY FUND MAJOR IF REPORTING THAT FUND SEPARATELY WOULD BE USEFUL . W HEN APPLYING THESE RULES , DEFERRED OUTFLOWS OF RESOURCES ARE INCLUDED WITH ASSETS AND DEFERRED INFLOWS ARE INCLUDED WITH LIABILITIES . A N ENTERPRISE FUND IS CONSIDERED MAJOR IF : ( A ) ASSETS , LIABILITIES , REVENUES , OR EXPENSES ARE 10 PERCENT OR MORE OF THE TOTAL FOR ALL ENTERPRISE FUNDS , AND ( B ) ITS ASSETS , LIABILITIES , REVENUES , OR EXPENSES ARE 5 PERCENT OR MORE OF THE TOTAL OF THE GOVERNMENTAL AND ENTERPRISE CATEGORIES , COMBINED . W HEN APPLYING THESE RULES , DEFERRED OUTFLOWS OF RESOURCES ARE INCLUDED WITH ASSETS AND DEFERRED INFLOWS ARE INCLUDED WITH LIABILITIES . • O PERATING ACTIVITIES ARE THOSE ASSOCIATED WITH OPERATING INCOME . A S A RESULT , CASH FLOWS FROM INTEREST EXPENSE , INTEREST REVENUE AND INVESTMENT INCOME DO NOT APPEAR IN THE OPERATING ACTIVITIES SECTION . 2 - 5 S EVERAL DIFFERENCES EXIST BETWEEN THE GASB FORMAT CASH FLOW STATEMENT AND THE FASB FORMAT REQUIRED OF COMMERCIAL BUSINESSES : 1) GASB REQUIRES GOVERNMENTS TO PREPARE CASH FLOWS FROM OPERATING ACTIVITIES ON THE DIRECT METHOD . 2) T HE RECONCILIATION OF INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES OF THE PROPRIETARY FUND , WHICH APPEARS IN THE BOTTOM SECTION OF THE STATEMENT , BEGINS WITH OPERATING INCOME , NOT NET INCOME ( OR TOTAL CHANGE IN NET POSITION ). 3) T HE STATEMENT HAS FOUR SECTIONS , RATHER THAN THE THREE OBSERVED IN FASB FORMAT STATEMENTS . T HESE INCLUDE : • N ONCAPITAL RELATED FINANCING ACTIVITIES INVOLVE THE BORROWING AND PAYMENT ( INCLUDING INTEREST ) OF LOANS FOR PURPOSES OTHER THAN FINANCING CAPITAL ADDITIONS – CHIEFLY , BORROWING FOR OPERATIONS . • C APITAL AND RELATED FINANCING INCLUDE GRANTS AND DEBT TRANSACTIONS ( INCLUDING INTEREST ) USED TO FINANCE CAPITAL ADDITIONS . • I NVESTING ACTIVITIES INVOLVE THE ACQUISITION AND SALE OF INVESTMENTS AS WELL AS CASH RECEIVED FROM INVESTMENT INCOME .

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-4 2 - 6. T HE DIFFERENCE BETWEEN ASSETS AND LIABILITIES IS CALLED NET POSITION AND IS REPORTED IN THREE CATEGORIES : ▪ N ET INVESTMENT IN CAPITAL ASSETS IS COMPUTED BY TAKING THE CAPITAL ASSETS , LESS ACCUMULATED DEPRECIATION , AND DEDUCTING OUTSTANDING DEBT THAT IS RELATED TO THE FINANCING OF CAPITAL ASSETS . L IABILITIES INCURRED TO FINANCE OPERATIONS ( INCLUDING LONG - TERM LIABILITIES FOR COMPENSATED ABSENCES OR EMPLOYEE BENEFITS ) WOULD NOT BE DEDUCTED . ▪ R ESTRICTED NET POSITION INCLUDE RESOURCES THAT ARE RESTRICTED BY : ( A ) EXTERNAL PARTIES , INCLUDING CREDITORS , GRANTORS , CONTRIBUTORS , OR BY LAWS OR REGULATIONS OF OTHER GOVERNMENTS , OR (2) LAWS OR CONSTITUTIONAL PROVISIONS OF THE REPORTING GOVERNMENT . ▪ T HE REMAINING AMOUNT , U NRESTRICTED NET POSITION , IS A “ PLUG ” FIGURE THAT IS DETERMINED BY DEDUCTING THE BALANCES OF THE OTHER TWO CATEGORIES FROM THE OVERALL EXCESS OF ASSETS OVER LIABILITIES .

