Chapter 3 Budgeting, Budgetary Accounting, and Budgetary Reporting by qug93699

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									Chapter 3 End of Chapter Materials Solutions

REVIEW QUESTIONS

Q3-1 A budget is a formal estimate of the resources that an organization plans to
     expend, for a given purpose or over a given period, and the proposed means of
     acquiring these resources. It informs the reader of what activities the organization
     plans to undertake and how the organization expects to finance these activities. In
     addition to serving as a framework for operations, the budget often acts as a legal
     document for certain types of organizations, principally governmental units.

Q3-2 State and local governments prepare operating budgets, capital budgets, and cash
     budgets, also referred to as cash forecasts.

Q3-3 Approaches to budget preparation include object-of-expenditure budgeting,
     performance budgeting, planning-program budgeting, and zero-based budgeting.
     The object of expenditure approach is the most common in practice.

Q3-4 A cash forecast is a plan of the actual monies expected to be received and
     expended during a particular period. It assists the smooth functioning of the
     organization by enabling the organization to anticipate cash shortages and
     surpluses before they occur. As a result, the organization can obtain more
     favorable interest rates than an organization that borrows or invests on a "crash"
     basis.
Q3-5 The steps in preparing a budget are:
      1. Prepare budgetary policy guidelines.
      2. Prepare a budget calendar.
      3. Prepare and distribute budget instructions.
      4. Prepare revenue estimates.
      5. Prepare departmental (or program) expenditure requests:
         a. Personal services work sheet
         b. Travel work sheet
         c. Operating expense work sheet
         d. Equipment work sheet
      6. Prepare nondepartmental expenditure and interfund transfer requests.
      7. Prepare a capital outlay request summary (if appropriate)
      8. Consolidate departmental expenditure requests, nondepartmental
         expenditure and interfund transfer requests, capital outlay requests and
         revenue estimates. Submit to the CEO for review and revision.
      9. Prepare the budget document.
     10. Present the budget document to the legislative body.
     11. Record the approved budget in the accounts.
     12. Determine the property tax (millage) rate.

                                               3-1
Q3-6   Types of supplementary information that should be included with budget requests
       are:
       a.     Departmental budget request worksheets
       b.     Departmental work programs
       c.     Pro forma balance sheets for each fund, as of the beginning and the
              end of the budget year
       d.     A cash forecast
       e.     A schedule of interest payments, sinking fund contributions, and
              bond issues and retirements
       Any three of these could be listed.

Q3-7 In addition to copies of forms and worksheets to be used, a set of budget
     instructions should contain the following:
     1.      A budget calendar,
     2.      A copy of the budgetary policy guidelines,
     3.      A statement summarizing the organization's anticipated fiscal
             condition for the following year,
     4.      A statement of specific policies to be followed when preparing
             expenditure requests,
     5.      A set of inflationary guidelines to be used in estimating future
             costs of equipment, supplies, etc.,
     6.      Specific instructions on how each form and work sheet should be
             completed, and
     7.      Instructions on where to seek help and clarification of any
             ambiguities that might arise.

Q3-8 The purpose of a budget calendar is to ensure that each person knows when his or
     her (and everyone else's) part of the budgetary process is due. A budget calendar
     formalizes all key dates in the budgetary process. The calendar itself can be a
     simple listing of dates or it can be in the form of a complex flowchart.

Q3-9 A capital budget is a supplement to the capital outlay request summary which
     presents information on the capital improvements desired over a long period of
     time (e.g., five years). It lists projects planned, estimated cost of each project and
     the proposed source or sources of funding for each project. It should be prepared
     several years in advance so that more realistic estimates can be made of the useful
     life of existing assets, the possibility of "unexpected" large expenditures can be
     minimized, and the organization can formulate a sound, long-range revenue
     raising plan.

Q3-10 The purposes of a budgetary review are to make certain that expenditure request
      documents have been properly prepared and that each requested item is justified,
      realistic and appropriate. This part of the budgetary review is performed by the
      budget officer. A final budgetary review is performed by the CEO. The purposes
                                                3-2
       of this review are to (1) obtain input of the CEO into the budgetary process, (2)
       act as a "court of last resort" for disputes between the budget officer and the
       persons preparing expenditure requests, and (3) to enable the CEO to prepare
       specific budget recommendations before submitting them to the legislative body.

