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					  Introduction to
Federal Accounting

    Presented by:


Paul J. Dominick, CDFM
     Adjunct Faculty
 Graduate School, USDA
pjdominick@verizon.net

                         1
Accounting
   The Systematic

         - Classification
         - Recording            Of the financial
         - Reporting              records of an
         - Analyzing               enterprise
         - Interpretation
                   used to
    - recognize the factors that determine its true condition
    - evaluate the progress or failures of a business

                                                            2
    ACCOUNTING

   “WHATSOEVER YE DEBIT, SO
    SHALL YE CREDIT. THIS YE
    MUST DO WITHOUT FAIL. FOR,
    IF THY DEBITS DO NOT EQUAL
    THY CREDITS, YE’LL FIND THY
    “ASSETS” IN JAIL”.


                                  3
Common Accounting
Terms
      Accounting Cycle
  Double Entry Accounting

       General Journal

      Ledger Accounts

       General Ledger

  Cash and Accrual Basis of
          Accounting
                               4
 Accounting Introduction
Federal accounting framework
 Budgetary accounting
 Financial accounting
 Managerial cost accounting

Users of Federal Financial Information
 External users (citizens and Congress)
 Internal users (agency heads and
  management)
                                           5
  The United States Constitution

“No money shall be drawn from the Treasury but in
consequence of appropriations made
by law . . .”

                        – and –

“. . . A regular statement and account of receipts and
expenditures of all public money . . . shall be
published from time to time.”

                        (Article 1, Sec 9, Clause 7)
                                                         6
                           Federal Financial Statements
                      Consolidated Statements

UNITED STATES GOVERNMENT
                                                                                               Balance Sheet
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997

(In billions of dollars)
                                                             Consolidated Statements
Assets:
Cash and other monetary assets        UNITED STATES GOVERNMENT
                                      CONSOLIDATED STATEMENT OF NET COSTS
                                                                                                                              Statement of Net Cost
Accounts receivable                   FOR THE YEAR ENDED SEPTEMBER 30, 1997
Loans receivable
                                      (In billions of dollars)
Taxes receivable
Inventories and related property      National defense
                                                                                               Consolidated Statements
                                      Human resources:
Property, plant, and equipment        Education, training, employme
                                        social services
Other assets net position:
Liabilities and
 Total assets
Accounts payable
                                      Health
                                      Medicare
                                                                        UNITED STATES GOVERNMENT
                                                                        CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION
                                                                        FOR THE YEAR ENDED SEPTEMBER 30, 1997
                                                                                                                                                 Statement of Change
Federal debt securities held by the
                                      Income security
                                      Social security
                                      Veterans benefits and services
                                                                        (In billions of dollars)

                                                                        Net cost of Government operations                 1,603.3
                                                                                                                                                    in Net Position
Federal employee and veteran ben
                                       Total human resources
                                      Physical resources:               Less:
Environmental liabilities
                                      Energy                            Financing sources
Benefits due and payable
                                      National resources and enviro       from non-exchange revenues:
Loan guarantee liabilities
                                      Commerce and housing credit       Individual income tax and
Other liabilities                                                                                               1,247.5
                                      Transportation                      tax withholdings
Commitments and contingencie
 Total liabilities                                                                                                179.8
                                      Community and regional devel      Corporation income taxes
Net position                                                                                                       27.8
 Total liabilities and net position
                                       Total physical resources
                                      Net interest:
                                                                        Unemployment taxes
                                                                        Excise taxes
                                                                                                                   55.8                             Required Supplemental
                                       Treasury securities held by th                                              19.7
                                      Other functions:
                                      International affairs
                                                                        Estate and gift taxes
                                                                        Customs duties
                                                                                                                   20.0                            Stewardship Information -
                                                                                                                   26.1
                                                                        Miscellaneous
                                      General science, space, and te
                                      Agriculture                        Total non-exchange revenues
                                                                                                                          1,576.7
                                                                                                                             11.6
                                                                                                                                                        Vol 6B, Chapter 11
                                      Administration of justice         Other earned revenues
                                      General government
                                       Total other functions
                                                                        Excess of costs over revenues
                                                                         before unreconciled transactions
                                                                                                                                    -15.0         RSI - Vol 6B, Chapter 12 (DM)
                                       Total
                                                                        Unreconciled transactions affecting                         12.4
                                                                         the change in net position.                                      -2.6
                                                                        Change in net position                                        -5,000.4
                                                                         Net position-beginning of period                             -5,003.0
                                                                         Net position-end of period


                                                                                                                                                                                  7
    Accounting-Related Legislation
   BUDGET AND ACCOUNTING ACT OF 1921:
       - ESTABLISHED AN EXECUTIVE BUDGET PROCESS

       - REQUIRED THE PRESIDENT TO SUBMIT HIS BUDGET
       RECOMMENDATIONS TO CONGRESS EACH YEAR. TO ASSIST
       HIM, THE BUREAU OF THE BUDGET WAS CREATED

       - CONGRESS WOULD BETTER COORDINATE REVENUE AND
       SPENDING DECISIONS

       - APPROPRIATIONS COMMITTEES JURISDICTION OVER
       SPENDING WAS STRENGTHENED

        - GOVERNMENT ACCOUNTABILITY OFFICE (GAO) WAS
    ESTABLISHED
                                                          8
Accounting-Related Legislation
1950 BUDGET AND ACCOUNTING ACT
   Amended the 1921 Budget and Accounting Act.