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-5 2 - 7. CITY OF SOUTHERN SPRINGS STATEMENT OF NET POSITION A S OF APRIL 30, 2020 G OVERNMENTAL A CTIVITIES B USINESS - T YPE A CTIVITIES T OTAL A SSETS : C ASH AND C ASH E QUIVALENTS R ECEIVABLES I NVENTORIES C APITAL A SSETS , N ET T OTAL A SSETS $4,0 5 0,000 6 50 ,000 10 ,6 00,000 15,3 0 0 ,000 $ 88 0,000 1,1 30,000 520,000 11,350 ,000 13,8 8 0,000 $4 ,9 30,000 1,7 80 ,000 520,000 21 ,9 5 0,000 29,180 ,000 L IABILITIES : A CCOUNTS P AYABLE N ONCURRENT L IABILITIES T OTAL L IABILITIES 5 50,000 5,5 50,000 6,1 00,000 6 59,000 3,210,000 3,8 69,000 1,2 09,000 8,7 60,000 9,9 69,000 N ET POSITION : N ET INVESTMENT IN CAPITAL A SSETS R ESTRICTED FOR D EBT S ERVICE U NRESTRICTED T OTAL N ET POSITION 5 ,0 50 ,000 7 54,000 3 ,3 9 6 ,000 $9,2 0 0 ,000 8,140 ,000 2 23,000 1,6 4 8 ,000 $ 10,0 1 1 ,000 13 ,1 90 ,000 977,000 5,044 ,000 $19,2 11 ,000

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-6 2 - 8. CITY OF NORTHERN PINES STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2020 P ROGRAM R EVENUES N ET (E XPENSE )R EVENUE AND C HANGE IN N ET POSITION F UNCTIONS /P ROGRAMS E XPENSES C HARGES FOR S ERVICES O PERATING G RANTS G OVERNMENTAL A CTIVITIES B USINESS - T YPE A CTIVITIES T OTAL G OVERNMENTAL A CTIVITIES : G ENERAL G OVERNMENT P UBLIC S AFETY P UBLIC W ORKS H EALTH AND S ANITATION C ULTURE AND R ECREATION I NTEREST ON L ONG - T ERM D EBT T OTAL G OVERNMENTAL A CTIVITIES $ 10,0 00,000 23,0 00,000 11,8 90,000 6,210,000 4,198,000 1,0 21,000 56,3 19,000 $1,110,000 1, 4 10,000 2,3 55,000 2,198,000 ________ 7 ,073,000 $ 698,000 1,210,000 ________ 1,908,000 $(8 ,8 90,000) (20,8 92,000) (11,8 90,000) (2,6 45,000) (2,000,000) ( 1,0 21,000) (47 ,3 38,000) $ $(8,8 90,000) (20,8 92,000) (11,8 90,000) (2,6 45,000) (2,000,000) ( 1,0 21,000) (4 7 ,3 38,000) B USINESS - T YPE A CTIVITIES : W ATER AND S EWER S YSTEM P ARKING S YSTEM T OTAL B USINESS - T YPE A CTIVITIES 11,550,000 419,000 11,969,000 12 ,6 78,000 2 98,000 12 ,976,000 ---- ---- ---- ---- ---- ---- 1, 1 28,000 ( 1 21,000 ) 1,00 7,000 1,1 28,000 (1 21,000 ) 1,00 7,000 T OTAL – PRIMARY GOVERNMENT $68,2 88,000 $20 ,049,000 $1,908,000 (47 ,3 38,000) 1,00 7,000 (46 ,3 31,000) G ENERAL R EVENUES : P ROPERTY T AXES S ALES T AXES I NVESTMENT E ARNINGS S PECIAL I TEM - G AIN ON S ALE OF L AND T RANSFERS T OTAL G ENERAL R EVENUES , S PECIAL I TEMS , AND T RANSFERS C HANGE IN N ET POSITION N ET POSITION , B EGINNING OF YEAR N ET POSITION , E ND OF Y EAR 27,112,000 20,698,000 1,250,000 (8 88,000) 48,1 72,000 8 34,000 12,2 22,000 $13,0 56,000 319,000 8 88,000 1,2 07,000 2 ,2 14,000 22,333,000 $24 ,5 47,000 27,112,000 20,698,000 319,000 1,250,000 - 49,379,000 3,048 ,000 34,5 55,000 $37,6 03,000

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-7 2 - 9 CITY OF EASTERN SHORES GENERAL FUND STATEMENTS OF REVENUES, EXPENDITUR ES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 2020 R EVENUES : P ROPERTY T AXES $ 27,5 20 ,000 S ALES T AXES 1 3,8 16,000 F EES AND F INES 1,3 24,000 L ICENSES AND P ERMITS 1,7 21,000 I NTERGOVERNMENTAL R EVENUES 2 ,3 68,000 I NVESTMENT E ARNINGS 654,000 T OTAL R EVENUES 47 ,40 3,000 E XPENDITURES : C URRENT : G ENERAL G OVERNMENT $ 11,725 ,000 P UBLIC S AFETY 24,444,000 P UBLIC W ORKS 6,211,000 H EALTH AND S ANITATION 1,16 3,000 C ULTURE AND R ECREATION 2,154,000 T OTAL E XPENDITURES 4 5,69 7,000 E XCESS OF R EVENUES O VER E XPENDITURES 1, 70 6,000 O THER F INANCING S OURCES (U SES ): T RANSFER TO C APITAL P ROJECT F UND (1,52 9,000) T OTAL O THER F INANCING S OURCES (U SES ) (1,52 9,000) S PECIAL I TEM : P ROCEEDS F ROM S ALE OF L AND 821,000 N ET C HANGE IN F UND B ALANCE 99 8 ,000 F UND B ALANCE , B EGINNING OF Y EAR 1, 750 ,000 F UND B ALANCE , E ND OF Y EAR $ 2, 748 ,000

