chapter 04d final

7/21/2019 Chapter 04D Final

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Budgeting,BudgetaryAccounting, andBudgetaryReporting

Chapter 4


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Learning Objectives

Understand budgetary accounting andreporting practices and requirements Explain role of budget in governmental

fund planning and control

Understand budgeting terminology,approaches, and recommendedpractices

Understand concept of budgetarycontrol points

Discuss basic procedures of preparingand adopting a budget

Understand dierences between 2013 Pearson Education, Inc. All rights reserved. 2


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Budgets

n businesses!management plans n governments!management plans"#D laws Control the activities authori$ed to

carry out plans %repare statement that permit

comparison of actual results withbudget and evaluation of variances

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Minimum BudgetInformation &ypes and amounts of authori$ed

expenditures %urposes for which expenditures are

to be made %lanned means for 'nancing

expenditures



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GASB Principes AddressBudgeting

"nnual budget(s) be adopted byevery governmental unit

"ccounting system provide basis for

appropriate budgetary control *udgetary comparison statements

(basic 'nancial statements) or

schedules (other +) be presentedfor -eneral .und /a0or pecial +evenue .unds with

legally adopted budgets 2013 Pearson Education, Inc. All rights reserved. 5


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Assumptions about G!Budget"nnual budget adopted on modi'ed

accrual (-""%) basis"ppropriations are made for

operating expenditures by functionand for capital outlay and debtservice expenditures made directly

in -. *udget does notincludeappropriations for interfundtransfers!assumes interfund

transfers are separately authori$ed 2013 Pearson Education, Inc. All rights reserved. 6


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B Recording t"e Budget#Page $%&'

Estimated +evenues

"ppropriations

*udgetary .und *alance

412,333 41,33

3

4,333

"s in the previous chapter, this entry is at summarylevel5 &o control revenues and expenditures, detailmust be maintained in the subsidiary ledger (as inChapter )5



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Revenues Ledger !ormat

(a)esDr5

Estimated

+evenuesDate

(Cr5)

+evenu

es

Dr5(Cr5)

*alance

" * C D

Use of Each Column

"5 Date of transaction*5 +ecords initial budget and changes in itC5 +ecords actual revenuesD5 +eports positive balance when amount must still be

collected6negative balance when collections exceed budgeted amount

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*otes about t"e RevenuesLedger Controlled by Estimated +evenues

and +evenues *alance is the dierence between

the budgetary account and theactual account

um of the balances in the +evenue7edger accounts mustequal thediferencebetween the Estimated+evenues account and the +evenues

account 2013 Pearson Education, Inc. All rights reserved. !


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+)penditures Ledger!ormat

GeneraGovernment

Dr5 (Cr5)

EncumbrancesDate

(Cr5)

"ppropriations

Dr5 (Cr5)

Unencumbered

*alance

Dr5

Expenditures

Use of Each Column"5 Date of transaction*5 +ecords estimated amount for issuance of (debit) or receipt

of (credit) orderC5 +ecords actual expenditureD5 +ecords initial budget and changes to itE5 +eports positive balance when budget is over8expended6

negative balance when spending authority remains

" * C D E



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*otes about t"e+)penditures Ledger

Unli9e Chapter where ledger wascontrolled only by Expendituresaccount, Encumbrances and

"ppropriations added for additionalcontrol

"ppropriations added to provide

overall control Encumbrances added to control

orders made but not yet 'lled

*alance : 2013 Pearson Education, Inc. All rights reserved. 11


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Maing Adjustments tot"e Budget "ssuming balanced budget is maintained,

increase in one functions appropriationrequires decrease in another

Unbalanced ad0ustments ncrease (decrease) in "ppropriations

(Estimated +evenues) requires*udgetary .und *alance to decrease

Decrease (increase) in "ppropriations(Estimated +evenues) requires*udgetary .und *alance to increase



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B- Adjusting t"e Budget#Page $%.'

