Question

GOVERNMENTAL ACCOUNTING: Prepare the journal entries for the following (note-the bureau is an enterprise fund)

1. The board of the Bureau of Electricity and Water apporved the construction of a new office building. The construction, including planning and architect fees, was estimated to be $900,000

2. In July, the office building contract was signed for the amount of $865,000

3. In October, the Bureau's office construction was completed. Of the contracted amount from above, a portion was paid but the balance will not until a final inspetion is completed in Janurary. Liabilities are recorded as contracts payable. Contract amount: $865,000. Amount Paid $632,500

Answer 1

Construction of New Office Building: Generally two category of assets are created by Govermental Department, One is General capital assets and other is Specific Capital assets projects.

General capital Assets are those assets which are long lived assets used for activites reported in Govermental Funds, and thses may includes land Building, Infrastructure activites such as Roads Streets Bridges etc.

Such Activites are funded by either through issue of goverment bonds to public or grant from other goverment department or transfer from other existing funds such as General fund, specific fund or capital project fund etc.

To record the above activity during the year fallowing entries are to be made:

As The Inspection will be done in next year, so the balance fund will be paid in january till then building will not be recognised in books. As and when inspection is completed and final certificate will be obtained then balance payment will be transferred and construction work in progress a/c will be transferred to building a/c.

Thanks