Question

On July 1, the start of its fiscal year, Victoria County reported the following balances ($ in thousands):

Fund balance:

Committed for encumbrances $500

Unassigned              900

Total fund balance      $1,400

During the year, the county ($ in thousands):

• Estimated that revenues for the year would be $13,500.

• Appropriated $14,000 for operations.

• Ordered supplies estimated to cost $13,000. Of these, the county received (and paid) supplies that it had estimated would cost $11,500. Actual cost, however, was $11,900.

• Received (and paid) all goods that it had ordered in the previous year. Actual cost was only $480.

• Recognized actual revenues of $13,800 (cash received).

REQUIREMENT：

（1）Record all journal entries including the closing entries.

（2）Show how the total fund balance (including the unassigned and committed portions) would be displayed at year-end.

Answer 1

Answer:

1.

Schedule of Changes in Unassigned Fund Balance

Revenues (a)                                                                                        $13,800

Expenditures (b)    12,380

Excess of revenues over expenditures 1,420

Less: Increase/(decrease) in reserve for encumbrances (c)    1000

Net change in unassigned fund balance

during the year [increase/(decrease)] 420

Add: Beginning of year balance 900

    End of year balance                                                                         $   1,320

(a)    The revenues would be the actual revenues; the budgeted revenues are irrelevant.

(b) Expenditures are the actual costs of the goods received and used — $11,900 plus $480.

(c) The increase in the reserve for encumbrances represents the required reserve at the end of the year for goods still on order ($1,500) (13,000-11,500) less the reserve at the beginning of year ($500). That is:

Reconciliation of Beginning and Ending Balances – Reserve for Encumbrances

Beginning balance                                                                                $   500

Add: Goods ordered during year                                                        13,000             $13,500

Less: Goods received during year

(at amount of initial encumbrance)

      Prior year $ 500

      Current year                                                                                    11,500              12,000

Ending balance                                                                                                            $1,500

2.

Fund balance:

Committed                                                                                         $1,500

Unassigned                                                                                             1,320

   Total fund balance                                                                            $180

3. Yes, the total fund balance equals the revenues less the expenditures:

Total fund balance, beginning of year $ 1,400

Add: Revenues    13,800

15,200

Less: Expenditures 12,380

Total fund balance, end of year   $2,820