Q3-11 A millage rate is a tax rate that, when applied to the assessed valuation of property
      being taxed, will provide the desired amount of revenue. It is determined by
      dividing the amount of money to be raised (the required tax levy) by the net
      assessed value of the property being taxed. The net assessed value of the property
      being taxed is the total value of the property, less the value of exempt property
      (e.g., religious institutions) and the value of the various exemptions granted from
      property taxes (e.g., old age, homestead, etc.).

Q3-12 A budget appropriation is a legal authorization for a government to spend a
      certain amount money for a specific purpose(s).

Q3-13 Three typical types of departmental expenditures are those for current operating,
      capital outlay, and debt service items.

Q3-14 The legal level of budgetary control refers to the organizational unit or budgetary
      unit at which expenditures legally must not exceed the appropriation. Examples
      of the legal level of budgetary control, from highest to lowest, are fund, function,
      department, and object of expenditure.

Q3-15 No, the balance in the estimated revenues account does not represent an asset.
      The estimated revenues account is a budgetary account against which actual
      revenues are compared for budget administration.

Q3-16 The budgetary fund balance account predicts the effect (increase or decrease) on
      actual fund balance during the budget period (usually a fiscal year) assuming that
      actual revenues will equal estimated revenues and expenditures will equal
      appropriations.

Q3-17 Five typical sources of revenues received by local governments are property taxes, sales
      taxes, charges for services, fines and forfeits, and intergovernmental (grants). Other
      sources include fees for licenses and permits and interest on investments.

Q3-18 The subclassifications of expenditures used in governmental budgeting and accounting
      are fund, function/program, organizational unit or department, activity, and object of
      expenditures.

Q3-19 The purpose of encumbrances in governmental accounting is to protect an
      appropriation from being overexpended. Encumbrances show the amounts of an
      appropriation that, in effect, have been used up by the issuance of purchase orders
                                                3-3
       prior to the ordered items being received and actual expenditures and liabilities
       recognized.


CASES

C3-1 The problem with these reports is that they are not tailored to the needs of their
     users. An assumption is made that all activities performed by this city are done so
     on a steady bases. While this is true for many activities others, such as police and
     flood protection, often are performed in "peaks" due to events like Carnival and
     hurricane season. The best approach for this city would be to adopt a form of
     flexible budgeting under which it would allocate more resources to activities like
     police, fire protection and flood control on a seasonal or "as needed" basis.
     Correlations between the extra costs of providing service (such as overtime for
     police officers) and events causing those extra costs would be developed and
     budgeted resources allocated accordingly. A base measure like visitors to the city
     might be used for police protection while past weather records and long-term
     forecasts might be used to plan costs of flood control on a month-to month basis.
     Generally the timing of events like Carnival, major sporting events and large
     conventions are known well in advance and, while hurricanes and floods are
     unpredictable, a large part of the cost of flood control is incurred even in calm
     seasons.

C3-2 No. The purpose of allowing the use of beginning fund balance to cover
     appropriations is to provide a "cushion" which, of course, must eventually be
     replenished. For example, a city might suddenly be faced with unexpected
     obligations, such as federal mandates. To raise the extra revenues to cover these
     mandates often takes a great deal of time and effort (e.g., persuading the citizens
     to vote for extra taxes for something with which they might not agree). In
     addition, it might not always be possible to balance revenues and appropriations
     under ordinary circumstances. For example, a city might be undergoing an
     economic downturn, which will be aggravated by extra taxes. The "cushion" will
     allow the necessary level of services to be performed until the economy recovers
     and additional revenue can be raised. Rural legislatures tend to distrust their
     counterparts from large cities and, not having experienced the complex needs of
     these governmental units, feel that a misleading picture is being presented. They
     also tend to be more conservative then their counterparts from large cities. On the
     other hand, rating agencies like Moody’s and Standard & Poor look at a
     reasonable fund balance as key to financial solvency and a means for cushioning
     against future revenue shortfalls. These agencies like to see fund balances at about
     3% to 5% of expenditures, depending on the economic sensitivity of the tax
     structure. Thus an argument can be made that nothing should be done to dilute the
     “cushion.” The proposal of the rural legislator would prevent a possible dilution
     of the “cushion.”
                                               3-4
ETHICS CASE