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-8 2 - 10. CITY OF WESTERN SANDS WATER AND SEWER FUND STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION YEAR ENDED DECEMBER 31, 2020 O PERATING R EVENUES : C HARGES FOR S ERVICES $ 17,387 ,000 O PERATING E XPENSES : P ERSON NE L S ERVICES $ 5,8 77,000 C ONTRACTUAL S ERVICES 2,9 95,000 U TILITIES 888,000 R EPAIRS AND M AINTENANCE 1,9 92,000 D EPRECIATION 5,4 22,000 T OTAL O PERATING E XPENSES 17,1 74,000 O PERATING I NCOME 2 13,000 N ONOPERATING R EVENUES (E XPENSES ): I NTEREST R EVENUE S TATE A ID 29,000 100,000 I NTEREST E XPENSE (10 4,000) T OTAL N ONOPERATING R EVENUES AND E XPENSES 25, 000 I NCOME ( LOSS ) B EFORE C ONTRIBUTIONS AND T RANSFERS 23 8,000 C APITAL C ONTRIBUTIONS 1,632,000 T RANSFER TO G ENERAL F UND ( 3 65,000) C HANGE IN N ET POSITION 1, 5 0 5,000 N ET POSITION , B EGINNING OF YEAR 1,8 00 ,000 N ET POSITION , E ND OF YEAR $ 3,30 5 ,000

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    Chapter 02 - Overview of Financial Reporting for State and Local Governments 2-9 2 - 11. # I NFORMATION I TEM S TATEMENT $ AMOUNT A. T OTAL CAPITAL OUTLAY FOR THE COURTHOUSE RENOVATION S TATEMENT OF R EVENUES E XPENDITURES & C HANGES IN F UND B ALANCE – GOVERNMENTAL FUNDS $ 10,924,818 B. T OTAL CASH PAID FOR CAPITAL ADDITIONS FOR THE S OLID WASTE FUND S TATEMENT OF C ASH F LOWS - P ROPRIETARY F UNDS $ 456,179 C. I NTEREST PAID ( NOT EXPENSE ) ON GENERAL LONG - TERM DEBT S TATEMENT OF R EVENUES E XPENDITURES & C HANGES IN F UND B ALANCE – GOVERNMENTAL FUNDS $ 924,818 D. I NTEREST PAID ( NOT EXPENSE ) ON WATER DEPARTMENT DEBT S TATEMENT OF C ASH F LOWS - P ROPRIETARY F UNDS $ 535,567 E. C APITAL ASSET ( NET ) FOR THE GOVERNMENT ’ S COMPONENT UNITS S TATEMENT OF N ET POSITION ( GOVERNMENT - WIDE ) $ 11, 170,900 F. C ONTRIBUTIONS RECEIVED FOR USE BY THE PRIVATE PURPOSE TRUST S TATEMENT OF C HANGES IN F IDUCIARY N ET POSITION $ 100,000 G. N ONCURRENT LIABILITIES ASSOCIATED WITH GOVERNMENTAL ACTIVITIES THAT ARE DUE IN MORE THAN ONE YEAR . S TATEMENT OF N ET POSITION ( GOVERNMENT - WIDE ) $ 39,834,882 H. N ONCASH CONTRIBUTIONS OF CAPITAL ASSETS FOR THE W ATER DEPARTMENT . S TATEMENT OF C ASH F LOWS - P ROPRIETARY F UNDS A LSO , S TATEMENT OF R EVENUES , E XPENSES AND C HANGES IN F UND N ET P OSITION : P ROPRIETARY FUNDS $ 3,085,946 2 - 12. # I NFORMATION I TEM S TATEMENTS $ AMOUNT A. T OTAL FUND BALANCE OF THE S PECIAL R EVENUE F UND S TATEMENT OF R EVENUES E XPENDITURES & C HANGES IN F UND B ALANCE – GOVERNMENTAL FUNDS B ALANCE S HEET – G OVERNMENTAL F UNDS $ 572,014 B. N ET POSITION AVAILABLE FOR EMPLOYEE PENSIONS S TATEMENT OF C HANGES IN F IDUCIARY N ET POSITION S TATEMENT OF F IDUCIARY N ET POSITION $ 10,983,590 C. O PERATING INCOME FOR THE I NTERNAL S ERVICE F UNDS S TATEMENT OF R EVENUES , E XPENSES , AND C HANGES IN F UND N ET POSITION – P ROPRIETARY FUNDS S TATEMENT OF C ASH F LOWS - P ROPRIETARY F UNDS $ 23,822 D. N ET POSITION OF THE PRIMARY GOVERNMENT S TATEMENT OF N ET POSITION ( GOVERNMENT - WIDE ) S TATEMENT OF A CTIVITIES ( GOVERNMENT - WIDE ) $ 86,285,455

