CHAPTER 2 : FUND ACCOUNTING

Ex 2-1 :
1 2 3 4 5 6 7 8 9 10
J G A H A B A I A F
Ex 2-2
1 2 3 4 5 6 7 8 9 10 11 12
A C D D C A A B C B B B
Ex 2-3
a.Focus on cash:

Note Account Titile and Explanations Debit Credit

1 entry necessary- no cash involved
2 Cash $ 300,000
Contribution revenues $ 300,000
(To record the partial collection of the note)
3 Building acquisition expenditure $ 120,000
Cash $120,000
(To record the cash paid to acquire the
building)
4 entry necessary- no cash involved

Focus on cash plus other current financial resources:

Note Account Titile and Explanations Debit Credit
1 Note receivable $ 1,000,000
Contribution revenues $1,000,000
(To record note receivable)
2 Cash $ 300,000
Note receivable $ 300,000
(To record the partial collection of the note)
3 Building acquisition expenditure $ 120,000
Cash $120,000
(To record the cash paid to acquire the
building)
4 Wage expenditure $ 4,000
Wages payable $ 4,000
(To record the wages earned by employees,
but not yet paid)

Focus on all economic resources:

Note Account Titile and Explanations Debit Credit
1 Note receivable $ 1,000,000
Contribution revenues $ 1,000,000
(To record note receivable)
 2 Cash $ 300,000
Note receivable $ 300,000
(To record the partial collection of the
note
3 Building $ 600,000
Cash $ 120,000
Mortgage note payable $ 480,000
(To record the acquisition of the building)
Depreciation expense $ 20,000
Accumulated depreciation $ 20,000
(To record depreciation on the building)
4 Wage expenditure $ 4,000
Wages payable $ 4,000
(To record the wages earned by
employees, but not yet paid)
b.

Statement of revenues and expenses

Cash Current financial All economic resources
resources
Contribution revenue $ 300,000 $ 1,000,000 $ 1,000,000
Building acquisition
Depreciation expense $ 120,000 $ 120,000 $ 20,000
Wage expenditure $0 $ 4,000 $ 4,000
Total expenses $ 120,000 $ 120,000 $ 24,000
Excess of revenues over $ 180,000 $ 876,000 $ 976.000
expenditures/expenses

Balance sheet
Cash Current financial All economic resources
resources
Assets
Cash $ 180,000 $ 180,000 $ 180,000
Note receivable $ 700,000 $ 700,000
Building((less accumulated $ 580,000
depreciation)
Total assets $ 180,000 $ 880,000 $ 1,460,000

Liabilities and Fund Balance

Wages payable $ 4,000 $ 4,000
Mortgage note payable $ 480.000
Fund balance $ 180,000 $ 876,000 $ 976,000
Total liabilities and fund balance $ 180,000 $ 880,000 $1,460,000
Ex 2-4
Journal entries in general fund (in millions)
Cash $ 20
Proceeds from borrowing $ 20
(To record the issuance of bonds)
Expenditure $4
Cash $4
(To record the purchase of land)
Cash $1
Proceeds from sale of land $1
(To record sale of land)
Repayment of bonds (expenditure) $2
Cash $2
(To record repayment of bonds)
Legal claims (Expenditure) $3
Cash $3
(To record payment of judgment)

2. Modified accrual statement

Balance sheet
Cash $ 12
Fund Balance $ 12

Statement of Revenues, Expenditures and Changes in Fund Balance

Revenues and other financing sources
Bond proceeds $ 20
Proceeds from sales of land 1
Total revenues and financing sources 21

Expenditures and other financing uses

Repayment of bonds 2
Acquisition of land 4
Legal claims 3
Total expenditures and other financing uses 9
Excess of revenues and other financing sources
over expenditures and financing uses $ 12