EC3-1 No. This is not ethical behavior. The “extra” money in the Director’s budget is
      money that can be used elsewhere. In order to provide this money to Streets and
      Parkways, the city might be underfunding a vital service in some other area. As
      budget director, you should compare the amounts requested by Streets and
      Parkways with the actual expenditures of previous years, to determine the amount
      of “padding” that is taking place. You should also look for frivolous expenditures
      and report them to the Mayor or the City Council. Finally, you should compare
      the expenditures of this department with those of the streets and parkways
      departments of some comparable-sized cities in order to establish benchmarks.

EXERCISES

E3-1 A budget is a formal estimate of resources that an organization plans to expend
     for a given purpose or over a given period and the proposed means of acquiring
     these resources. A budget can be used for:
     1.      Planning - It forces managers to formulate goals, identify the
             interrelationship of various activities and to consider future events
             and the various means of achieving the organization's goals.
     2.      Evaluating Performance- It provides a "standard" with which to
             compare actual results and to analyze causes of variances from
             standard. It also provides an objective basis for measuring superior
             or inferior performance.
     3.      Coordinating Activities - It encourages thinking about the over-all
             objectives of the organization and how each activity contributes to
             the overall effort. It forces managers to subdivide work in an
             organized manner among their subordinates.
     4.      Implementing Plans - It communicates management's expectations
             of subordinates as to what must be accomplished. It establishes
             responsibilities for meeting goals and provides a guide for
             performance.
     5.      Communicating Plans - It is a means of expressing the goals of the
             organization, and the means of attaining them, in a concise,
             quantitative manner. It also helps managers communicate to
             subordinates, in many areas, the expected level of performance.
     6.      Motivation - If presented properly, it can motivate employees to
             work more effectively and efficiently, since it provides a goal for
             the employees to meet (or beat) and the means by which the
             employees can measure their own performance. It should be
             possible to "beat" the budget occasionally and, when this happens,
             the employee(s) should be rewarded.

                                              3-5
       7.   Authorizing Actions - In the case of governmental units, budgets
            are legal documents which can be used to control the release of
            monies for designated activities. In such instances, budgets are
            used to establish ceilings on spending and to provide legal
            guidance as to how and, in many cases, when monies can be spent.

E3-2        July payments for July purchases, $650,000 x .50 =                     $325,000
            July payments for June purchases $400,000 x .70 =                      $280,000
            July payments for items purchased prior to June                          50,000
            Estimated cash disbursements for July                                  $655,000
               Note: Items purchased and vouchered in June but returned in
            July, before payment was made, are not relevant in a cash budget.


E3-3        May collections of sales taxes collected by merchants in May:
            $2,000,000 x .05 x .20 =                                                $20,000
            May collections of sales taxes collected by merchants in April:
            $l,500,000 x .05 x .70 =                                                 52,500
            May collections of sales taxes collected by merchants
                prior to April:                                                      10,000
            Estimated cash receipts from sales taxes collected by
                the City in May:                                                    $82,500


E3-4        Budgeted revenues from property taxes                                  $800,000
            Amount of property taxes to be levied in order
              to collect $800,000 ($800,000/.97)                                   $824,742

            Property tax base:
            Assessed valuation of all property                                  $ 50,000,000
            Less: Assessed value of property not subject to tax                   10,000,000
            Assessed value of property subject to tax                           $ 40,000,000
            Less exemptions:
               Homestead                                                          $2,500,000
               Veterans                                                            1,000,000
               Old age, blindness, etc.                                              500,000
            Net assessed value of property                                      $ 36,000,000

            a. Property tax rate: $824,742 / $36,000,000 = .02291
               or $22.91 per $1,000 of assessed valuation

            b. $2,291 ($100,000 x .02291)