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    Chapter 03 – Modified Accrual Accounting 3-1 ` C HAPTER 3 : M ODIFIED A CCRUAL A CCOUNTING : I NCLUDING THE R OLE OF F UND B ALANCES AND B UDGETARY A UTHORITY 3 - 1. T HE SOLUTION TO THIS AND THE FIRST EXERCISE OF C HAPTERS 1 AND 2 AND 4 THROUGH 9 WILL DIFFER FROM STUDENT TO STUDENT ASSUMING EACH HAS A DIFFERENT CAFR. 3 - 2. T HE BUDGET STABILIZATION FUND ’ S PURPOSE IS TOO VAGUE AND MUST BE REPORTED WITH U NASSIGNED FUND BALANCE . 3 - 3. R AINY DAY FUNDS ARE CLASSIFIED AS COMMITTED ONLY IF THEY ARE CREATED BY A RESOLUTION OR ORDINANCE THAT IDENTIFIES THE SPECIFIC CIRCUMSTANCES UNDER WHICH THE RESOURCES MAY BE EXPENDED . R AINY DAY AMOUNTS THAT ARE AVAILABLE “ IN EMERGENCIES ” OR IN PERIODS OF “ REVENUE SHORTFALLS ” WOULD NOT BE CLASSIFIED AS COMMITTED UNLESS THE EMERGENCY OR SHORTFALL CONDITION IS SPECIFIED AND OF A MAGNITUDE TO DISTINGUISH IT FROM EVENTS THAT OCCUR ROUTINELY . R AINY DAY FUNDS NOT MEETING THESE CONDITIONS ARE REPORTED AS UNASSIGNED FUND BALANCE IN THE G ENERAL F UND . C ITY OF O XBOW P ARTIAL B ALANCE S HEET – G ENERAL F UND A S OF D ECEMBER 31, 2020 FUND BALANCES N ONSPENDABLE - P REPAID I NSURANCE 7 ,0 00 R ESTRICTED - I NTERGOVERNMENTAL GRANTS 199 ,000 - E MERGENCY SERVICES 2 6 ,000 C OMMITTED - R AINY DAY FUND 6 00,000 - C APITAL PROJECTS 27 5,000 A SSIGNED - U NASSIGNED 452 ,000 TOTAL FUND BALANCE $ 1, 559 ,0 00

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    Chapter 03 – Modified Accrual Accounting 3-2 3 - 4. D EBITS C REDITS A. E STIMATED R EVENUES C ONTROL A PPROPRIATIONS C ONTROL B UDGETARY F UND B ALANCE 10,8 00,000 9,4 00,000 1,4 00,000 B. E STIMATED R EVENUES C ONTROL B UDGETARY F UND B ALANCE A PPROPRIATIONS C ONTROL 9,7 00,000 4 00,000 10 ,1 00,000 C. E STIMATED R EVENUES C ONTROL E STIMATED O THER F INANCING S OURCES C ONTROL A PPROPRIATIONS C ONTROL E STIMATED O THER F INANCING U SES C ONTROL B UDGETARY F UND B ALANCE 10,2 00,000 1,300,000 9,7 00,000 9 00,000 9 00,000 D. E STIMATED R EVENUES C ONTROL E STIMATED O THER F INANCING S OURCES C ONTROL B UDGETARY F UND B ALANCE A PPROPRIATIONS C ONTROL E STIMATED O THER F INANCING U SES C ONTROL 9,9 00,000 1,1 00,000 1 00,000 10,000,000 1,1 00,000

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    Chapter 03 – Modified Accrual Accounting 3-3 3 - 5. VILLAGE OF SYCAMORE GENERAL JOURNAL D EBITS C REDITS A. E STIMATED R EVENUES C ONTROL A PPROPRIATIONS C ONTROL B UDGETARY F UND B ALANCE 1,12 0,000 987 ,000 133 ,000 B. C ASH R EVENUES C ONTROL 1,105 ,000 1,105 ,000 C. E NCUMBRANCES C ONTROL BUDGETARY F UND B ALANCE - R ESERVE FOR E NCUMBRANCES 479 ,000 479 ,000 D. B UDGETARY F UND B ALANCE - R ESERVE FOR E NCUMBRANCES E NCUMBRANCES C ONTROL E XPENDITURES C ONTROL A CCOUNTS P AYABLE 470,500 47 0 ,000 470,500 47 0 ,000 E. E XPENDITURES C ONTROL A CCOUNTS P AYABLE 51 3 ,000 51 3 ,000 F. A CCOUNTS P AYABLE C ASH 98 3 ,000 98 3 ,000