3. The balance sheet fails key long-term assets and long-term obigations. But, of course, it is not intended
to do so. Instead, it is intended to indicate the current financial resourse available to meet current
obiligations.
4. Similarly, the statement of revenues, expenditures and other financing sources does not measure the
cost of services (e.g. it recognize borrowings as an increase in fund balance and the full cost of acquiring
fixed assets as a decrease). It is not designed to do so. Instead it is design to report on flows of current
financial resources – net assets that are likely of great interest to the district’s governing body, managers
and constituents.
Ex 2-6
A B c d e f g h
8 2 7 5 4 3 1 6

P. 2-1
a.

(1)Cash $100,000
Revenues from grants $100,000
To record revenues
(2) Expenditures—computers $ 10,000
Cash $ 10,000
To record expenditure for purchase of five computers
(3) Expenditures—wages $ 6,000
Cash $ 6,000
To record expenditure for payment of wages and salaries
(4) Cash $ 24,000
Proceeds from borrowing $ 24,000
To record receipt of loan proceeds
(5) Expenditures—automobile $ 24,000
Cash $ 24,000
To record the purchase of the automobile
(6) Expenditures—interest $ 200
Cash $ 200
To record payment of interest on note
(7) No entry is necessary. The computer is not reported as an asset in the general fund, so it need not be
removed from it.
b. Entrepreneurs Consultants
Balance Sheet General Fund
Asset: Cash $83,800
Fund balance $83,800

Entrepreneurs Consultants Statement of Revenues, Expenditures and Other Changes in Fund Balances

Revenues:
Grants $100,000
Expenditures:
Acquisition of computers 10,000
Acquisition of automobile 24,000
Wages 6,000
Interest 200
Total expenditures 40,200
Excess of revenues over expenditures 59,800
Other changes in fund balance:
Proceeds of borrowing 24,000
Additions to fund balances $ 83,800
c. Entrepreneurs Consultants
Statement of Net Position

Assets:
Cash $ 83,800
Computers $ 8,000
Automobile 24,000
32,000
Less: accumulated depreciation 6,400 25,600
Total assets $109,400

Liabilities and net position:

Note payable 24,000
Net position 85,400
Total liabilities and net position $109,400

Expenses: Entrepreneurs Consultants

Statement of Activities

Wages $ 6,000
Interest 200
Depreciation 6,400
Loss on computer 2,000
Total expenses 14,600
Revenues:
Grants 100,000
Increase in net position $ 85,400

P2.2
1. (in million)

No. Acc Title Debit Credit

1 General fund $150

Taxes revenue $150

Operating expenses $100

General fund $100

2 Debt service fund $20

General fund $20

3 Capital projects $130

Bonds $130

Construction of plant and equipment $40

Capital projects $40

2. The government-wide statements would differ in that:

 the funds would be consolidated; there would be only one column
 the $40 million expended to construct plant and equipment would be reported as assets
 the $130 million of bonds issued would be reported as liabilities
P 2.4
1. ($)

General Fund Capital Project Fund Debt service Fund Total

Asset

Cash 400 150 50 600

Investment 1200 450 150 1800

Total asset 1600 600 200 2400

Fund Balances 1600 600 200 2400

Both cash and investments were allocated on the basis of fund balances. Thus cash was allocated as
follows:

General fund 600 x (1600:2400) = 400

Capital Project fund 600 x (600:2400) = 150

Debt service fund 1800 x (200:2400) = 50

Total cash 50

Investment were allocated as following:

General fund 1800 x (1600:2400) = 1200

Capital Project fund 1800 x (600:2400) = 450

Debt service fund 1800 x (200:2400) = 150

Total investments 1800

The columnar presentation gives the more complete picture, as long as fixed assets are presented
elsewhere in the financial statements (e.g., separate schedules or full accrual statements).
It shows the specific resources assigned to each of the funds. However, many users, particularly those
with a background in business-type reporting would find the combined balance sheet (as prepared by the
comptroller) the easier to understand.
Nevertheless, unless the balance sheet or accompanying notes make clear that some assets are restricted,
the users risk being misled as to whether the assets are available for future expenditure