                                            3-6
E3-5 Surplus from prior year                                                        $ 800,000
                                     Year-to-                         Estimated
                                         Date         Remainder           Total
                                       Actual           of Year       Revenues
       Property taxes              $1,250,000          $500,000     $ 1,750,000
       Out-of-township tuition         50,000            20,000          70,000
       Lottery receipts               100,000            50,000         150,000
       State grants                   500,000                ---        500,000     $2,470,000
                                                                                    $3,270,000
       Expenditures:
              Salaries             $875,000            $450,000     $1,325,000
              Fringe benefits         90,000             40,000        130,000
              Operating expenses 588,000                240,000        828,000
              Equipment             110,000              50,000        160,000
              Transportation          15,000             10,000         25,000
              Debt service          100,000             100,000        200,000       2,668,000
       Projected year-end fund balance                                              $ 602,000

E3-6 (Multiple-choice)
     1. b 5. d
     2. d 6. b
     3. d 7. d
     4. d

E3-7 1. The behavioral benefits of a budget lie in the ability of the budget and the
        budgetary process to motivate managers to accomplish the organization's
        objectives. This is done by using the budget as a vehicle to communicate
        the organization's objectives, establishing sub-objectives in accordance
        with the legislative body's objectives and providing a thoroughly-
        understood common basis for performance measurement and feedback.

       2. The budgetary process has been subject to criticism by behavioral
          scientists and others on several counts:
          a. The most serious charge is that the budgetary process fails to
              recognize that individuals may not accept the organization's
              objectives as their own. The result is lack of effort by the
              individual to achieve the organization's objectives.

           b.    The level of objectives set may be established without regard to
                how this will motivate managers to achieve the objectives.
                Results may include underachievement of potentially obtainable
                levels of performance and/or destruction of morale.


                                                3-7
           c.    The budget is used as a pressure device to force conformity with
                and acceptance of objectives established in the budget. This often
                results in personnel finding ways to "beat" the budget, rather than
                actually improving performance.

           d. The budget is administered by individuals, not directly involved
              in the operating activity of the organization, who are not
              particularly skillful in dealing with people.

       3. The most serious problem that must be overcome in order to solve
          problems identified by the criticisms in part (2) is the lack of
          understanding of forces that cause managers to act as they do. There
          must be recognition that the traditional assumptions which underlie the
          budget process are not entirely valid. Such assumptions include:

           a. Managers accept organizational objectives as their own objectives.
           b. Tight standards are best because they represent hard-to-reach
              goals and people will strive to reach hard-to-reach goals.
           c. Upper levels of management are best equipped to establish
              operating sub-objectives.

           It is necessary to recognize behavioral influences (psychological and
           sociological) on managers in the work that they do.

           The most common specific recommendation is to use participative
           budgeting. This approach is considered desirable because it provides for
           an opportunity to identify the objectives of operating personnel and the
           organization. This increases the ability of both to develop operating
           activities to reach those objectives. It also increases the likelihood that
           objectives will be set at levels which will be effective in motivating
           personnel toward the organization's goals.

E3-8       Students' answers to this exercise will be specific to the state in which
           their school is located.

E3-9 (Budgetary Fund Balance)
     a. 0. Estimated revenues equal appropriations.
     b. $2,000,000 debit. Appropriations exceed estimated revenues by this amount.
     c. $2,000,000 credit. Estimated revenues exceed appropriations by this amount.




                                                3-8
E3-10 (Budgetary accounting)
      Total estimated revenues = $2,000,000 + 720,000 + 120,000 + 8,500 =
      $2,848,500.

      Total appropriations = $425,000 + 1,300,000 + 630,000 + 367,000 = $2,722,000.

      Estimated revenues - Appropriations = $2,848,500 - $2,722,000 = $126,500 surplus.

           Estimated revenues                                      2,848,500
               Appropriations                                                     2,722,000
               Budgetary fund balance                                               126,500
           To record 2009 budget.