   Assigned to the executive branch the responsibility for maintaining accounting
    systems and producing financial reports.

    The CG, in consultation with the Director of OMB, was required to prescribe the
    principles, standards, and related requirements for accounting to be observed
    by the executive agencies.

   Each was given the responsibility for establishing and maintaining systems of
    accounting and internal controls.

   Established accounting systems of executive agencies were required to conform
    to the principles, standards, and related requirements prescribed by the CG.


                                                                                     9
    Accounting-Related Legislation
   THE CONGRESSIONAL BUDGET AND IMPOUNDMENT CONTROL
    ACT OF 1974:
         - CHANGED THE FISCAL YEAR TO 1 OCTOBER TO 30 SEPTEMBER

         - CONGRESSIONAL BUDGET OFFICE(CBO)

        ESTABLISHED TO PROVIDE DATA ON AND ANALYSIS OF THE FEDERAL
    BUDGET

         -   ESTABLISHED HOUSE AND SENTATE BUDGET COMMITTEES
      “Concurrent Resolution on the Budget”
Accounting-Related Legislation
   1982 Federal Managers’ Financial Integrity Act:

   Each agency reports the results of a self-evaluation
    of the adequacy of systems of internal control

   Assurance that agencies are managed properly


   Obligations and costs comply with applicable laws

   Funds, property and other assets are safeguarded
    against waste, loss, and unauthorized use

                                                           11
Accounting-Related Legislation
   Prompt Payment Act of 1982

    Pay vendors on time or pay interest




                                          12
Accounting-Related Legislation
   CHIEF FINANCIAL OFFICERS ACT OF 1990

       - REQUIRED CFO IN CABINET DEPARTMENTS
       AND SPECIFIED AGENCIES

       - CFOs OVERSEE FINANCIAL MANAGEMENT
       ACTIVITIES




                                               13
Accounting-Related Legislation
   Government Performance and Results Act of 1993
    Requires agencies:
      to submit 5-year strategic plans…DoD must update at least every 4
       years
      to submit annual performance plans
          Now part of Performance Budget

      to report prior year program performance by November 15th of
       each year
          Now in Performance and Accountability Report (PAR)

          Shifts focus of programs from workload activities to

           performance metric outputs and outcomes.




                                                                      14
   Output vs. Outcome

Outputs            Outcomes

Products            Tangible
or services         changes or
delivered           benefits that
by your             result from
program.            your program.

                                    15
Accounting-Related Legislation
   Government Management Reform Act – 1994

    - Required systems to:
        -- support the control of cost of government
        -- support full cost reporting and full disclosure of
        financial data

    - Required application of accounting standards to
    produce consistency in financial reporting



                                                           16
Accounting-Related Legislation
   Federal Financial Management Improvement Act –
    1996

   Each agency head establish, evaluate, and maintain adequate
    systems of accounting and internal control

   Incorporate accounting standards and reporting objectives

   Each audit of an agencies financial statements shall report if the
    agency is in compliance with the preceding requirements




                                                                    17
Federal Accounting Standards
Advisory Board (FASAB)
   Develops and recommends federal
    accounting concepts and standards
       established in 1990
       5 Concepts
       33 Standards

   Federal Generally Accepted Accounting
    Principles (GAAP)

                                            18
  Implementation of Federal
  Accounting Standards


Office of Management
 and Budget (OMB)
              Government
          Accountability Office
                (GAO)
                       Department of
                         Treasury
                                       19
Types of Government Funds

 Department of Defense:
      Appropriated Funds
      Reimbursable Funds
      Revolving Funds
      Trust Funds
      Nonappropriated Funds
                               20
Categories of Appropriations

 Annual Appropriations
 Multiyear Appropriations
 No-Year Appropriations
 Permanent (Indefinite) Appropriations



                                          21
                             Flow of Funds
            THE PRESIDENT                                   CONGRESS

                                   PRESIDENT AND CONGRESS
                                     AGREE ON THE BUDGET



   PRESIDENT SIGNS
   APPROPRIATIONS                          TREASURY                 OMB
        BILLS
                                          ISSUE TREASURY       APPORTIONS THE
                                          WARRANTS AND         APPROPRIATIONS
                                          CREATES “BANK
                                          ACCOUNTS”
             Units A, B, C