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    Chapter 03 – Modified Accrual Accounting 3-4 3 - 6. A. (1) E XCHANGE TRANSACTIONS ARE TRANSACTIONS “ IN WHICH EACH PARTY RECEIVES AND GIVES UP ESSENTIALLY EQUAL VALUES .” (2) NONEXCHANGE TRANSACTIONS ARE TRANSACTIONS “ IN WHICH A GOVERNMENT RECEIVES ( OR GIVES ) VALUE WITHOUT DIRECTLY GIVING ( OR RE CEIVING ) EQUAL VALUE IN EXCHANGE .” B. T HE FOUR ELIGIBILITY REQUIREMENTS ARE (1) REQUIRED CHARACTERISTICS OF RECIPIENTS : REQUIRED CHARACTERISTICS OF RECIPIENTS MEANS THAT RECIPIENTS MUST BE THE TYPE SPECIFIED IN THE LEGISLATION OR GRANT AGREEMENTS . (2) TIME REQUIREMENTS : IF A DONOR SPECIFIES THAT A GRANT BE EXPENDED BY A RECIPIENT IN A FUTURE PERIOD , THEN THE RECIPIENT WOULD NOT RECOGNIZE THE RECEIVABLE OR THE REVENUE UNTIL THAT FUTURE PERIOD (3) REIMBURSEMENTS : REIMBURSEMENT GRANTS REQUIRE THAT QUALIFYING EXPENDITURES MUST BE INCURRED BY A RECIPIENT BEFORE A REVENUE CAN BE RECOGNIZED . (4) CONTINGENCIES : R ESOURCES PLEDGED THAT HAVE A CONTINGENCY ATTACHED ARE NOT TO BE RECOGNIZED UNTIL THE CONTINGENCY HAS BEEN MET . C. T HE FOUR CLASSES OF NONEXCHANGE REVENUES ARE (1) IMPOSED NONEXCHANGE TRANSACTIONS , (2) DERIVED TAX REVENUES , (3) GOVERNMENT - MANDATED NONEXCHANGE TRANSACTIONS , AND (4) VOLUNTARY NONEXCHANGE TRANSACTIONS . A N EXAMPLE OF IMPOSED NONEXCHANGE REVENUES WOULD BE PROPERTY TAXES . A SSETS FROM PROPERTY TAXES ARE RECOGNIZED WHEN AN ENFORCEABLE LEGAL CLAIM EXISTS . R EVENUES WOULD BE RECOGNIZED IN THE PERIOD FOR WHICH THE TAXES ARE LEVIED . E XAMPLES OF DERIVED TAX REVENUES INCLUDE SALES , INCOME , AND MOTOR FUEL TAXES . F OR DERIVED TAX REVENUES , ASSETS ARE RECOGNIZED WHEN THE TAX IS IMPOSED . T HE TAX IS RECOGNIZED AS REVENUE AT THE SAME TIME AS THE ASSET , PROVIDING THAT THE UNDERLYING TRANSACTION HAS TAKEN PLACE . A N EXAMPLE OF GOVERNMENT - MANDATED NONEXCHANGE TRANSACTIONS WOULD BE STATE FUNDING FOR MAINSTREAMING HANDICAPPED CHILDREN IN CLASSROOMS , ACCOMPANIED BY STATE LAW THAT MAINSTREAMING TAKE PLACE . A SSETS AND REVENUES SHOULD BE RECOGNIZED WHEN ELIGIBILITY REQUIREMENTS HAVE BEEN MET . A N EXAMPLE OF A VOLUNTARY NON EXCHANGE TRANSACTION WOULD BE A CONTRIBUTION OR GRANT TO SUPPORT A PROGRAM THAT WAS VOLUNTARILY ENTERED INTO BY THE GOVERNMENT . NONEXCHANGE TRANSACTIONS SHOULD BE RECOGNIZED AS ASSETS AND REVENUES WHEN ELIGIBILITY REQUIREMENTS HAVE BEEN MET .

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    Chapter 03 – Modified Accrual Accounting 3-5 3 - 7. A. U NDER MODIFIED ACCRUAL ACCOUNTING , REVENUES SHOULD BE RECOGNIZED WHEN MEASURABLE AND AVAILABLE TO FINANCE EXPENDITURES OF THE CURRENT PERIOD . P ROPERTY TAXES ARE CONSIDERED TO BE AVAILABLE WHEN RECEIVED NO MORE THAN 60 DAYS AFTER THE END OF A FISCAL YEAR . B. U NDER MODIFIED ACCRUAL ACCOUNTING , EXPENDITURES ARE DECREASES IN NET FINANCIAL RESOURCES AND ARE GENERALLY RECOGNIZED WHEN FUND LIABILIT I ES ARE INCURRED . E XPENDITURES MAY BE FOR CURRENT PURPOSES , CAPITAL OUTLAY , AND DEBT SERVICE . 3 - 8. (1) GAAP B ASIS IS THE ACCOUNTING PRINCIPLES USED TO REPORT IN THE G ENERAL F UND B ALANCE S HEET AND S TATEMENT OF R EVENUES , E XPENDITURES AND C HANGES IN F UND B ALANCE . I T IS THE RESULT OF APPLYING GASB STANDARDS FOR GOVERNMENTAL FUND REPORTING . (2) B UDGETARY B ASIS IS THE BASIS USED TO REPORT THE “A CTUAL ” COLUMN IN THE BUDGETARY COMPARISON SCHEDULE . T HE ACTUAL COLUMN OF THE BUDGETARY COMPARISON SCHEDULE IS TO BE REPORTED ON THE BASIS REQUIRED BY LAW FOR BUDGET PREPARATION , EVEN IF THAT BASIS DIFFERS FROM GASB STANDARDS . T YPICALLY BUDGETARY BASIS DIFFERS FROM THE GAAP BASIS IN THE TIMING OF THE RECOGNITION OF REVENUES AND EXPENDITURES .