E3-11 (Relationship between budgetary fund balance and actual fund balance)
      a. Revenues - Expenditures = $5,000,000 - [$4,950,000 - 7,000] = $57,000 increase.
      b. Revenues - Expenditures = $5,000,000 - $4,950,000 = $50,000 increase.
      c. Revenues - Expenditures = [$5,000,000 + $4,000] - $4,950,000 = $54,000 increase.
      d. Revenues - Expenditures = [$5,000,000 - $3,000] - [$4,950,000 - $3,000] = $50,000
          increase.
      e. Revenues - Expenditures = [$5,000,000 + $2,000] - [$4,950,000 - $6,000] = $58,000
          increase.

E3-12 (Encumbrance Journal Entries)
          Encumbrances                                                16,700
              Budgetary fund balance reserved for encumbrances                        16,700
          To record encumbrance for goods ordered.

           Budgetary fund balance reserved for encumbrances           16,700
               Encumbrances                                                           16,700
           To reverse encumbrance for goods received.

           Expenditures                                               16,700
               Cash                                                                   16,700
           To record expenditure for purchased goods.

E3-13 (Encumbrance Journal Entries)
          Encumbrances--public safety                                 16,700
              Budgetary fund balance reserved for encumbrances                        16,700
          To record encumbrance for goods ordered.

           Budgetary fund balance reserved for encumbrances           16,700
               Encumbrances–public safety                                             16,700
           To reverse encumbrance for goods received.

                                             3-9
           Expenditures–public safety                                      17,000
               Cash                                                                  17,000
           To record expenditure for purchased goods.

E3-14 (Encumbrance Journal Entries)
          Encumbrances–public safety                                       16,700
              Budgetary fund balance reserved for encumbrances                       16,700
          To record encumbrance for goods ordered.

           Budgetary fund balance reserved for encumbrances                16,700
               Encumbrances–public safety                                            16,700
           To reverse encumbrance for goods received.

           Expenditures–public safety                                      16,500
               Cash                                                                  16,500
           To record expenditure for goods purchased.

E3-15 (Encumbrance and partial orders)
       October 1   Encumbrances--Road Maintenance                          10,000
                       Budgetary fund balance reserved for encumbrances              10,000
                   To record encumbrance.

       October 20 Budgetary fund balance reserved for encumbrances          8,000
                      Encumbrances--Road Maintenance                                  8,000
                  To record partial reversal of encumbrance.

                   Expenditures--Road Maintenance                           8,000
                       Cash                                                           8,000
                   To record expenditure.

       November 1Budgetary fund balance reserved for encumbrances           2,000
                     Encumbrances--Road Maintenance                                   2,000
                 To record partial reversal of encumbrance.

                   Expenditures--Road Maintenance                           2,000
                       Cash                                                           2,000
       To record expenditure.

E3-16 (Budgetary interchange)
                 Appropriations--Public Safety                            500,000
                     Appropriations--Streets and Bridges                            500,000
                 To record budgetary interchange.




                                              3-10
PROBLEMS




           3-11
 P3-1
                                      STATEMENT OF ACTUAL AND ESTIMATED REVENUES

 Fund: General
 Date: October 15, 2008
 Prepared by ____________
 Approved by ____________

                                       Jan.-Sept.    Oct.-Dec.         Total
                            2007         2008          2008            2008           2008           2009
         Source             Actual       Actual      Est. Act.       Est. Act.       Budget       Estimated      Remarks
 Property taxes           5,436,720   $4,084,000    $1,400,000      $5,484,000     $5,504,000     $5,904,000   Reassessment
 Interest and penalties      38,486        22,800       15,000          37,800         38,000         38,000
 Sales taxes                872,680      454,500       445,000         899,500        900,000      1,080,000   Rate increase
 Fines and penalties         64,842        39,240       30,000          69,240         70,000         77,000   Conventions
Lottery receipts      -0-
 54,250
      175,750       230,000        225,000      450,000
 License fees           9,650        7,540        2,460    10,000         10,000         10,000
 Total           $6,422,378     $4,662,330   $2,068,210$6,730,540     $6,747,000     $7,559,000




                                                             3-12
P3-2
                                        Village of Nimbus
                                          General Fund
                                        Budget Summary
                                         Fiscal Year 2009
   Revenues:
      Property Taxes                                                  $5,904,000
      Interest and Penalties                                              38,000
      Sales Taxes                                                      1,080,000
      Fines and Penalties                                                 77,000
      Lottery Receipts                                                   450,000
      License Fees                                                        10,000   $7,559,000