  BUDGET
                                                   Agency
EXECUTION                    Agency
  BEGINS
                             Divisions             Hqs.
Funding Flow
   Authorization

   Appropriation

   Treasury Warrant

   Apportionment

   Allotment

   Allocation

   Commitment

   Obligation

   Outlay

                       23
Types of Financial Authority
  Direct
  Obligation                    Constitutes
                                funding
  Authority (DOA)               received by
         +                      installation
  Funded
  Reimbursement
  Authority (FRA)
                                Allows funding
         +                      to be increased
  Automatic                     by amount of
  Reimbursement                 orders received
  Authority (ARA)
  = Total Financial Authority
                                                  24
     Direct Obligation Authority (DOA)
   Specific dollar amount
   To be used for mission activities and base
    operations
   Quarterly amount immediately available for
    obligation upon receipt of the allotment
   Controlled by installation




                                                 25
Funded Reimbursement Authority
            (FRA)
   Specific dollar amount
   For specific non-mission activities
    - Foreign Military Sales, damage to Government
    Quarters and Trailer Court Lot Rental and
    Utilities
   Quarterly amount not immediately available for
    obligation upon receipt of allotment (placed in a
    reserve account)
   Controlled by Agency
                                                        26
     Automatic Reimbursement
         Authority (ARA)
   No specific dollar amount
   For specific non-mission activities
    (Other than those listed in FRA)
   Not immediately available for obligation upon
    receipt of the allotment (obligation authority
    "generated" based on receipt of order)
   Controlled by installation


                                                     27
     Flow of Resources
 Commitments (FMR Volume 3 Chapter 8)

 Obligations (Bona fide need - FMR Volume 11A 020507)
    Obligating Documents

       • Contracts, Purchase Orders
       • Travel Orders
       • Requisitions
       • Military Interdepartmental Purchase Requests (MIPR)
            – Project Orders (FMR Volume 11A, Chapter 2)
            – Economy Act Orders (FMR Volume 11A, Chapter 3)
 Outlays

                                                               28
Reimbursements
   Project Order (41 U.S.C. 23):
       Placed with and accepted by:
          Government Owned and Government
           Operated (GOGO) establishment.
          Shipyard, arsenal, ordinance plant or other
           manufacturing plant or shop.




                                                         29
                          Project Orders
   Same as a commercial contract to the customers’ appropriation
        Extends beyond the life of the appropriation. Up to five years
         after the appropriation expires for new obligations
        Over-billing may create a 31 USC 1517 violation
   Normally issued for the overhaul or manufacturing of a specific
    number of items within a specific time frame for a specific price
   Performing activity should incur costs of not less than 51% of the
    total costs to performing the work
   The performing activity must not accept the project order if the
    requirements of the project order regulations are not met
   A Military Interdepartmental Purchase Request (DD 448 Form) is
    used to issue project orders                                          30
         Project Order Characteristics
   Specific regarding work to be done
   Single purpose with identification to a final product or end item
   Includes a production schedule
   Includes funded cost per item
   Usually mission oriented
   Be performed in house
   Bona fide need in the year executed
   Commence work within a reasonable time (90 days)
   Return orders for cancellation if work financed by an expiring
    appropriation is not started by 1 January

                                                                        31
Reimbursements
   Authorized by:
       The Economy Act (31 U.S.C. 1535)
           Ordering Activity: Orders supplies or services
            from a performing activity (government
            activities only).
           Record as obligations when the order is
            accepted in writing (DD Form 448-2) by the
            performing activity.



                                                             32
Economy Act Orders
    Must be closed-out by 30 September.
    Change in dollar amount requires:
       An amendment to the original MIPR

        (DD Form 448).
       Acceptance (DD Form 448-2) of the

        amendment by the performing
        activity.
       Adjust the obligation in accounting

        based on the acceptance of (DD
        Form 448-2).

