1 THE BASICS OF FUND ACCOUNTING THE BASICS OF FUND ACCOUNTING Presented by: Darla Erickson Local Government Services Bureau State Accounting Division, Department of Administration 1 THE BASICS OF FUND ACCOUNTING THE BASICS OF FUND ACCOUNTING Topics covered in this presentation: • Overview of Governmental Accounting Basics • Overview of Governmental Accounting Basics • Principles • Fundamentals of Debits and Credits • Fund Accounting/Basis of Accounting • Using the BARS Chart of Accounts • Funds • Funds • Accounts • Objects 2
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
Presented by:
Darla Erickson
Local Government Services Bureau
State Accounting Division, Department of Administration1
THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
Topics covered in this presentation:
• Overview of Governmental Accounting Basics• Overview of Governmental Accounting Basics
• Principles
• Fundamentals of Debits and Credits
• Fund Accounting/Basis of Accounting
• Using the BARS Chart of Accounts
• Funds• Funds
• Accounts
• Objects
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
SOME OF THE ACRONYMS COMMON
TO GOVERNMENTAL ACCOUNTING
CAFR Comprehensive Annual Financial Report
GASB Governmental Accounting Standards Board
GAAFR Governmental Accounting, Auditing,
TO GOVERNMENTAL ACCOUNTING
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GAAFR Governmental Accounting, Auditing,
and Financial Reporting
GAAP Generally Accepted Accounting Principles
THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
• PRINCIPLES OF GOVERNMENTAL ACCOUNTING• Accounting and Reporting Capabilities
• Accounting systems should be maintained in accordance with generally accepted accounting principles (GAAP) and uniform in MT by using the BARS Chart of Accounts as prescribed by the Local Government Services Bureau
• Chart of Accounts: http://doa.mt.gov/lgsb/Forms/AccountingSystemsProgram/1_AccountingManuals/01_BARSChartofAccount
• Updates: http://doa.mt.gov/lgsb/bars_memos
• Fund Accounting Systems• Accounting systems should be organized and operated on a fund basis
• Fund Types• Fund financial statements should report governmental, proprietary
and fiduciary fund types if applicable
• Number of Funds• Only maintain those funds required by law and sound financial management
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
• PRINCIPLES OF GOVERNMENTAL ACCOUNTING
• Special Revenue Funds (*recent change)p ( g )• Special Revenue Funds must meet the new definition of a special revenue fund according to GASB54:
• Used to account for proceeds of specific revenue sources that are committed or restricted to expenditures for specific purposes other than debt service or capital projects.
– Balances will be
» Non‐spendable
» Restricted
» Committed
» Assigned (but not only assigned fund balance)
» Negative Unassigned Fund Balance
*Existing funds that do not meet this fund balance type will report their balance in the General Fund at year‐end for reporting purposes.
*Or Commit Revenues or Fund Balance to a major purpose by year‐end by taking the highest action of local government by year‐end.
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
• PRINCIPLES OF GOVERNMENTAL ACCOUNTING
• Reporting Capital Assetsp g p• A clear distinction should be made between general capital assets and those of the proprietary and fiduciary funds.
• Capital Assets are different than an asset inventory listing– Threshold Policy should be determined by cost and useful life
• Valuation of Capital Assets• Assets should be reported at historic cost
– Donated assets at the estimated fair market value at the time of acquisition
• Depreciation of Capital Assets• Capital assets should be depreciated over their estimated useful lives
– Use your entity’s historical information to determine the useful life – the life will vary according to use of the asset
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
• A clear distinction should be made between business‐type long‐term liabilities and general long‐term liabilities
• Measurement Focus/Basis of Accounting in the BFS• The basic financial statements should display the government‐wide financial statements (full accrual) and the fund financial statements (modified accrual)
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
• PRINCIPLES OF GOVERNMENTAL ACCOUNTING• Budgeting, Budgetary Control/Reporting
• Budgets should be adopted, controlled through monitoring and comparison statements included in reporting.
• The budgetary statements should present original budget, final budget, actual amounts and a comparison with actual to final
– Date change: Approved budget due to County by the later of 30 days after receipt of the certified taxable valuation or first Thursday in Sept
– Due to LGSB 60 days after receipt of the certified taxable valuation or Oct 1– Local Budget Act: 7‐6‐40 MCA
• Transfer, Revenue, Expenditure/Expense Classifications• Revenues should be maintained by fund, major source and other financing sources
• Expenditures of governmental funds by fund, function/activity and other financing uses (transfers, etc)
• Expenses of proprietary funds by fund/activity/object 8
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
• PRINCIPLES OF GOVERNMENTAL ACCOUNTING• Common Terminology and Classificationgy f
• A common terminology and classification should be used consistently throughout the accounting software, budget, and financial report of each fund
• Annual Financial Reports• Preparation of financial reports for the benefit of management should be prepared
• An Annual Financial Report should be prepared and made available• An Annual Financial Report should be prepared and made available to the public and the Local Government Services Bureau
• Due to LGSB by Dec 31
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
• Financial Statements:
• Balance Sheet (Governmental Funds) or Statement of Net Assets (Enterprise Funds)Consists of:
FUNDAMENTALS OF DEBITS & CREDITSFUNDAMENTALS OF DEBITS & CREDITS
• RECAPDebits must equal credits
An entry made within a fund should have equal debits and credits
All debits and credits should be made to asset, liability, revenue, expenditure/expense, other financing sources/uses or restatement accounts
Rarely, if ever, should fund balance/net assets accounts be debited or credited
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Test our knowledge
1. Assets have a normal __________ balance:1 C dit1. Credit2. Debit
2. Liabilities have a normal ______ balance:1. Debit 2. Credit
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2. Credit
3. Debits should equal:1. Revenues2. Credits
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TYPES OF FUNDSTYPES OF FUNDS
GOVERNMENTAL FUNDS
• 11000 ~ General
• 22000 ~ Special Revenue
• 33000 ~ Debt Service
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• 33000 ~ Debt Service
• 44000 ~ Capital Projects
• 88000 ~ Permanent
TYPES OF FUNDSTYPES OF FUNDS
PROPRIETARY FUNDS
• 55000 ~ Enterprise
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• 66000 ~ Internal Service
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TYPES OF FUNDSTYPES OF FUNDS
FIDUCIARY FUNDS
• 77000 ~ Pension Trust~ Investment Trust
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Investment Trust ~ Private Purpose Trusts~ Agency