   Appropriations:
      Streets & Parkways
      Personal Services                                $1,846,285
      Travel                                                1,850
      Equipment                                            80,900
      Operating Items                                      36,450     $1,965,485

       Public Safety
       Personal Services                               $1,115,000
       Travel                                              10,000
       Equipment                                          650,000
       Operating Items                                     85,000      1,860,000

      Administration
      Personal Services                                $1,450,000
      Travel                                               20,000
      Equipment                                           100,000
      Operating Items                                      60,000      1,630,000    5,455,485
   Excess of Revenues Over Appropriations                                           2,103,515

   Other Financing Sources (Uses):
      Transfer to Debt Service Fund                    $1,000,000
      Transfer to Venus Park Fund                          50,000     $1,050,000   (1,050,000)

   Excess of Revenues and Other Sources
   Over Expenditures and Other Uses                                                 1,053,515
   Estimated Fund Balance - January 1, 2009                                         2,607,241
   Estimated Fund Balance - December 31, 2009                                      $3,660,756

P3-3   (Budgetary journal entry)

       Estimated Revenues--Property taxes                           $ 9,500,000
       Estimated Revenues--Sales taxes                                1,835,000



                                                3-13
       Estimated Revenues--Fines and forfeits                       65,500
       Estimated Revenues--Intergovernmental                     1,455,250
               Appropriations--Administration                                $ 2,250,000
               Appropriations--Public Safety                                   4,770,500
               Appropriations--Parks and Recreation                            1,150,000
               Appropriations--Streets                                         3,435,000
               Appropriations--Libraries                                         900,000
               Budgetary fund balance                                            350,250
           To record 2009 General Fund operating budget.

P3-4   (Budgetary accounting)
       1. Estimated revenues--property taxes                     1,600,000
          Estimated revenues--fines and forfeits                   150,000
          Estimated revenues--intergovernmental                    475,000
              Appropriations--general government                               210,000
              Appropriations--public safety                                  1,580,000
              Appropriations--streets                                          395,000
              Budgetary fund balance                                            40,000
            To record Tessietown's 2009 General Fund budget.

       2. Encumbrances--general government                         210,000
          Encumbrances--public safety                            1,450,000
          Encumbrances--streets                                    395,000
              Budgetary fund balance reserved for encumbrances               2,055,000
            To record encumbrances for issued purchase orders.

       3. Cash                                                   1,267,000
              Revenues--property taxes                                         855,000
              Revenues--fines and forfeits                                     117,000
              Revenues--intergovernmental                                      295,000
            To record collection of revenues.

       4. Budgetary fund balance reserved for encumbrances       1,019,000
              Encumbrances--general government                                 165,000
              Encumbrances--public safety                                      719,000
              Encumbrances--streets                                            135,000
            To reverse encumbrances for items received.

         Expenditures--general government                         163,500
         Expenditures--public safety                              720,100
         Expenditures--streets                                    134,000
             Cash                                                            1,017,600
           To record expenditures for items received.

       5. Appropriations--public safety                           120,000
              Appropriations--streets                                          120,000



                                                3-14
     To record budgetary interchange.

6. Cash                                               960,000
       Revenues--property taxes                                 742,000
       Revenues--fines and forfeits                              37,000
       Revenues--intergovernmental                              181,000
     To record collection of revenues.

7. Budgetary fund balance reserved for encumbrances   973,500
       Encumbrances--general government                          45,000
       Encumbrances--public safety                              693,700
       Encumbrances--streets                                    234,800
     To reverse encumbrances for items received.

  Expenditures--general government                     45,000
  Expenditures--public safety                         691,250
  Expenditures--streets                               235,350
      Cash                                                      971,600
    To record expenditures for items received.