                                              33
Customer/Provider Scenario
   Customer (ordering agency) prepares MIPR requesting the
    repair and overhaul of 400 widgets for a total cost of
    $ 1,300,000. The MIPR was issued as a Project Order and is
    funded with an annual O&M appropriation

   Performing agency accepts the MIPR and prepares a MIPR
    acceptance, DD Form 448-2

   Based on the MIPR acceptance the ordering agency records an
    obligation in their accounting records and the performing
    agency records an order received in their accounting records in
    the amount of $1,300,000




                                  34
   MIPR Impact On Customer/ Provider Books
Provider Books
     Orders Received              Reimbursements Earned                    Collections                 Unfilled Orders


MIPR ACCEPTANCE         $ 1.3M    $ 1.216M                         $ 1.216M                     $ 84
FY ’09 – 14 – Available
To complete Work thru             Billed to Customer based on                                   Should complete work by
30 Sept., 2014                    Cost In support of the Project                                30 Sept. 2014
Assumes O&M customer              (SF 1080 bill submitted)           4252/4251 R.E. COLL./R.E
                                                                     1010/1310
4220/4210 Unfilled Orders/Anti.     4251/4220 R.E./UFO                FWTT/A.R.
Reimb & Other Income                1310/5200 A/R - REV



Customer Books

     Obligations                              Cost                   Payment / Liquidation      Un-liquidated Obligations


MIPR ACCEPTANCE          $ 1.3M   $ 1.216 M                        $ 1.216 M                    $ 84

Project Order                     Based on SF 1080 Bill                                         Must be de-obligated if not
(DD 448-2)                                                                                      Completely liquidated by
                                    4801/4901                      4901/4902                    30 Sept. 2014
4610/4801                           6100/2110                      2110/1010
                                    3100/5700




                                                                                                                              35
   USSGL Chart of Accounts
1000          Assets
2000          Liabilities
3000          Net Position (Capital)
4000          Budgetary
5000          Revenues and Financing Sources
6000          Expenses
7000          Gains and Losses
8000          Memorandum Accounts
FMR Volume 1, Chapter 7

                                               36
Budgets
A Budget:
   Provides the oxygen on which agencies survive
   Is a quantitatively expressed plan
   Sets the goals and objectives of an organization.
   Is for a specific financial period (e.g., fiscal year)




                                                             37
Budgets (cont.)
A Federal budget:
 1. Is initiated by the President
     through the operation of OMB and
     built from smaller to larger units
 2. A Public Law when signed by
     Congress and signed by the
     President
 3. A Public Law representing different
  levels of obligational authority         38
Budgeting
   Accounting is very important, however it isn’t in the
    headlines as often as the budget, however,
   The status of agency’s budget authority must be
    accounted for to avoid overspending or
    overobligating
   Budget accounts are set forth in the 4000 series of
    the Standard General Ledger

    SFFAS NO. 7


                                                            39
Budgetary Accounting
   Budgetary accounting is often referred
    to as fund accounting.

   Budgetary accounts are a set of
    accounts that are self-balancing and
    represent different levels of obligational
    authority for different units.

                                             40
Budgetary Accounting
   Purpose
       Record appropriation status
       Record subdivisions of budgetary authorities
       Record valid commitments, obligations,
        expenditures, outlays
       Control use of budgetary authorities
          Use for appropriate purpose

          Use during time provided

          Use within amount provided



                                                       41
Budgetary Definitions
   Appropriations
       Congressional authorization to obligate
        government and make payment from the Treasury
   Apportionment
       Distribution of congressional budgetary authority
        to a federal agency by OMB
   Allotment
       Distribution of apportioned budgetary authority to
        organizational activities
   Commitment
       Administrative reservation of budgetary authority
                                                            42
Budgetary Definitions (cont’d)
   Obligation
       Legally encumbers a specified sum of budgetary authority
        that requires future payment
   Outlays/Disbursements
       Payment for costs incurred, goods and services received
   Expended Authority
       Budgetary authority used to fund goods and services
        received
   Expired Authority
       Budgetary authority that is no longer available for new
        obligations
   Canceled Authority
       Budgetary authority that has been closed
                                                                   43
What is an
Obligation?

              44
     Government Definition
   Orders placed,
   Contracts awarded,
   Grants issued,
   Services received, etc.--
   -- that will require payments (“outlays”)
    during the same or a future period.
                                            45
 Obligations are Classified as:
                OBLIGATION




 Undelivered Order           Delivered Order


Unpaid         Paid      Paid           Unpaid
 4801          4802      4902            4901


                                                 46
       What is an “Accrued
       Expenditure”?
Charges…that reflect liabilities incurred and the
need to pay for:
      a.    services…
      b.    goods…received…
      c.    amounts becoming owed under programs for
            which no current service or performance is
            required (such as annuities, benefit payments..)*
Expenditures accrue regardless of when cash
payments are made…*
*GAO, “Glossary of Federal Terms Used in the Federal Budget Process”, 1981.

