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Momento 4: Producción de un folleto con recomendaciones para informarse sobre la pandemia del coronavirus
The importance of the budget in government accounting is epitomized by budgetary accounting. Budgetary accounting has several elements designed to help both the central budget office and departmental managers monitor actual financial performance against the budget. Recording appropriations and spending against the appropriations provides accountability and helps ensure that appropriation limitations are not exceeded. Recording budgeted and actual revenues in the accounting system, as well as appropriations and charges against them, gives the central budget office the data needed to curtail expenditures in response to looming revenue shortfalls.
From the general ledger perspective, it is best to consider the budgetary accounting journal entries separate from the financial accounting entries. Actually, there are only a few types of bud- getary journal entries: (a) to record the budget; (b) to record changes to the budget; (c) to record the placing of purchase orders or contracts; and (d) to reverse the entry when items ordered are received. Budgetary controls are facilitated by maintaining subsidiary revenues and appropria- tions ledgers, and preparing periodic reports comparing budgeted with actual revenues and bud- geted appropriations with charges against the appropriations.
Recording the Adopted Budget
To illustrate the budgetary journal entries, assume an entity called Tiny Town performs a single function (public safety) within a single department (the Police Department). The legal level of bud- getary control is at object-of-expenditure level. The town council makes appropriations for three objects-of-expenditure. Table 3-10 shows the approved budget for the General Fund for 2012.
TABLE 3-10 General Fund Budget
Tiny Town General Fund Budget
Calendar Year 2012 Estimated Revenues Property taxes $900,000 Miscellaneous 100,000 $1,000,000 Appropriations Salaries $700,000 Materials 190,000 Police cars 100,000 990,000
At the beginning of the fiscal year, Tiny Town makes the following budgetary accounting entry in the General Fund to record the adopted budget.
Estimated revenues 1,000,000
Appropriations 990,000
Budgetary fund balance 10,000
To record the 2012 budget.
To best understand this entry, it is useful to decompose it into two parts. First, Tiny Town could record estimated revenues in this manner:
Estimated revenues 1,000,000
Budgetary fund balance 1,000,000
To record estimated revenues for 2012.
The debit to Estimated revenues predicts the effect, in isolation, that actual revenues will have on the fund balance at the end of the year—that is, actual revenues are predicted to be $1,000,000 and, by themselves, would increase the fund balance by $1,000,000. Likewise, Tiny Town could record its planned expenditures—that is, its budget appropriations—as follows:
Budgetary fund balance 990,000
Appropriations 990,000
To record appropriations for 2012.
This entry, in essence, identifies the amount of fund net assets (fund balance) that Tiny Town plans to spend during 2012. That is, expenditures are predicted (authorized) to be $990,000 and, by themselves, would reduce the fund balance by that amount.
The $10,000 credit balance in the Budgetary fund balance account—from the original entry or from the combined effect of its two parts—indicates that Tiny Town expects a budget surplus for the year. 4 That is, if actual revenues and expenditures prove to be exactly as budgeted, the ending actual fund balance will increase by $10,000 (actual revenues of $1,000,000 less expen- ditures of $990,000 = $10,000). Conversely, if Tiny Town had appropriated an amount greater than estimated revenue, the resulting debit balance in the Budgetary fund balance account would signal that Tiny Town anticipates a budget deficit for the year.
In practice, the journal entry to record the budget is prepared in compound form (debiting the two estimated revenue accounts and crediting the three appropriations accounts), as shown later in the chapter. Our purpose in using single estimated revenues and appropriations accounts here was to make it easier to understand the nature of the journal entry.
The purpose of recording estimated revenues and appropriations is to establish reference points for budgetary controls. At any time during the year, government officials can compare the estimated revenues with actual revenues to see if the estimates are being met. Similarly, as charges are being made against the various appropriations accounts, officials can see whether sufficient balances are available for additional spending.
4 Some writers and practitioners prefer to credit Unassigned fund balance (a financial account) rather than Budgetary
fund balance (a budgetary account) when recording the budget. We do not recommend this practice because it (a) cre- ates the appearance of increases or decreases in actual fund balance before changes actually occur; (b) may mislead unsophisticated preparers and users of financial reports; and (c) needlessly confuses budgetary accounting with finan- cial accounting.