P2.6

No. Acc Title Debit Credit Type

1 Cash 1000000 Debit service fund

Tax revenue 1000000

2 Acc receivable 5000 General fund

… revenue 5000

z3 Cash 60000 Permanent fund

Dividend revenues 60000

4 Cash 70000 Fiduciary fund

Dividend revenues 70000

5 Construction expenditure 6000000 Capital projects fund

Contract payable 6000000

6 Transfer-out to debt service fund 400000 General fund

Cash 400000
 Cash 400000

Operating transfer-in from the general fund 400000

Investment 400000 Debt service fund

Cash 400000

7 Depreciation expense 100000 Internal service fund

Accumulated depreciation 100000

8 Cash 30000 Enterprise fund

Parking fee revenues 30000

9 Cash 8000000 Enterprise fund

Bonds payable 8000000

10 Due to school district 3000000 Agency fund

Cash 3000000

P. 2-10
a. Journal entries

1. General fund

Cash $110
Tax revenue $110

2. Capital projects fund

Cash $ 30
Proceeds from bonds $ 30

3. Capital project funds

Expenditure for building $ 25

Cash $ 25

4. General fund
Operating expenditures $ 70
Cash $ 63
Accounts payable 7

5. General fund

Transfer to debt service fund $ 12

Cash $ 12
Debt service fund

Cash $ 12

Transfer from general fund $ 12

6. Debt service fund

Interest expenditure $2

Payment of principal (expenditure) 6

Cash $8

7. Special revenue fund

Cash $4

Hotel taxes $4

Tourism expenditures $3
Cash
$3

8. Internal service fund

Cash $4

Transfer in from general fund $4

Supplies inventory $2
Cash
$2

Cash $1

Sales revenue $1

Cost of supplies sold $1

Supplies inventory
$1

General fund

Transfer out to internal service fund $4

Cash
$4
 Supplies expenditure $1
Cash
$1

b. Combined balance sheet

Buffalo School District Governmental Funds Combined Balance Sheet

Special Capital Debt

General Revenue Projects Service
Fund Fund Fund Fund

Total

Assets
Cash $30 $ 1 $5 $4 $40
Totals $30 $ 1 $5 $4 $40

Liabilities and Fund

Balances
Accounts payable $7 $7
Fund balances 23 1 5 4 33
Totals $30 $ 1 $5 $4 $40

c. Combined Statement
Buffalo School District
Combined Statement of Revenues, Expenditures and Other Changes in Fund Balances Governmental Funds

Special Capital Debt

General Revenue Projects Service
Fund Fund Fund Fund

Total

Revenues
Property taxes $110 $110
Hotel taxes $ 4 4

Total revenues $110 $ 4 $0 $0 $114

Expenditures

Operating $ 70 $ 70
Supplies 1 1
Interest 2 2
Debt repayment 6 6
Tourism 3 3
Acquisition of building 25 25
 Total expenditures $ 71 $ 3 $25 $8 $107

Excess of revenues
over expenditures $ 39 $ 1 ($25) ($ 8) $ 7

Other financing sources (uses)

Bond proceeds $30 $ 30
Transfer to/from debt service fund ($12) $12 0
Transfer to internal service fund (4) (4)

Total other financing

sources and uses ($16) $0 $30 $12 $ 26

Net increase in fund balance $ 23 $1 $5 $4 $ 33

Buffalo School District

Statement of Revenues, Expenses and Other Changes in
Fund Net Position Internal Service Fund

Sales revenue $1
Cost of supplies sold 1
Excess of revenues over expenses $0
Transfer from general fund 4
Increase in net position $4

d. Government Statement
Revenues
Property taxes $110
Hotel taxes 4
Total revenues $114
Expenses
Operating $ 70
Supplies 1
Interest 2
Depreciation 1
Tourism 3
Total expenses $ 77

Increase in net position $ 37

Buffalo School District Statement of Net Position

Assets
Cash $43
Supplies inventory 1
Building (net of $1 accumulated depreciation) 24
 Total assets $68

Liabilities and Net Position

Accounts payable
$7

Bonds payable 24
Net Position

Restricted for acquisition of capital assets

$5
Restricted for payment of bonds 4
Restricted for promoting tourism 1
Unrestricted 27 37
Total liabilities and net position $68