                                                                              47
     Expenditures in the Budget

              OBLIGATION




                           Delivered Order
Expenditure
                      PAID           UNPAID



                                              48
        Accrual Accounting Events
                                    Timing of the Recording of Purchase of
                                 Materials Under Accrual Method of Accounting
                                           Records in Accounting Records in Month in Which:


    Transaction          Order is Placed         Materials are           Bill is Paid         Materials are used
                                                  Delivered
Placing an order for   As an obligation
materials


Materials Delivered                           As an accrued
                                              expenditure

Payment made for                                                    As a disbursement of
materials                                                           cash


Materials used or                                                                          As an applied cost
consumed




                                                                                                              49
What is an
 Outlay?
             50
   A payment of an obligation
   Once all payments are made, the obligation goes
    away (is “liquidated”)
   Outlays during a fiscal year may be for payment of
    obligations incurred in prior years or in the same
    year




                                                         51
  Outlays are Paid Obligations

                OBLIGATION




 Undelivered Order           Delivered Order



UNPAID        PAID OUTLAY PAID         UNPAID



                                                52
How do we Link to the
Budget?
   Accounting events are assigned unique
    identifiers from a standard government-
    wide list (U.S. Standard General
    Ledger)
   All federal agencies are required to use
    these standard accounts in order to
    properly link to the Budget

                                           53
              Fiscal Law
 An agency may obligate & expend
  appropriations:
   Only for a proper purpose
   Only within the authorized time limits
   Within the amounts established by Congress for a
    bona fide need




                                                   54
            PURPOSE

Proper Purpose Rule:

For the purposes for which they were
appropriated
per 31 U. S. C. 1301 (a):

“ Appropriations shall be applied only to
the objects for which the appropriations
were made except as otherwise provided
by law ”
                                            55
                  Time
   Within the authorized time limits:

     Expenditure of funds must be incurred
      within the time for which the appropriation
      was made available.

     Do not execute current year funds for prior
      or future year expenditures.


                                                56
                Time
 A valid obligation must be made to an
  appropriation within the period the funds are
  available.
    O&M: One fiscal year
    RDTE: Two fiscal years
    Procurement: Three fiscal years
    MILCON: Five fiscal years
    SCN: Five fiscal years
    No Year: Dollar specific, indefinite
     expiration

                                              57
                Amount
 Within the amounts established by
  Congress:
   The obligation may not exceed the amount
     appropriated by statute, nor may it be
    incurred before the appropriation becomes
    law (31 U.S.C. 1341 and 41 U.S.C. 11).




                                            58
59
60
       Budgetary Accounting

  RESOURCES = STATUS OF RESOURCES
4119   Appropriations        4450   Unapportioned
4201   Total Actual          4510   Apportionments
       Resources Collected   4610   Allotments
                             4700   Commitments
                             4801   Undel Order, Unpaid
                             4901   Deliv Order, Unpaid
                             4902   Deliv Order, Paid
                             4650   Expired Authority
                             4350   Canceled Authority
                                                          61
Proprietary Accounting
   Purpose
       Accounting for assets and liabilities
       Accounting for revenues and expenses
       Determining financial position
       Determining results of operations


   SFFAS NO. 7

                                                62
Proprietary Accounting
   Balance Sheet
       Assets = Liabilities + Net Position
       1000 Assets = 2000 Liabilities + 3000 Net
        Position (Capital)


   Statement of Net Cost
       Expenses – Exchange Revenue = Net Cost
        of Operations
                                                    63
The Historical Cost Concept
   Generally accepted accounting
    principles (GAAP) requires that assets
    always be stated at their actual cost
    rather than at their current market
    values

   Accounting is concerned with what you
    paid for something, not what it is worth
    today                                   64
The Matching Principle
Concept
   Expenses of a period that are recorded and reported
    are only those incurred to produce the revenues
    generated for the same period
   Some expenses require periodic adjustment to reflect
    only the amount of expenses for the financial period
   Examples:
      Prepaid Insurance

      Prepaid Rent

      Depreciation of Capital Assets




                                                       65
Cash versus Accrual
Accounting
   Cash accounting --
       revenue is recorded when cash is
        received and expenses when cash
        payment is made
       fails to match revenue with related
        expenses, therefore does not lead to
        logical income measurement




                                               66
Cash Accounting




                  67
Accrual Basis of Accounting




                              68
Accrual Accounting (cont.)
   Example: $10,000 payroll that is split
    between two reporting periods:
   A portion is earned but not paid at end
    of the month:
       4 days ($4,000) earned in September
       6 days($6,000 to be earned in October)
       $4,000 is recorded as a payroll expense in
        September. $4,000 is recorded as a liability
        (salaries payable)
                                                   69
     Flow of Accounting Data

 Recognized A     Prepare A           Analyze and            Process (Record)
Transaction Has    Source           Prepare a Journal         Into Accounting
   Occurred       Document               Entry                    Records




                  Make Period End           Prepare
  Prepare A                                                       Close the Books
                   Adjustments        Financial Statements
 Trial Balance
                   and Accruals            (Reports)