                                         3-15
P3-5 (Subsidiary ledgers)
                                        Tessietown
                                       General Fund
                                      Revenues Ledger
                                           2009

Source: Property taxes
 Entry            Item            Estimated Revenues      Actual Revenues   Difference
  No.                                     Dr                     Cr          Dr (Cr)
      1                  Budget               1,600,000                         1,600,000
      3           Cash Receipts                                   855,000         745,000
      6           Cash Receipts                                   742,000           3,000



Source: Fines and forfeits
 Entry            Item            Estimated Revenues      Actual Revenues   Difference
  No.                                     Dr                     Cr          Dr (Cr)
      1                  Budget                150,000                            150,000
      3           Cash Receipts                                   117,000          33,000
      6           Cash Receipts                                    37,000          (4,000)


Source: Intergovernmental
 Entry            Item            Estimated Revenues      Actual Revenues   Difference
  No.                                     Dr                     Cr          Dr (Cr)
      1                  Budget                475,000                            475,000
      3           Cash Receipts                                   295,000         180,000
      6           Cash Receipts                                   181,000          (1,000)




                                            3-16
17
                                                    Tessietown
                                                  General Fund
                                               Appropriations Ledger
                                                   January 2008
Function: General government
                                                                                                            Available
 Entry No.                               Appropriation            Encumbrances         Expenditures    Appropriation
                               Item       Cr                      Dr        Cr           Dr            Cr
            1                Budget             210,000                                                      210,000
            2        Order materials                         210,000                                               0
            4      Receive materials                                        165,000                          165,000
            4    Record expenditure                                                          163,500            1,500
            7      Receive materials                                         45,000                           46,500
        7     Record expenditure                                                              45,000            1,500
Function: Public safety
                                                                                                           Available
Entry No.                                 Appropriation           Encumbrances          Expenditures   Appropriation
                                 Item      Cr                     Dr        Cr            Dr           Cr
        1                     Budget           1,580,000                                                    1,580,000
        2             Order materials                         1,450,000                                      130,000

        4           Receive materials                                        719,000                         849,000
        4         Record expenditure                                                         720,100         128,900
        5       Budgetary interchange          (120,000)                                                        8,900
        7           Receive materials                                        693,700                         702,600
        7       Record expenditure                                                           691,250          11,350
Function: Streets
                                                                                                           Available
Entry No.                                  Appropriation           Encumbrances        Expenditures    Appropriation
                                 Item       Cr                     Dr        Cr          Dr            Cr
        1                      Budget            395,000                                                     395,000
        2              Order materials                            395,000                                          0

        4            Receive materials                                      135,000                          135,000
        4          Record expenditure                                                        134,000            1,000
        5       Budgetary interchange            120,000                                                     121,000
        7            Receive materials                                      234,800                          355,800

        7          Record expenditure                                                        235,350         120,450


                                                           3-20
P3-5 (Continued) The balances for each revenues source after transaction 7 are as follows:
       Property taxes, $3,000 debit balance. Fines and forfeits, $4,000 credit balance.
       Intergovernmental, $1,000 credit balance. After transaction 7, the available
       appropriations for the General Government, Public Safety, and Streets functions are,
       respectively, $1,500, $11,350, and $120,450. Much of the spending authority now
       appropriated to the Streets function would have “belonged” to the Public Safety function
       had the budgetary interchange at transaction 5 not taken place.


P3-6
   1.   Estimated revenues--property taxes                           2,550,000
        Estimated revenues--charges for services                       400,000
        Estimated revenues--miscellaneous                              175,000
        Budgetary fund balance                                         130,000
             Appropriations--administration                                           465,000
             Appropriations--public safety                                          1,860,000
             Appropriations--roads and bridges                                        930,000
          To record Quiet City's 2009 General Fund budget.

   2.   Encumbrances--administration                                   465,000
        Encumbrances--public safety                                  1,860,000
        Encumbrances--roads and bridges                                930,000
            Budgetary fund balance reserved for encumbrances                        3,255,000
          To record encumbrances for issued purchase orders.

   3.   Cash                                                         2,318,000
            Revenues--property taxes                                                2,005,000
            Revenues--charges for services                                            248,000
            Revenues--miscellaneous                                                    65,000
          To record collection of revenues.


