Question

Required:

During the year 2017, the district engaged in the following transactions. Make appropriate journal entries. This is the first year of operations.

Post the journal entries to the general ledgers.

Balance Sheet showing the status of year‐end asset and fund balance accounts.

Statement of Revenues, Expenditures and Changes in Fund Balances for the year.

The following are the transactions that are needed for the above requirements:

Prior to the start of the year, the governing board adopted a budget in which agency revenues were estimated at $5,600 (all dollar amounts in this exercise are expressed in thousands) and expenditures of $5,550 were appropriated (authorized). Record the budget using only the control (summary) accounts.

It collected $5,800 in fees, grants, taxes, and other revenues.

It ordered goods and services for $3,000. Except in special circumstances it classifies reserves for encumbrances as “assigned” fund balance.               

During the year it received and paid for $2,800 worth of goods and services that had been previously encumbered. It expects to receive the remaining $200 in the following year.               

It incurred $2,500 in other expenditures for goods and services that had not been encumbered.

Answer 1

Journal Entries

                                                                                                                                (Dollars in thousands)

Event	Account Titles and Explanations	Debit	Credit
1	Estimated revenue	5,600
	Appropriations		5,550
	Fund Balance		50
	(to record budget)
2	Cash	5,800
	Revenue		5,800
	(to record receipt of revenue such as fees, grants, taxes and other revenue)
3	Encumbrance	3,000
	Reserve to encumbrance		3,000
	(to record reserve to fulfill the commitments for goods and services ordered)
4	Expenditure	2,800
	Cash		2,800
	(to record expenditure of goods and service received)
	Reserve to encumbrance	2,800
	Encumbrance		2,800
	(To record reversing of reserve to encumbrance of which goods and service received and charged to expenditure)
5	Expenditure	2,500
	Cash		2,500
	(To record expenditure which was not encumbered)
6	Revenue	5,800
	Estimated revenue		5,600
	Fund balance		200
	(closing of revenue and estimated revenue)
7	Appropriations	5,550
	Expenditures		5,300
	Encumbrance		200
	Fund balance		50
	(To close appropriations, expenditures and encumbrance and remaining balance transfer to fund balance)

General Ledger

Cash
Event	Description	Debit	Credit	Balance
2	Receipt of revenue	5,800		5,800 Dr
4	Payment for goods and service receipt		2,800	3,000 Dr
5	Payment for goods and service		2,500	500 Dr

Encumbrance
Event	Description	Debit	Credit	Balance
3	Reserve for encumbrance	3,000		3,000 Dr
4	Goods and service received		2,800	200 Cr
7	Closing of expenditures	200		0

Reserve for Encumbrance
Event	Description	Debit	Credit	Balance
3	Encumbrance		3,000	3,000 Cr
4	Goods and service received	2,800		200 Cr

Expenditure
Event	Description	Debit	Credit	Balance
4	Goods and service received	2,800		2,800 Dr
5	Goods and service not encumbered	2,500		5,300 Dr
7	Closing of expenditures		5,300	0

Revenue
Event	Description	Debit	Credit	Balance
2	Receipt of revenue		5,800	5,800 Cr
6	Closing of revenue	5,800		0

Fund Balance
Event	Description	Debit	Credit	Balance
1	Budget recording		50	50 Cr
7	Closing of revenue		200	250 Cr
8	Closing of expenditures		50	300 Cr

Estimated Revenue
Event	Description	Debit	Credit	Balance
1	Budget recording	5,600		5,600 Dr
7	Recording of closing		5,600	0

Appropriations
Event	Description	Debit	Credit	Balance
1	Budget recording		5,550	5,550 Dr
8	Recording of closing	5,550		0

Statement of revenue, expenditure and Changes in fund balance

Revenue	5,800
Expenditure	(5,300)
Increase in total fund balance	500
Encumbrance	(200)
Net Increase in fund balance	300

Balance Sheet showing the status of year‐end asset and fund balance accounts.

Assets
Cash	500
Total Assets	500
Fund balance
Reserved for encumbrance	200
Increased in fund balance	300
Total fund balance	500