                                                                                    70
The Accounting Process
(Cycle)
The Cycle Involves:
 Work Performed During The Period

       JOURNAL ENTRIES
       POSTING TO LEDGER ACCOUNTS
       DETERMINING UNADJUSTED BALANCES
       ESTABLISHING A TRIAL BALANCE AND COMPLETING
        WORKSHEET
   Work Performed At The End Of The Period
       JOURNALIZE AND POST ADJUSTING AND POST CLOSING
        ENTRIES
       PREPARE POST CLOSING TRIAL BALANCE AND
         FINANCIAL STATEMENTS
                                                         71
     General Journal

   “Original” day-to-day record showing
    the “debit” and “credit” effect of each
    transaction
   Includes a brief explanation for each
    transaction
   Used to update the general ledger
    accounts

                                              72
Ledger Account
   Means of accumulating in “one place”
    all information regarding changes in a
    specific account
   Comprised of three elements
      title

      left side which is called the debit side

      right side which is called the credit

       side
   Commonly referred to as a “T Account”
                                              73
    General Ledger

   All ledger accounts are maintained
    within the general ledger
   Federal government general ledger
    account structure is established,
    maintained, and updated by the
    Treasury Department



                                         74
Accounts And Ledgers
   Accounts Are Classified As Follows:

   Assets -                (What Is Owned)
   Liabilities -           (What Is Owed)
   Costs/Expenses -        (What Is Spent)
   Revenue/Income -        (What Is Earned)
   Equity -                (Assets -Liabilities)
                           (Net Worth)
    Gains/Losses
    Budget
    Memorandum
                                                    75
USSGL Chart of Accounts
   1000   Assets
   2000   Liabilities
   3000   Net Position (Capital)
   4000   Budgetary
   5000   Revenues and Financing
           Sources
   6000   Expenses
   7000   Gains and Losses
   8000   Memorandum Accounts



                                    76
The Accounting Equation
   Assets = Liabilities + Equity
    Or

   A=L+E
    Or
    A–L=E
    Given The Accounting Equation, With Any Two Of
    The Three Factors, We Can Determine The Third
    Factor

                                                     77
78
    ACCOUNTING

   “WHATSOEVER YE DEBIT, SO
    SHALL YE CREDIT. THIS YE
    MUST DO WITHOUT FAIL. FOR,
    IF THY DEBITS DO NOT EQUAL
    THY CREDITS, YE’LL FIND THY
    “ASSETS” IN JAIL”.


                                  79
     Double Entry Accounting
   Forms the basis for most current day
    accounting operations
   Every business transaction affects two
    or more accounts
   Equal debit and credit entries are made
    for every transaction
   Total of all debit entries must equal the
    total of all credit entries

                                                80
Normal Account Balance
   Refers to the Debit (left side) or Credit
    (right side) of a ledger account
   Assets normally have debit balances
   Liabilities and net position accounts
    normally have credit balances
   Expense accounts normally have debit
    balances
   Revenue accounts normally have credit
    balances
                                                81
         Debit and Credit Guide
 Account Type        Effect of              How You Record
  Affected By     Transaction on                                       Normal Balance
  Transaction        Account            Debit             Credit

                        +                 DR                                 DR
Assets
                         -                                  CR
                        +                                   CR               CR
Liabilities
                         -                DR
                        +                                   CR               CR
Net Position
                         -                DR
                                                           CR*           DR / CR **
Budgetary
                         -                DR
                        +                                   CR               CR
Revenues
                         -                DR
                        +                 DR                                 DR
Expenses
                         -                                  CR
* = To increase the budgetary account “Other Appropriations Realized” you debit (DR)
** = Budgetary Accounts have either a debit or credit balances, depending on the        82
account.
     General Journal
 APPROPRIATIONS                  Reference     Debit     Credit

 Account Title and Explanation

Allotments-Realized Resources     4119       100,000

Un-apportioned Appropriations     4450                 100,000
Funds With Treasury               1010       100,000
Unexpended Appropriations         3101                 100,000