Recording Encumbrances
The other basic element of budgetary accounting involves recording encumbrances against the amounts available for appropriation. Encumbrances reduce the amounts available for appropria- tion for items ordered by a government but not yet received. Recall that a business entity ordinar- ily makes three entries related to the purchase and use of supplies: one to record the liability for the purchase, a second to record payment of the liability, and a third (or series of entries) to record supplies used. Businesses do not make formal accounting entries to record items on order. In contrast, from the budgetary perspective, a portion of the appropriation effectively is “used up,” or encumbered, at the point a government orders supplies—even though the supplies have not yet been received. Thus, a government may make four entries related to the purchase and use of supplies: The first entry encumbers the appropriation for the cost of an order placed with a supplier, a second records the liability for the purchase, and a third records payment of the liabil- ity. Depending on the nature of the accounting system, a fourth entry (or series of entries) may be made to record supplies used.
At the point it issues a purchase order, a government expresses its intent to incur an expen- diture (a reduction of net assets). From a financial accounting standpoint, the expenditure is not recognized until the related liability is incurred, typically when the ordered materials are received. From a budgetary accounting standpoint, however, the purchase order uses up a portion of the appropriation. The government gives formal accounting recognition to the order by recording an encumbrance equal to the purchase order amount. If Tiny Town were to issue a purchase order for $1,000, the entry to record the encumbrance would be this:
Encumbrances 1,000
Budgetary fund balance reserved for encumbrances 1,000
To record encumbrance for purchase order.
The encumbrance (debit) reduces the net available appropriation. The “budgetary fund balance reserved for encumbrances” is, in effect, a placeholder for the ensuing liability. When the open purchase order is fulfilled (i.e., ordered items are received), the encumbrance entry is reversed, and an expenditure is recorded. Assuming that the cost of goods received equals the cost of goods ordered, Tiny Town would make the following two entries:
Budgetary fund balance reserved for encumbrances 1,000
Encumbrances 1,000
To reverse encumbrances.
Expenditures 1,000
Vouchers payable (or Cash) 1,000
To record expenditure for purchased materials.
Thus, at any time, the available appropriation equals the amount appropriated minus the total of the outstanding encumbrances (for purchase orders placed but not received) and the expenditures. Note that the purpose of recording encumbrances is to provide control over an appropriation characterized by expenditures that are unpredictable as to timing and/or amount, or in cases in which a single appropriation supports geographically dispersed activities. In con- trast, some appropriations are drawn down by expenditures in predictable patterns, (e.g., monthly payments on a photocopier lease). For such appropriations, encumbrances serve no control pur- pose and need not be recorded; the amount available for spending is reduced directly by record- ing the expenditure.
Detailed Illustration
We are now ready to illustrate the budgetary accounting entries within the context of an example that contains both budgetary and financial accounting entries. This will help you see how budgetary accounting helps maintain budgetary control. Budgetary control—through budget-to-actual com- parisons—is facilitated by maintaining subsidiary revenues and appropriations ledgers to which post- ings are made from both the financial accounting entries and the budgetary accounting entries. We will start with the Tiny Town budget from Table 3-10 and add some budgetary and financial accounting transactions. (To simplify the illustration, the financial accounting transactions shown here are cash-based; modified accrual accounting is introduced in Chapter 4 .) We will also post the transactions to the subsidiary ledgers. The events and transactions for January 2012 are as follows:
Date
January 2 The budget is recorded.
3 Property taxes of $500,000 are received in cash.
8 Two police cars are ordered at an estimated total cost of $46,000. 12 Police cars ordered Jan. 8 are received at an invoiced cost of $45,000. 15 Miscellaneous revenues totaling $13,000 are received in cash.
16 Two more police cars are ordered at an estimated total cost of $54,000. 21 Police cars ordered Jan. 16 are received with an invoice for $55,000. 22 Property taxes of $399,500 are received in cash.
25 Materials are ordered with an expected cost of $15,000.
28 The ordered materials are received along with an invoice for $16,000.
31 Payday for Tiny Town’s employees is the last day of the month; salaries of $60,000 are paid.
Here is how the Tiny Town transactions are recorded in general journal form and how the entries affect the revenues ledger ( Table 3-11 ) and appropriations ledger ( Table 3-12 ):
Jan. 2 Estimated revenues—property taxes 900,000
Estimated revenues—miscellaneous 100,000
Appropriations—salaries 700,000
Appropriations—materials 190,000
Appropriations—police cars 100,000
Budgetary fund balance 10,000
To record the budget in the general ledger.
