[thorsbew]

I’m reviewing my government accounting section and have a hard time distinguishing between expenditures and expenses. Can anyone offer up any information? I’m at a loss!

Aud - 65 + 79, BEC - 82, REG - 89, FAR - 86

[Anonymous]

Expenditures are for governmental funds, which uses modified accrual. Expenses are for proprietary and fiduciary funds, which use full accrual.

[Anonymous]

I am reviewing FAR now, but haven't gotten to chapter 8 yet in my review, so I may be a little foggy, but aren't there no expenses in government? it's ALL expenditures, isn't it? from my understanding expenditures are similar to expenses in regular commercial accounting, but also include things such as fixed assets. you also have to understand the individual “jobs” of each fund.

for example, if the general fund goes out and buys new equipment for an entire building, and issues bonds to pay the cost (say $200,000 was the cost of the equipment, as well as the debt proceeds from the bonds issued)

the general fund would first collect the debt proceeds:

DR Cash 200,000

CR Other fin sources 200,000

then they purchase the equipment (remember, NO RECORDING OF FIXED ASSETS, they are expenditures in the fund statements!) (the fixed assets will show later on the gov't-wide statements)

DR Expenditures 200,000

CR Cash 200,000

so at this point, the general fund is settled, the debt service fund now comes in to play to pay the bills of the bonds (say 10% interest, ridiculous, but just for simplicity)

DR Expenditures 20,000

CR Cash 20,000

throughout the year different funds dump money into the debt service fund to “pay their bills” so to speak (interfund transfers).

this is my broad understanding of fund accounting, again I'm giving the disclaimer that I haven't looked at it in a couple weeks, so if I am mistaken anywhere, someone please clarify! take the test on the 24th!

[thorsbew]

cpame,

Does the general fund need to do anything to record the initial liability of the bonds and then to transfer it to the debt service fund? Or does the debt service fund take it right from the get-go?

Aud - 65 + 79, BEC - 82, REG - 89, FAR - 86

[Anonymous]

Well remember that there is no long-term debt included in the fund statements, so I would assume no liability is recorded. I believe the general fund would just transfer the 20k cash to debt service and the debt service pays it out as an expenditure for the interest payment.

I really don't remember the gov't wide reporting too well (like I said, haven't gotten there yet), but that is where you would see the 200k debt, within government activities.

[tax_vixen]

An expenditure is a cash outlay to buy something (or credit card, or however you buy it).

An expense is an item that hits your income statement.

Examples of when they are not the same thing:

You pay $100 for prepaid insurance. You have a $100 expenditure. You do not have an expense though. You have an asset until you utilize that insurance (then it becomes an expense as you utilize it).

You depreciate a building, which has no cash outlay. This is an expense but not an expenditure.

AUD - 92 :: REG - 99 :: FAR - 92 :: BEC - 82

[Anonymous]

Am I correct in thinking that encumbrances are just expenditures that have yet to be delivered?

The government generates a PO, and while waiting for the goods, they restrict funds using an encumbrance…correct?

So:

DR: Encumbrance

CR: Reserve for Encumbrance

Upon Delivery

Reverse the above entry and:

DR: Expenditure

CR: Cash (or payable)

I hate government accounting!!!

[Anonymous]

an encumbrance is just the government freezing and reserving some of its funds for something it is going to purchase. you have the entries correct, but I think your logic and thinking is a little off.

say some government department needs a truck, and places a purchase order asking the general fund or whatever to buy it. the department doesn't know the exact price, but they basically are saying “we need you to order us a truck, it should be around $40,000.”

so the government reserves the funds by booking an encumbrance (using the first entry you mentioned).

DR: Encumbrance 40,000

CR: Reserve for encumbrance: 40,000

then the purchasing department or whatever goes looking for the truck that department needs, and finds one and buys it for $36,000. now you need to reverse the encumbrance, and buy the truck:

DR: Reserve for encumbrance: 40,000

CR: Encumbrance: 40,000 (this reverses the initial entry)

DR: Expenditure 36,000

CR: Cash or payable 36,000

from what I understood in becker, the entire purpose of encumbrances is to set aside money for purchases you are going to place. this is in case say on 12/29 that truck order was placed, when the budget is being made for the following year, they see the encumbrance of 40,000, so they know that 40,000 of your funds are already going to be set aside for a purchase that's about to take place.

[thorsbew]

book marking this page. Excellent description of how to figure this out!

Aud - 65 + 79, BEC - 82, REG - 89, FAR - 86

[Anonymous]

From my understanding so far

Expenditures=Fund Accounts (except propietary and fiduciary funds)

Expenses=Government Wide Financials (& proprietary and fiduciary funds)

Governmental funds use the expenditures terminology. The difference is that the government wide statements accrue the entire expense and the fund account only accrues the current expenditure for the year.

For example, landfill closure costs would be completely expensed in the government-wide financials when they percentage of the amount due is incurred like with a for profit entity. The fund, though, only recognizes and expenditure for the amount of the actual cash going out of the fund, not the whole expense.

Hopefully I am interpreting this correctly based on my studies!

[Author]

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