                                                                  83
     General Journal
 OMB APPORTIONMENT               Reference    Debit    Credit

 Account Title and Explanation

Un-apportioned Authority         4450        25,000

Apportionment                    4510                 25,000




                                                                84
     General Journal
  ALLOTMENT                      Reference    Debit    Credit

 Account Title and Explanation

Apportionments                   4510        20,000

Allotments-Realized Resources    4610                 20,000




                                                                85
    General Journal
COMMITMENT                      Reference   Debit     Credit

Account Title and Explanation

Allotments Realized Resource     4610       2,000

Commitments                      4700               2,000




                                                               86
    General Journal
OBLIGATION                       Reference   Debit   Credit

Account Title and Explanation

Commitments                       4700       2,000

Undel. Orders – Obligs. Unpaid    4801               2,000




                                                              87
    General Journal
RECEIPT OF MAT’LS ORDERED          Reference   Debit   Credit

Account Title and Explanation

Undel. Orders – Obligs. Unpaid     4801        2,000

Del. Orders – Oblig. Unpaid        4901                 2,000

Operating Materials Held for Use   1511        2,000

Accounts Payable                   2110                 2,000

Unexpended Appropriation           3107        2,000

Expended Appropriation             5700                 2,000

                                                                88
     General Journal
 PAYMENT OF INVOICE              Reference    Debit   Credit

 Account Title and Explanation

Delivered Orders Oblig. Unpaid   4901        2,000

Delivered Orders Oblig - Paid    4902                 2,000



Accounts Payable                 2110        2,000

Fund Balance With Treasury       1010                  2,000




                                                               89
90
91
92
93
Managerial Cost Accounting
   Is the process of:
         - Accumulating

        - Measuring

        - Analyzing

        - Interpreting

      - Reporting Cost
Source: SFFAS No. 4
                             94
Managerial Cost Accounting
   Full Cost

        Direct Costs (Direct Labor/Direct Material)

        Indirect Costs (Overhead)

        Intra-entity Costs (General and Administrative)

        Inter-entity Costs

             Cost of goods and services received from other entities

             Providing entity responsible for providing cost data

             Recognition limited to material amounts                   95
Working Capital Funds

   Established to satisfy recurring DoD requirements
    using a businesslike buyer-and-seller approach.

   Have a goal to breakeven over the long term.

   Use the funds collected to pay for acquisition of
    resources needed to operate the fund.

            Reference - 10 U.S.C., Section 2208
              DoDFMR Volume 3, Chapter 19



                                                        96
 DEFENSE WORKING CAPITAL FUND
 How it Works


                                     CUSTOMERS
                                  OPERATING FORCES
                                 READINESS COMMANDS
                APPROPRIATES
                   $ FUNDS      PLACE
                                                 PAY             BILL FOR
                               ORDERS
                                                                  COSTS/
                           REVOLVING         WORKING             SERVICES
                             FUNDS           CAPITAL
                                               $$
  CONGRESS
APPROPRIATED
  $ WORKING
    CAPITAL              FINANCES COST OF PERFORMING WORK




                                             PRODUCTION       GENERAL &
         LABOR COSTS     DIRECT MATERIAL
                                              OVERHEAD      ADMINISTRATIVE




                                                                             97
 General Plant, Property and
 Equipment (PP&E)

 A tangible asset.
 An estimated useful life of 2 or more years.
 Not intended for sale in the ordinary course of
  business.
 Intended to be used or available for use by the
  entity.
 Subject to “Capitalization Thresholds”

                                                    98
WCF CAPITAL INVESTMENT PROGRAM
Accounting Capitalization Criteria
   ACQUISITION COST =TO OR > $20,000 - FOR REAL PROPERTY (LAND,
    BLDGS. & MINOR CONSTRUCTION)

    ACQUISITION COST = TO OR > $100,000 - FOR ALL OTHER CAPITAL ASSETS,
    INCLUDING DEPRECIABLE PLANT, EQUIPMENT AND SOFTWARE
    DEVELOPED, MANUFACTURED, TRANSFERRED OR ACQUIRED

   USEFUL LIFE = 2 YEARS OR MORE
   ACQUISITION COST INCLUDES:
      Purchase Cost
      Transportation
      Design
      Installation
      Other Related Costs
   COMPUTER SYSTEMS ON BASIS OF COMPLETE SYSTEM
   COMPUTER SOFTWARE CAPITALIZED AS HARDWARE


                                                                     99
WCF CAPITAL INVESTMENT PROGRAM
Depreciation Criteria

   STRAIGHT LINE METHOD

       Less residual value if it exceeds 10% of the cost of
        the asset

   COMMENCES ON MONTH FOLLOWING:

       Date of Receipt

       Date Asset Installed/ Ready for Use

   EQUIPMENT AND MINOR CONSTRUCTION PROJECTS IN
    SUPPORT OF MOBILIZATION WILL NOT BE
    DEPRECIATED
                                                               100
No-Year Appropriations
   31 U.S.C. 1555
       A No-Year Account is to be Closed If:

            Agency Head or President Determines Purpose
             Fulfilled

            No Disbursements Have Been Made for Two
             Years


                                                       101
Objectives of Federal Financial
Reporting
   Budgetary Integrity
       Funding properly spent?


   Operating Performance
       Outputs and outcomes?