Notice that the debit items in the above entry are posted for each revenue source in the estimated revenues columns of the revenues ledger, and the credits to appropriations are posted for each appropriation in the appropriations columns of the appropriations ledger. The balance column of the revenues ledger now shows debit balances of $900,000 for property taxes and $100,000 for miscellaneous revenue, indicating that no actual revenues have yet been recorded. In the appropriations ledger, the available appropriations columns show the full amounts appropri- ated as available for spending because there have not yet been any encumbrances or expenditures.
Jan. 3 Cash 500,000
Revenues—property taxes 500,000
TABLE 3-11 Illustrative Revenues Ledger Tiny Town General Fund Revenues Ledger
January 2012 Source: Property Taxes
Date Item Estimated Revenues Dr Actual Revenues Cr Difference Dr (Cr) 2 Budget 900,000 900,000 3 Cash receipts 500,000 400,000 22 Cash receipts 399,500 500 Source: Miscellaneous Date Item Estimated Revenues Dr Actual Revenues Cr Difference Dr (Cr) 2 Budget 100,000 100,000 15 Cash receipts 13,000 87,000
The credit to Revenues from this entry is posted by source to the actual revenues column of the revenues ledger; the resulting $400,000 balance indicates that this amount of property tax revenues remains to be realized to meet the budget estimate.
Jan. 8 Encumbrances—police cars 46,000
Budgetary fund balance reserved for encumbrances 46,000 To record encumbrance for purchase of police cars.
The debit to Encumbrances from the January 8 entry is posted to the encumbrances col- umn of the appropriations ledger for the police cars appropriation. The resulting $54,000 balance in the available appropriation column shows that this is the amount of the police car appropria- tion remaining available for future spending.
Jan. 12 Budgetary fund balance reserved for encumbrances 46,000
Encumbrances—police cars 46,000
To reverse encumbrance for purchase of police cars.
Expenditures—police cars 45,000
Vouchers payable 45,000
To record purchase of police cars.
Notice that the credit to Encumbrances in the first January 12 entry, when posted to the encumbrances column in the appropriations ledger for police cars, reverses the encumbrance previously posted. Reversing the encumbrance restores—momentarily—the available police car appropriation to the original $100,000 amount. The debit to Expenditures from the second January 12 entry, when posted to the expenditures column, reduces the available police car appropriation to $55,000. The net effect of posting the two journal entries is that the encumbrance for $46,000 has been replaced with an expenditure for $45,000. Hence, whereas the available
TABLE 3-12 Illustrative Appropriations Ledger Tiny Town General Fund Appropriations Ledger
January 2012 Object Code: Salaries
Appropriation Encumbrances Expenditures
Available Appropriation
Date Item Cr Dr Cr Dr Cr
2 Budget 700,000 700,000
31 Payroll 60,000 640,000
Object Code: Materials
Appropriation Encumbrances Expenditures
Available Appropriation Date Item Cr Dr Cr Dr Cr 2 Budget 190,000 190,000 25 Order materials 15,000 175,000 28 Receive materials 15,000 190,000 28 Record expenditure 16,000 174,000
Object Code: Police Cars
Appropriation Encumbrances Expenditures
Available Appropriation Date Item Cr Dr Cr Dr Cr 2 Budget 100,000 100,000 8 Order 2 vehicles 46,000 54,000 12 Receive 2 vehicles 46,000 100,000 12 Record expenditure 45,000 55,000 16 Order 2 vehicles 54,000 1,000 21 Receive 2 vehicles 54,000 55,000 21 Record expenditure 55,000 0
appropriation balance was $54,000 on January 8 after the encumbrance was recorded, the avail- able appropriation balance on January 12—after the invoice was received—is $55,000 because the actual cost of this purchase was $1,000 less than anticipated.
Jan. 15 Cash 13,000
Revenues—miscellaneous 13,000
To record collection of miscellaneous revenue.
The credit to miscellaneous revenue, when posted to the actual revenues column of the revenues ledger, reduces the estimated revenues to be received to $87,000. Year-to-date comparisons
of amounts collected with amounts normally collected in comparable periods helps budget offi- cials determine if the estimate for the year is likely to be achieved.