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    Chapter 03 – Modified Accrual Accounting 3-6 3 - 9 . CITY OF SOUTH RIVER APPROPRIATION, EXPENDITURES, AND ENCUMBRANCES LEDGER GENERAL FUND: P UBLIC S AFETY – P OLICE MONTH: JULY, 2020 U NEXPENDED A PPROPRIATION B ALANCE T RANSACTION R EFERENCE A PPROPRIATIONS E NCUMBRANCES E XPENDITURES = SUM 1 B UDGET ($8,900,000) ($8,900,000) 2 P URCHASE O RDERS I SSUED $520,000 ($8,380,000) 3 I NVOICES RECEIVED AND APPROVED FOR PAYMENT ($480,000) $478,000 ($8,382,000) 4 P AYROLLS $302,000 ($8,080,000) 5 B UDGET R EVISION $50,000 ($8,030,000) T OTAL ($8,850,000) $40,000 $ 780,000 ($8,030,000) $ A MOUNTS IN ( ) DENOTE CREDITS 3 - 10. 1. T HE C ITY APPROVED A BUDGET PROVIDING APPROPRIATIONS TO THE P UBLIC S AFETY D EPARTMENT IN THE AMOUNT OF $ 300 ,000. 2. P URCHASE ORDERS TOTALING $ 19,5 00 WERE PLACED AND ENCUMBRANCES RECORDED . 3. I NVOICES TOTALING $ 15 ,500 ARE RECEIVED AND APPROVED FOR PAYMENT . T HESE ITEMS WERE PREVIOUSLY ENCUMBERE D IN THE AMOUNT OF $ 16 ,000 . $ 3,5 00 OF THE PURCHASE ORDERS FROM #2 ARE STILL OUTSTANDING . 4. E XPENDITURES TOTALING $ 11,000 ARE RECORDED . S INCE THESE AMOUNTS WERE NOT PREVIOUSLY ENCUMBERED , THEY ARE LIKELY SALARIES OR OTHER RECURRING ITEMS 5. T HE APPROPRI ATIONS BUDGET IS REDUCED BY $ 18 ,000 AS A RESULT OF A BUDGET REVISION .

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    Chapter 03 – Modified Accrual Accounting 3-7 3 - 11 (A) C ITY OF V IENNA B UDGETARY C OMPARISON S CHEDULE G ENERAL F UND F OR THE Y EAR E NDED D EC . 31, 2020 A CTUAL A MOUNTS V ARIANCE Budgeted (Budgetary with Final Original Final Basis) Budget Revenues : Taxes 6,500,000 6,465 ,000 6,480,000 15 ,000 Licenses 230,000 230 ,000 225,000 (5 ,000) Intergovernmental 1,200,000 1 ,200,000 1,200,000 0 Miscellaneous 120,000 104,000 106 ,000 2 ,000 Total Revenues 8,050,000 7,999 ,000 8,011 ,000 12 ,000 Expenditures and Encumbrances General Government 2,700,000 2,602,000 2,50 3,500 9 8,500 Public Safety 4,050,000 4, 200,000 4,215,000 (15,000) Health and Welfare 1,23 0,000 1, 22 0,000 1,198,000 2 2 ,000 Total Expenditures and Encumbrances. 7,98 0,000 8,02 2,000 7,91 6,500 10 5,500 Net Change in Fund Balance 7 0,000 (23 ,000) 94, 500 1 17 ,500 Fund Balance – Beginning 350,000 350,000 350,000 0 Fund Balance - Ending 42 0,000 327 ,000 4 44 ,500 1 17 ,500 3 - 11 (B) G ENERAL L EDGER S UBSIDIARY L EDGER D EBITS C REDITS D EBITS C REDITS B UDGETARY F UND B ALANCE E STIMATED R EVENUES C ONTROL A PPROPRIATIONS C ONTROL 93 ,000 51 ,000 4 2 ,000 R EVENUES L EDGER : T AX R EVENUES M ISCELLANEOUS R EVENUES A PPROPRIATIONS L EDGER : G ENERAL G OVERNME NT H EALTH AND W ELFARE P UBLIC S AFETY 98 ,000 1 0,000 35 ,000 16,000 150, 000

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    Chapter 03 – Modified Accrual Accounting 3-8 3 - 12 (A). CITY OF SPRINGFIELD GENERAL FUND - GENERAL JOURNAL YEAR ENDED DECEMBER 31, 2020 G ENERAL L EDGER S UBSIDIARY L EDGER D EBITS C REDITS D EBITS C REDITS 1. E STIMATED R EVENUES C ONTROL B UDGETARY F UND B ALANCE 12, 471 ,000 12, 471 ,000 E STIMATED R EVENUES L EDGER : P ROPERTY T AXES S ALES T AXES L ICENSES AND PERMITS M ISCELLANEOUS R EVENUES 5, 641 ,000 4, 83 0,000 1,500,000 500,000 2. B UDGETARY F UND B ALANCE A PPROPRIATIONS C ONTROL 10, 495 ,000 10, 495 ,000 A PPROPRIATIONS L EDGER : G ENERAL G OVERNMENT C ULTURE AND R ECREATION H EALTH AND W ELFARE 5, 285 ,000 4, 21 0,000 1,000,000 3. C ASH R EVENUES C ONTROL 12,74 5,00 0 12, 745 ,00 0 R EVENUES L EDGER : P ROPERTY T AXES S ALES T AXES L ICENSES AND PERMITS M ISCELLANEOUS R EVENUES 5, 54 5,000 4,7 0 0,000 1,7 00,000 800,000 4. E NCUMBRANCES C ONTROL B UDGETARY F UND B ALANCE - R ESERVE FOR ENCUMBRANCES 10,8 10 ,000 10,8 10 ,000 E NCUMBRANCES L EDGER : G ENERAL G OVERNMENT C ULTURE AND R ECREATION H EALTH AND W ELFARE 5, 275 ,000 4,63 0,000 905,000

