Question

Provide complete answers to the following two problems:

1. Describe the differences in cash flow statements required by GASB standards when compared with cash flow statements required by FASB standards.
2. The Village of Watkins Glenn operated an educational program for at-risk middle school children. Businesses and nonprofit organizations sponsor the children and pay the registration fee.
   1. The following cash receipts were collected:
      1. Registration 310,000
      2. Cash loan from bank       65,000
   2. The following cash disbursements were made:
      1. Payroll taxes 30,600
      2. Labor 102,800
      3. Insurance 12,400
      4. Interest 3.050
      5. Purchase school bus 62,000.

Required:

• Prepare the journal entries to record revenues and disbursements if the city treats the program as an enterprise fund
• Prepare the journal entries to record revenues and disbursements if the city treats the program as a special revenue fund.

Answer 1

Solution:
Differences in cash flow statements required by GASB standards and required by FASB standards are as follows:-

• FASB has three cash flow reporting categories, viz - Operating, Investing and Financing.But GASB has four cash flow reporting categories, viz - Operating, Investing, Capital & Related financing and Non capital financing.
• GASB requires direct method of cash flow But FASB allows both direct and indirect method of cash flow.
• GASB offers more accurate and Transparent representation of financing activities compared with FASB

ENTERPRISE FUND

JOURNAL ENTRIES
Date	Particulars	Debit	Credit
	Cash	$ 310,000.00
	Operating Revenue - Charge for Services		$ 310,000.00
	Cash	$    65,000.00
	Long term notes payables		$    65,000.00
	Operating Expenses - Payroll tax	$    30,600.00
	Operating Expenses - Wages	$ 102,800.00
	Operating Expenses - Insuarance	$    12,400.00
	Non-Operating Expenses - Interest	$      3,050.00
	Equipment - Bus	$    62,000.00
	Cash		$ 210,850.00

SPECIAL REVENUE FUND

JOURNAL
Date	Particulars	Debit	Credit
	Cash	$ 310,000.00
	Revenue - Charge for Services		$ 310,000.00
	Cash	$    65,000.00
	Other financing Sources - Issuance of long term note payable		$    65,000.00
	Current Expenditure - Payroll tax	$    30,600.00
	Current Expenditure - Wages	$ 102,800.00
	Current Expenditure - Insuarance	$    12,400.00
	Debt service Expenditure - Interest	$      3,050.00
	Capital Expenditure - Bus	$    62,000.00
	Cash		$ 210,850.00