Jan. 16 Encumbrances—police cars 54,000
Budgetary fund balance reserved for encumbrances 54,000 To record encumbrance for purchase of police cars.
The debit to Encumbrances from the January 16 entry is posted to the encumbrances col- umn of the appropriations ledger appropriation for police cars. The resulting $1,000 credit bal- ance in the available appropriation column shows that, at the time the second police car order is encumbered, Tiny Town still has $1,000 of police car appropriation available for future spending.
Jan. 21 Budgetary fund balance reserved for encumbrances 54,000
Encumbrances—police cars 54,000
To reverse encumbrance for purchase of police cars.
Expenditures—police cars 55,000
Vouchers payable 55,000
To record purchase of police cars.
Similar to the January 12 entries, the credit to Encumbrances from the first January 21 entry reverses the encumbrance previously posted in the appropriations ledger. Reversing the encum- brance raises the available police car appropriation temporarily to $55,000. The debit to Expenditures from the second January 21 entry zeroes out the available appropriation for police cars. The unan- ticipated $1,000 extra cost of the second order of police cars absorbed the remaining appropriation in its entirety. If the invoice had been for an amount greater than $55,000, the police cars could not have been accepted without an increase in the police cars appropriation by the town council.
Jan. 22 Cash 399,500
Revenues—property taxes 399,500
To record receipt of property tax revenue.
Similar to the January 3 entry, the credit to Revenues in the January 22 entry is posted to the actual column of the revenues ledger account for property taxes. The resulting $500 debit amount in the balance column shows that, to this point, actual property tax revenues are less than estimated property tax revenues by $500.
Jan. 25 Encumbrances—materials 15,000
Budgetary fund balance reserved for encumbrances 15,000 To record encumbrance for purchase of materials.
The debit to Encumbrances in the January 25 entry, $15,000, is posted to the encumbrances column of the appropriations ledger account for the materials object. As a result, $175,000 of the appropriation remains available for spending.
Jan. 28 Budgetary fund balance reserved for encumbrances 15,000
Encumbrances—materials 15,000
To reverse encumbrance for materials purchased.
Expenditures—materials 16,000
Vouchers payable 16,000
Posting the credit to Encumbrances in the first of the January 28 entries to the appropria- tions ledger reverses the encumbrance of January 25, resulting in the temporary restoration of the available materials appropriation to $190,000. The $16,000 debit to Expenditures in the second January 28 entry, when posted to the expenditures column of the appropriations ledger, reduces the available appropriation to $174,000. (One might expect that the invoice would be for the same amount as the purchase order. However, a purchase order might permit a supplier to ship a quan- tity that is, say, 10 percent more than the amount ordered.)
Jan. 30 Expenditures—salaries 60,000
Cash 60,000
To record disbursement of payroll at month end.
The end-of-month payroll entry is posted to the expenditures column of the appropria- tions ledger in the salaries account, leaving an available balance of $640,000. First, notice that this expenditure was not preceded by an encumbrance. Salaries generally are not encumbered because budgetary control is maintained through a separate “vacancy control” procedure, whereby all the positions covered by the budget are listed (see the personal services worksheet in Table 3-4 on page 69), showing the name of the individual occupying the position. Vacancies may be filled, not filled, or delayed in being filled, depending on operational needs and how much of the appropriation remains available. Second, notice that the $60,000 expenditure is slightly more than 1/12 of $700,000. This might raise a “red flag” for budget officials. But an efficient police chief will know that several officers will retire shortly and that hiring replace- ments at lower pay levels will ensure that sufficient funds will be available to meet the payroll for the rest of the year.
We see from this illustration how the revenues and appropriations ledgers provide useful information about actual account balances compared with budgeted amounts. For instance, after Tiny Town received the first two police cars, the appropriations ledger showed that the remaining available appropriation was $55,000. As a result, the town was able to buy better-equipped cars when it placed the second order. Close monitoring of encumbrance and expenditure rates on the materials and personal services appropriations enables budget officials to ensure there will be sufficient amounts available to finance operations for the full year. Similarly, a report based on the data provided by the revenues ledger will enable budget officials to determine promptly the likelihood of a shortfall from budgeted amounts.