[nalratoss]

I have a hard time differentiating fund balance vs budget. For instance:

1. The following information pertains to Pine City’s general fund for Year 1:
Appropriations
$6,500,000
Expenditures
5,000,000
Other financing sources
1,500,000
Other financing uses
2,000,000
Revenues
8,000,000
After Pine City’s general fund accounts were closed at the end of Year 1, the fund balance increased by

$1,000,000
$2,500,000
$1,500,000
$3,000,000

I used appropriation in the calculation: revenue + other sources – (appropriation + other uses). Therefore, I got 1 Mil. So I selected 1 Mil.

After looking at the answer, I realized they were asking the fund balance.

However, I still can’t figure out the journal entries that gives me the remaining fund balance.

2. Here’s another question:
A county’s balances in the general fund included the following:
Appropriations
$435,000
Encumbrances
18,000
Expenditures
164,000
Vouchers payable
23,000
What is the remaining amount available for use by the county?

Submit $248,000
Submit $271,000
Submit $253,000
This answer is correct.
An appropriation is a budgetary account. It is the total authorized to be expended for the period. An encumbrance also is a budgetary account. It is debited and encumbrances outstanding is credited to recognize a commitment to expand resources. An expenditure is recognized by the general fund when the liability has been incurred. Accordingly, comparison of appropriations, encumbrances, and expenditures determines that the unencumbered amount of appropriations that still may be expended is $253,000 ($435,000 – $18,000 – $164,000).
Submit $230,000

So in this question, we use the appropriation in the calculation, but in the previous question, we don’t use it?

Thanks.

FAR-80

AUD-77

REG-75

BEC-82

 

I'm done done!

[Anonymous]

The fund balance is like the retained earnings of the fund, so it increases by Revenues – Expenses.
The budget is a journal entry at the beginning of the year to book the budget, and then at the end of the year it is reversed. Its just a reminder in the books. It does not increase or decrease cash in or cash out. Appropriations are estimated/budgeted expenditures, not actual expenditures. So don't include them in #1. If you have Becker (or google), check out BAE-BAE.

The next question is asking how much do we have left in the budget?
At the beginning of the year, they decided to budget for 435k in expenses, which is the Appropriations entry. That's your beginning balance.
Then they had $164k expenditures.
Then they had ordered $18k but did not receive the item yet, so that's booked as Encumbrances aka open purchase orders.
Vouchers payable is ignored because it is already included in expenditures (see journal entries).
435k-164k-18k = 253k left to spend

Journal entries for spending government money:
Order item:
DR Encumbrances (like a purchase order)
CR Budgetary control
Item arrives:
DR Budgetary control (to reverse the purchase order)
CR Encumbrances
DR Expenditure (same thing as an expense, but in Government they use “Expenditure”)
CR Vouchers payable
Pay your bill:
DR Vouchers payable
CR Cash

[Author]

Replies