   4.   Budgetary fund balance reserved for encumbrances             1,943,000
            Encumbrances--administration                                              265,000
            Encumbrances--public safety                                               902,000
            Encumbrances--roads and bridges                                           776,000
          To reverse encumbrances for items received.

        Expenditures--administration                                   263,500
        Expenditures--public safety                                    902,000
        Expenditures--roads and bridges                                776,000
            Cash                                                                    1,941,500
          To record expenditures for items received.

   5.   Cash                                                           801,000
            Revenues--property taxes                                                  535,000
            Revenues--charges for services                                            155,000
            Revenues--miscellaneous                                                   111,000
          To record collection of revenues.
6.   Budgetary fund balance reserved for encumbrances   1,302,000
         Encumbrances--administration                               200,000
         Encumbrances--public safety                                948,000
         Encumbrances--roads and bridges                            154,000
       To reverse encumbrances for items received.




                                            3-22
Expenditures--administration                          201,000
Expenditures--public safety                           947,000
Expenditures--roads and bridges                       153,500
    Cash                                                        1,301,500
  To record expenditures for items received.




                                               3-23
  P3-7 (Revenues and appropriations subsidiary ledgers)

                                              Quiet City
                                            General Fund
                                           Revenues Ledger
                                                2009
Source: Property taxes
     Entry No.     Item              Estimated Revenues     Actual Revenues     Difference
                                     Dr                     Cr                  Dr (Cr)
     1             Budget            2,550,000                                  2,550,000
     3             Cash Receipts                            2,005,000           545,000
     6             Cash Receipts                            535,000             10,000
    6                                                                           10,000
Source: Charges for services
    Entry No.     Item               Estimated Revenues     Actual Revenues     Difference
                                     Dr                     Cr                  Dr (Cr)
    1             Budget             400,000                                    400,000
    3             Cash Receipts                             248,000             152,000
    5            Cash Receipts                              155,000             (3,000)
Source: Miscellaneous
    Entry No.     Item               Estimated Revenues     Actual Revenues    Difference
                                     Dr                     Cr                 Dr (Cr)
    1             Budget             175,000                                   175,000
    3             Cash Receipts                             65,000             110,000
    5             Cash Receipts                             111,000            (1,000)

                                             Quiet City
                                           General Fund
                                        Appropriations Ledger
                                                2009
Function: Administration
                                                                                               Available
 Entry No.                           Appropriation      Encumbrances       Expenditures     Appropriation
                              Item    Cr                Dr        Cr         Dr             Cr
         1                  Budget        465,000                                                465,000
         2         Order materials                     465,000                                         0
         4       Receive materials                               265,000                         265,000
         4   Record expenditure                                                263,500             1,500
         6       Receive materials                               200,000                         201,500
         6   Record expenditure                                                201,000               500

                                                     3-24
Function: Public safety
                                                                                             Available
 Entry No.                          Appropriation      Encumbrances        Expenditures   Appropriation
                            Item     Cr                Dr        Cr          Dr           Cr
         1                Budget       1,860,000                                              1,860,000
         2      Order materials                      1,860,000                                        0
         4    Receive materials                                  902,000                        902,000
         4   Record expenditure                                                 902,000               0
         6    Receive materials                                  948,000                        948,000
         6   Record expenditure                                                 947,000           1,000

Function: Roads and bridges
                                                                                             Available
 Entry No.                          Appropriation      Encumbrances        Expenditures   Appropriation
                             Item    Cr                Dr        Cr          Dr           Cr
         1                Budget          930,000                                              930,000
         2       Order materials                      930,000                                        0

         4     Receive materials                                 776,000                       776,000
         4   Record expenditure                                                776,000               0
         6     Receive materials                                 154,000                       154,000

         6   Record expenditure                                                153,500             500

P3-7 (Continued) The balances for each revenues source after transaction 6 are as follows:
  Property taxes, $10,000 debit balance, Charges for services, $4,000 credit balance.
  Miscellaneous, $1,000 credit balance. After transaction 6, the available appropriations for
  the Administration, Public Safety, and Roads and Bridges functions are, respectively, $500
  credit, $1,000 credit, and $500 credit.




                                                    3-25

								
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