Question

Nizwa Municipality follows fund accounting. The following transactions took place during the year 2019. 1. The city collects property taxes from its citizens amounting to RO 80,000. The city plans to use this for financing the general operating activities planned by Al Dakiliyah governorate.

You are required to state for each of the transactions above,:  The fund in which Fund these transactions will be recorded  Pass journal entries in each of the respective funds  Briefly explain the Basis of accounting, the accounting treatment and the measurement focus of these transactions in the respective funds where these transactions are accounted.   

Answer 1

A governmental accounting system should be organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.

Basis of accounting refers to when revenues and expenditures are recognized and reported in the financial statements.

Revenues are recognized only when cash is received and expenditures are recognized when chargeable against the report year’s budget appropriations as required by state law. This generally results in revenues being recognized when delivered to the government or government’s agent and expenditures being recognized when paid. Warrants and checks are considered paid when issued. An exception to expenditure recognition would be during any open period after the close of the fiscal year when expenditures can be charged against the previous period for claims incurred in the previous period. Open periods are required by statute for cities.Special purpose districts which use the county or a city as their treasurer may use the same open-period as their treasurer. If a district acts as its own treasurer, no open period is allowed by statute.

Journal entries can be entered with various options:

Enter standard General Journal entries where you supply all of the information, including the debits and credits.
Enter General Journal entries with an offset option, where you set an offset account for all entries and you supply only one debit or credit. The offset account will be entered automatically with either a debit or credit depending on the entry you supplied.
Enter General Journal entries with a template option, where the template controls which accounts and details are entered. The detail of the General Journal entry is entered by clicking Template Detail rather than entering information into the General Journal Entry grid.
Enter General Journal entries with an auto-reversing option. This option can be used when you know you have a liability against your company at the end of a month, for example, you may know you have a payroll wage liability but have not yet entered the Payroll. If the General Journal entry is entered with an auto-reversing entry at the beginning of the next month, the payroll wage liability you entered at the end of the month will automatically be reversed so that the General Ledger is updated with the true Payroll information.

Jouranal Entries;

1.Receipt of tax Amount
Cash(Fund)A/c...dr 80000
To Funds A/c 80000.
2.operating expenses
Expenses A/c......dr 80000
To cash A/c 80000.