   Controls
       Safeguarding assets?
                                  102
  Federal Financial Reporting

                DoDFMR Volume 6B
 Balance Sheet (Chapter 4)
 Statement of Net Cost (Chapter 5)
 Statement of Changes in Net Position (Chapter 6)
 Statement of Budgetary Resources (Chapter 7)
 Statement of Custodial Activity (Chapter 9)


                                                     103
Statement of Net Costs
   Also Referred to as:
       Statement of Operations
       Income statement
   Purpose
       intended to provide revenue and expense details
       reports results (net profit or net loss)
   Prepared on basis of general ledger 5000 and
    6000 account balances


                                                      104
Statement of Net Costs




                         105
Statement of Changes in Net
Position
   Reports the
       beginning net position
       effect of those transactions that caused the net
        position to change
       ending net position
   Prepared on the basis of the Statement of
    Net Costs and the “Financing Sources”



                                                           106
Statement of Changes in Net
Position
   ITEMS THAT INCREASE NET          ITEMS THAT DECREASE
    POSITION                          NET POSITION

   Excess of revenue over cost      Excess of cost over revenue
    (net income)                      (net loss or net cost of
   Legislative appropriations        operations)
   Property obtained from           Property provided to another
    another govt. agency for          agency for which no
    which no reimbursed is            reimbursement is expected
    required                         Funds returned to the
                                      Treasury
                                     Appropriations returned



                                                               107
Statement of Financial Position
   Also referred to as the Balance Sheet
       assets
            dollar amount of future economic benefits
             owned and managed by the agency
       liabilities
            dollar amounts owed by the agency
       net position (equity)
            the difference between assets and liabilities

                                                             108
Statement of Financial Position
   Summarizes the net worth or liquidity of
    an entity at a particular time
   Changes from day to day
   Accounts on this statement are
    permanent accounts
   Is a summary of accounting equation
   Assets = Liabilities + Government
    Equity
                                          109
Statement of Financial Position




                                  110
Flow of Financial Statement
Preparation
   1. Statement of Net Costs

   2. Statement of Changes of Net
    Position

   3. Statement of Financial Position


                                         111
112
Statement of Budgetary
Resources
   Provides information on how budget
    resources were made available as well as
    their status at the end of the reporting
    period.
   Should be reconcilable to the budget
    execution information reported on the SF 133
    Report on Budget Execution and Budgetary
    Resources.


                                               113
Contact Information:

Paul J. Dominick
PJDominick@verizon.net


                         114
ADDITIONAL INFORMATION




                         115
   Some Basic Concepts: Life Cycle




Appropriation

                Obligation
                             Expiration
                                          Cancellation
                                                  116
    Some Basic Concepts: Life Cycle
 There are three possibilities for the status of resources:



Unobligated


Obligated, unpaid


Obligated, paid



                                                              117
         Some Basic Concepts: Life Cycle
         End of Year 1


Original
Appropriation

                            Unobligated
                                          Amount
                                          remaining to
                            Obligated
                                          account for
                            but unpaid
                                          in year 2
          Total
          Obligations

                            Obligated
                            and paid


                                                   118
Some Basic Concepts: Life Cycle
End of Year 2

                End of Yr2


                             Unobligated   Amount
                                           remaining
                             Obligated     to account
                             but unpaid    for in year 3

                             Obligated
                             and paid




                                                    119
Some Basic Concepts: Life Cycle
End of Year 3



                  Unobligated
                                Amount
                  Obligated     remaining to
                  but unpaid    account for
                                in year 4
                  Obligated
                  and paid




                                          120
Some Basic Concepts: Life Cycle
End of Year 4



                  Unobligated   Amount
                                remaining to
                  Obligated
                                account for
                  but unpaid
                                in year 5
                  Obligated
                  and paid




                                          121
Some Basic Concepts: Life Cycle
End of Year 5



                  Unobligated   Amount
                                remaining to
                  Obligated
                                account for
                  but unpaid
                                in year 6
                  Obligated
                  and paid




                                          122
Some Basic Concepts: Life Cycle
End of Year 6



                  Unobligated   Amount
                                remaining
                  Obligated
                                to cancel
                  but unpaid




                                            123
    Accounting Classification
   Identifies the source of funding and
    purpose for which used
   Creates an audit trail




                                       124
        Specific Allotment Accounting
                 Classification
21 * 2065   18-1003 113G05.00 26CU NGP2 W44MEH02970100 B39597 97B395 LM0 7RQAA S39029



                                                                                        Fiscal
                                                                                        Station
                                                                                        Number
                                                             JON     CCC          UIC
                                     MDEP
                                              Reference Number              PMC

                                Element Of Resource (EOR)
                                                   APC – Accounting Processing Code
                       AMSCO (Program Element)
                                                   MDEP – Management Decision Package
               Allotment Serial Number             PMC – Program Manager Code
                                                   JON – Job Order Number (APC + DPI code)
            Operating Agency                       CCC – Cost Center Code (DPI code + APC)
       Appropriation                               UIC – Unit Identification Code

   Fiscal Year
                                                                                             125
Department Code
126

				
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