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    Chapter 03 – Modified Accrual Accounting 3-9 3 - 12 (A) (C ONTINUED ) G ENERAL L EDGER S UBSIDIARY L EDGER D EBITS C REDITS D EBITS C REDITS 5A. B UDGETARY F UND B ALANCE - R ESERVE FOR E NCUMBRANCES E NCUMBRANCES C ONTROL 10, 810, 000 10,8 10 ,000 E NCUMBRANCES L EDGER : G ENERAL G OVERNMENT C ULTURE AND R ECREATION H EALTH AND W ELFARE 5, 275 ,000 4,63 0,000 905,000 5B. E XPENDITURES C ONTROL C ASH 10, 785 ,000 10, 785 ,000 E XPENDITURES L EDGER : G ENERAL G OVERNMENT C ULTURE AND R ECREATION H EALTH AND W ELFARE 5, 285 ,000 4,61 0,000 890,000 6. B UDGETARY F UND B ALANCE A PPROPRIATIONS C ONTROL 250,000 250,000 A PPROPRIATIONS L EDGER : G ENERAL G OVERNMENT C ULTURE AND R ECREATION 14 0,000 11 0,000

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    Chapter 03 – Modified Accrual Accounting 3-10 3 - 12 (B) CITY OF SPRINGFIELD BUDGETARY COMPARISON SCHEDULE GENERAL FUND YEAR ENDED DECEMBER 31, 2020 B UDGETED A MOUNTS A CTUAL A MOUNTS (B UDGETARY B ASIS ) V ARIANCE W ITH F INAL B UDGET P OSITIVE (N EGATIVE ) O RIGINAL F INAL R EVENUES : P ROPERTY T AXES S ALES T AXES L ICENSES AND P ERMITS M ISCELLANEOUS T OTAL R EVENUES $5, 641 ,000 4, 83 0,000 1,500,000 500,000 12, 471 ,000 $5, 641 ,000 4, 83 0,000 1,500,000 500,000 12, 471 ,000 $5,54 5,000 4,7 00,000 1,7 00,000 800,000 12,74 5 ,000 (96 ,000) (130 ,000 ) 200,000 300,000 274 ,000 E XPENDITURES AND E NCUMBRANCES : G ENERAL G OVERNMENT C ULTURE AND R ECREATION H EALTH AND W ELFARE T OTAL E XPENDITURES AND E NCUMBRANCES 5,285 ,000 4, 210 ,000 1,000,000 10, 495 ,000 5,425 ,000 4, 320 ,000 1,000,000 10,745 ,000 5, 285 ,000 4,61 0,000 890,000 10,785 ,000 140,00 0 (290,00 0 ) 110,000 (40 ,000 ) E XCESS (D EFICIENCY ) OF R EVENUES O VER E XPENDITURES AND E NCUMBRANCES F UND B ALANCE , B EGINNING F UND B ALANCE , E NDING 1, 976 ,000 7 5 3 ,000 $ 2,729 ,000 1, 726 ,000 7 5 3 ,000 $ 2,479 ,000 1, 960 ,000 7 5 3 ,000 $ 2, 713 ,000 234 ,000 --- $ 234 ,000

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    Chapter 03 – Modified Accrual Accounting 3-11 3 - 13 TOWN OF RIVERSIDE BUDGETARY COMPARISON SCHEDULE GENERAL FUND YEAR ENDED DECEMBER 31, 2020 B UDGETED A MOUNTS A CTUAL A MOUNTS (B UDGETARY B ASIS ) V ARIANCE W ITH F INAL B UDGET P OSITIVE (N EGATIVE ) O RIGINAL F INAL R EVENUES : P ROPERTY T AXES B USINESS L ICENSES T OTAL R EVENUES $ 685 ,000 165 ,000 85 0 ,000 $ 685 ,000 135 ,000 820 ,000 $ 687,500 12 4,000 81 1,500 $ 2,500 (1 1 ,000 ) 8 ,500 E XPENDITURES AND E NCUMBRANCES : G ENERAL G OVERNMENT P ARKS AND R ECREATION S ANITATION S TREETS AND S IDEWALKS T OTAL E XPENDITURES AND E NCUMBRANCES 395 ,000 110,000 90,000 160,000 755 ,000 395 ,000 160 ,000 90,000 160,000 80 5 ,000 365 ,000 160 ,500 91,600 157,333 7 74 ,433 30 ,0 00 ( 500 ) (1,600) 2,667 30 ,567 E XCESS (D EFICIENCY ) OF R EVENUES O VER E XPENDITURES AND E NCUMBRANCES F UND B ALANCE , B EGINNING F UND B ALANCE , E NDING 95 ,000 49 ,000 $ 144 ,000 15,000 49 ,000 $ 64 ,000 37 ,067 49 ,000 $ 86 ,067 22 , 06 7 --- $ 22 , 06 7