Estimated +evenues

"ppropriations

"ppropriations

*udgetary .und *alance

4,333

,333


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Recording+ncumbrances >ccurs when order is placed!for

estimated amount ?ill be reversed when order is

received!still for the estimatedamount

"ctual amount!as demonstrated inChapter !recorded inExpenditures account



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/- Recording

+ncumbrances#Page $%0'Encumbrances

Encumbrances>utstanding

3,333

3,333



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/& Receipt of Order #Pages$%01$-2'

@4a +everse estimate

Encumbrances >utstanding

Encumbrances

@4b +ecord the "ctual

Expenditures

Aouchers %ayable

3,333

1B,B33

3,333

1B,B33



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3osing +ntries and BudgetaryAccounts

Entries on pages = and =riginal budget .inal budget"ctual on a budgetary basis (if not

-""%, reconciliation must be includedin notes (if *.) or with schedule (if+)

/ost governments include optionalAariance column



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*e)t !78Reestabis"+ncumbrances #Page $&9'

Encumbrances

Encumbrances>utstanding

13,333

13,333

&his entry reestablishes budgetary accounts foroutstanding orders5 #ecessary only if governmentis honoring outstanding orders at end of previous'scal year5



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P"ases of t"e BudgetingProcess %lanning!critical 'rst step given

complexity of modern governmentsproviding critical goods and services

provided by government that are notevaluated through mar9et process

Control!gives 7egislature control ofChief Executive, who uses budget tocontrol subordinates

Evaluation!standard fordetermining legal and administrative

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Budget (ypes

Capital or Current &entative or Enacted

-eneral or pecial .ixed or .lexible Executive or 7egislative



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3omparison of :i;erentBudget (ypes

Capital &ypically used for

acquisitions

requiring severalyears &ypically contains

portion for current

year and for futureyears

urrent Also +no(n as

o&erating %udget

ontains &ro&osede*&enditures )orcurrent o&erations,de%t service, and

esti#ates o)e*&enda%le resourcesto %e availa%le duringthe $ear



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&entative %lans that are

sub0ect to change

"lso includesrequests fromdepartments toChief Executive

Enacted

A&&ro&riation enacted

%$ legislative %ranch

that &rovides legal

%asis )or control over

the e*ecutive %ranch

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-eneral &ypically used for

general

governmentalactivities 'nancedthrough -eneral.und, pecial

+evenue .unds,and Debt ervice.unds

"&ecial

udget enacted )or

an$ other t$&e o)

activit$



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.ixed "ppropriations are

for speci'c dollar

amounts ofexpendituresFexpenses

"ppropriated

amount may not beexceeded

7imit Gexibility of

Chief Executive

le*i%le

-$&icall$ )i*ed &er unit

o) goods or services%ut var$ in total %ased

on de#and )or goods

or services

ore a&&ro&riate )or

Pro&rietar$ unds %ut

rarel$ used



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Executive %repared by

executive branch

but approved bythe legislature

egislative

Pre&ared and

a&&roved %$

legislative %ranch



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Budgetary PreparationProcess >verview!process starts with

calendar to assure that budget isprepared on time

%reliminary estimates!overallbudgetary outloo9 and plans forincreases or decreases based onrevenue growth or decline

%repare actual budget!examinebudgetary requests, compare toavailable resource pro0ections, ma9e

necessary ad0ustments, and then 2013 Pearson Education, Inc. All rights reserved. 33


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Aternative BudgetingApproac"es >b0ect8of8expenditure %erformance

%rogram and planningprogramming8budgeting Hero8based budgeting



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Object4of4+)penditureApproac"Essential Elements ubordinate agencies submit detailed

budget requests

Chief executive compiles and modi'esagency requests and submits overallrequest

7egislature ma9es line8itemappropriations

"ccounting system must capture data insuicient detail to permit budgetary

control and accountability at legislative8 2013 Pearson Education, Inc. All rights reserved. 35


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Legisative 3onsiderationand Action Consideration begins once budget

document received from ChiefExecutive!typically a series of

meetings with Chief Executive anddepartment heads

*udget may be passed n one lump sum, or n separate appropriation for each

program or function

2013 P Ed ti I All i ht d 36

chapter 04d final

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