TYPES OF FUNDSTYPES OF FUNDS
99000 ACCOUNT GROUPS - For Governmental Funds!
• General Capital Assets ~ 9000
• General Long-Term Debt ~ 9500
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• No longer required to be reported
• Can keep updated for your records
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THE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
BASIS OF ACCOUNTING
Full Accrual Basis
Deals with the timing and recognition of transactions and events
When recognized:
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Modified Accrual Basis
Cash Basis
BACK TO THE BASICSTHE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
Full Accrual Basis of Accounting
• Recognizes increases and decreases in economicRecognizes increases and decreases in economic resources (Net Assets) as soon as the underlying event or transaction occurs
•Revenues are recognized as soon as they are earned
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•Expenses are recognized as soon as the liability is incurred
• Regardless of the time of related cash inflow and outflows
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BACK TO THE BASICSTHE BASICS OF FUND ACCOUNTINGTHE BASICS OF FUND ACCOUNTING
Modified Accrual Basis of Accounting
•Recognizes increases and decreases in financial gspendable resources only to the extent that they reflect near-term inflows and outflows of cash
• Amounts are recognized as revenues when earned, only so long as they are collectible within the
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only so long as they are collectible within the period or soon enough thereafter to be used to pay liabilities of the current period. (60 days)
• In other words, when they are available to pay expenditures of the current period.
BACK TO THE BASICSBACK TO THE BASICS
The Cash Basis of Accounting
I th i l t t hi d id th l t• Is the simplest to achieve and provides the least disclosure
• Only revenues received and expenses or expenditures disbursed are recognized
• The Balance Sheet of the Governmental Unit
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The Balance Sheet of the Governmental Unit displays only a balance in cash and the fund balance accounts.
• The Operating Statement presents results of only the cash transactions for the reporting fund.
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Test our knowledge
Governmental Funds are reported using which Basis of Accounting:
1. Full Accrual Basis2. Modified Basis3. Cash Basis
Enterprise Funds are reported using
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Enterprise Funds are reported using which Basis of Accounting:
1. Full Accrual Basis2. Modified Basis3. Cash Basis
Within these two groups, assets and liabilities are f th d fi d i t th l i l t i
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further defined into other logical categories depending upon the nature of the particular asset or liability.
BALANCE SHEET ACCOUNTSBALANCE SHEET ACCOUNTS
Principal groups of asset & other debit numbers:
1010 /10100000 – Cash/Investments
11110000 – Taxes/Assessments Receivable
12120000 – Other Receivables
13130000 – Due from and advance from
14140000 – Prepaid Expenses
15150000 – Inventories
16160000 – Restricted Assets
17170000 – Other Debits 46
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BALANCE SHEET ACCOUNTSBALANCE SHEET ACCOUNTS
Example of further breakdown of an asset taccount:
11110000 – Taxes Receivable
111000 – Mobile Home Taxes Receivable
113000 – Real Taxes Receivable
115000 – Personal Taxes Receivable
116000 – Protested Taxes Receivable
118000 – Special Assessments Receivable47
BALANCE SHEET ACCOUNTSBALANCE SHEET ACCOUNTS
Liabilities, equity & other credits numbers:
20200000 Sh t t P bl20200000 – Short‐term Payables
21210000 – Other Short‐term Payables/Due to
22220000 – Deferred Credits
23230000 – Long‐term Liabilities
24240000 – Other credits
25250000 – 27270000 – Fund Balance/Net Assets
28280000 – Investment in Capital Assets (Fund 9500)48
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BARS BARS –– REVENUE ACCOUNTSREVENUE ACCOUNTS
310000 - Taxes320000 Licenses and Permits320000 - Licenses and Permits330000 - Intergovernmental Revenues340000 - Charges for Services350000 - Fines and Forfeitures360000 - Miscellaneous Revenues
410000 - General Government420000 Public Safety420000 - Public Safety430000 - Public Works440000 - Public Health450000 - Social/Economic Services460000 - Culture and Recreation
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460000 Culture and Recreation470000 - Housing and Community Dev.480000 - Conversation of Natural Resources490000 - Debt Service