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    Chapter 03 – Modified Accrual Accounting 3-12 3 - 14 . S OLUTIONS TO THE E XCEL BASED EXERCISES ARE ALSO AVAILABLE IN E XCEL ON THE INSTRUCTOR ’ S WEBSITE Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual: General Fund For The Year Ended December 31, 2020 Budgeted Amounts REVENUES Original Final Actual Amounts Budgetary Basis Variance with Final Budget Property Taxes 14,677,000 14,677,000 15,361,830 684,830 Other Local Taxes 11,562,500 11,562,500 11,761,522 199,022 Charges for Services 1,613,011 1,613,011 1,601,435 (11,576) Intergovernmental 7,892,080 8,047,907 7,098,698 (949,209) Miscellaneous 1,504,977 1,388,385 1,262,549 (125,836) TOTAL REVENUES 37,249,568 37,288,803 37,086,034 (202,769) EXPENDITURES Current General Government 3,567,838 3,489,870 3,453,502 36,368 Judicial Administration 1,351,000 1,497,845 1,456,734 41,111 Public Safety 7,753,002 8,325,564 8,216,347 109,217 Public Works 4,541,651 4,984,353 4,602,273 382,080 Health and Welfare 4,823,267 4,440,167 4,418,294 21,873 Education 8,963,248 8,929,725 8,887,834 41,891 Parks and Recreation 2,983,861 3,097,528 3,055,325 42,203 Community Development 872,594 904,168 899,209 4,959 TOTAL EXPENDITURES 34,856,461 35,669,220 34,989,518 679,702 REVENUES OVER (UNDER) EXPENDITURES 2,393,107 1,619,583 2,096,516 476,933 OTHER FINANCING SOURCES (USES): Transfers (to) other funds (3,560,000) (3,257,000) (3,256,899) 101 (3,560,000) (3,257,000) (3,256,899) 101 Excess of revenues and other sources over (under) expenditures and other uses (1,166,893) (1,637,417) (1,160,383) 477,034 FUND BALANCE - Beginning of Year 12,338,963 12,338,963 12,338,963 - FUND BALANCE - End of Year 11,172,070 10,701,546 11,178,580 477,034 The shaded information below is provided in the student excel template. Solution journal entries appear on the next page.

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    Chapter 03 – Modified Accrual Accounting 3-13 3 - 14 General Ledger Subsidiary Ledger a. Record the original budget Debits Credits Debits Credits Revenues control account Estimated Revenues Control 37, 249 ,568 Estimated Other Financing Uses Control - Budgetary Fund Balance 37, 249 ,568 Estimated Revenues ledger: Property Taxes 14, 677 ,000 Other Local Taxes 11,562,500 Charges for Services 1,613,011 Intergovernmental Revenue 7,892,080 Miscellaneous 1,504,977 37, 249 ,568 Appropriations control account Budgetary Fund Balance 38, 416,461 Appropriations Control 34, 856,461 Estimated Other Financing Uses Control 3,560,000 Appropriations subsidiary ledger: General Government 3,567,838 Juidicial Administration 1, 351,000 Public Safety 7,753,002 Public Works 4,541,651 Health and Welfare 4,823,267 Education 8,963,248 Parks and Recreation 2,983,861 Community Development 872,594 34, 856,461 Other Financing Uses subsidiary ledger: Transfers out 3,560,000 General Ledger Subsidiary Ledger b . Record the budget revisions Debits Credits Debits Credits Estimated Revenues Control 39,235 Estimated Other Financing Uses Control 303,000 Budgetary Fund Balance 470,524 Appropriations Control 812,759 Revenues subsidiary ledger: Intergovernmental Revenues 155,827 Miscellaneous 116,592 Appropriations subsidiary ledger: General Government 77,968 Judicial Administration 146,845 Public Safety 572,562 Public Works 442,702 Health and Welfare 383,100 Education 33,523 Parks and Recreation 113,667 Community Development 31,574 Other Financing Uses subsidiary ledger: Transfers out 303,000

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    Chapter 03 – Modified Accrual Accounting 3-14 General Ledger Subsidiary Ledger c . Record the Actual Revenues Debits Credits Debits Credits Cash 37,086,034 Revenues Control 37,086,034 Revenues subsidiary ledger: Property Taxes 15,361,830 Other Local Taxes 11,761,522 Charges for Services 1,601,435 Intergovernmental Revenue 7,098,698 Miscellaneous 1,262,549 37,086,034 General Ledger Subsidiary Ledger d . Record the encumbrances Debits Credits Debits Credits Encumbrances Control 34, 989 ,518 Budgetary Fund Balance - Reserve for Encumbrances 34, 989 ,518 Encumbrances subsidiary ledger: General Government 3, 453 ,502 Juidicial Administration 1,456,734 Public Safety 8,216,347 Public Works 4,602,273 Health and Welfare 4,418,294 Education 8,887,834 Parks and Recreation 3,055,325 Community Development 899,209 34, 989 ,518 General Ledger Subsidiary Ledger e. Record the actual expenditures and Encumbrance Reversals Debits Credits Debits Credits Budgetary Fund Balance - Reserve for Encumbrances 34, 989 ,518 Encumbrances Control 34, 989 ,518 Encumbrances subsidiary ledger: General Government 3, 453 ,502 Judicial Administration 1,456,734 Public Safety 8,216,347 Public Works 4,602,273 Health and Welfare 4,418,294 Education 8,887,834 Parks and Recreation 3,055,325 Community Development 899,209 34, 989 ,518 Expenditures Control 34, 989 ,518 Accounts Payable 34, 989 ,518 Expenditures subsidiary ledger: General Government 3, 453 ,502 Judicial Administration 1,456,734 Public Safety 8,216,347 Public Works 4,602,273 Health and Welfare 4,418,294

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