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CHAPTER 5

REVENUE ACCOUNTING
Governmental Funds

Prentice Hall Publishing Governmental and NonProfit Accounting 7e 1-1 Freeman / Shoulders

5-1

LEARNING OBJECTIVES
Determine

when various types of revenues


should be recognized and reported
Identify the four categories of nonexchange
transactions
Understand
Modified accrual revenue recognition criteria in

both simple and complex situations


Accounting for the levy, collection, and
enforcement of property taxes, as well as other
tax revenues
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-2

LEARNING OBJECTIVES
Account

for

Investment income per GASB Statement 31


Revenue budget revisions
Changes in revenue accounting principles

Understand

and account for the various types


of intergovernmental revenues, including

Both pass-through grants and other grants


Entitlements
Shared revenues
Payments in lieu of taxes

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-3

CHAPTER OVERVIEW
Reviews,

expands, and refines the


governmental fund revenue accounting
discussions of Chapters 2 and 4

Comparisons

to private business

Similar - distinguish nonrevenue resources


Different revenue accounting

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-4

CHAPTER OVERVIEW
(Continued)
Coverage

includes:

1. Revenue definition and recognition


2. Classification of revenue accounts
3. Accounting for specific types of revenues
4. Other revenue-related transactions,

events, and entries

Chapter assumes

GAAP-based revenue
accounting and reporting

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-5

REVENUE DEFINITION
Governmental

fund revenues are


increases in fund net assets that
either
Result in a corresponding increase in

the net assets of the government as a


whole or

Result from exchange-like interfund

services provided

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-6

GOVERNMENTAL FUND
REVENUES
May

result from:

Exchange transactions (or exchange-like

interfund transactions)

Record the asset when the revenue is earned or


Record the asset when received if prior to being
earned

Revenues recognized under modified accrual


recognition criteria
If prior to meeting criteria, report as deferred revenue

Nonexchange transactions addressed in GASB 33


2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-7

WHAT ARE NONEXCHANGE


REVENUE TRANSACTIONS?
Transactions

in which a

governmental entity gives or


receives value without receiving
or giving equal value in return.

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-8

NONEXCHANGE TRANSACTION
TYPES

Four revenue transaction types based on


principal characteristics (Figure 5-1):
1.

Derived tax revenues

2.

Imposed nonexchange revenues

3.

Government-mandated nonexchange transactions

4.

Voluntary nonexchange revenues

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-9

NONEXCHANGE TRANSACTIONS
Each

revenue

Transaction type has


Identifying characteristics
Recognition criteria for
Asset recognition

Revenue recognition

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

DERIVED TAX REVENUES


Examples

- Sales taxes
- Hotel taxes

- Gas taxes
- Income taxes

Characteristics
Tax assessed on exchange transactions of other

entities (non-government) or individuals

Asset

recognition

When underlying exchange transaction occurs

(sale takes place or income is earned)


If cash is received before underlying exchange
occurs, revenue should be deferred
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

IMPOSED TAX REVENUES


Examples
Property taxes
Fines and forfeitures

Characteristics
Assessments and taxes imposed on nongovernmental

entities other than those on exchange transactions

Asset

recognition

When legally enforceable claim arises


Subject to time restriction when resources are first

required or permitted for use (i.e., property taxes in


the period for which taxes are levied)

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

GOVERNMENT-MANDATED
REVENUES
Examples
State grants for mandated environmental facilities
Federal grants for mandatory school programs

Characteristics
When a government at one level provides resources to a

government at another level


Mandating use for a specific purpose

Asset

recognition

When eligibility requirements are met

Recipient meets characteristics specified by provider


Expenditures are made under reimbursement program
When timing requirements are met

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

VOLUNTARY REVENUES
Examples
State reimbursements for special education programs
State distribution of gas taxes to city for roads

Characteristics
When two or more parties willingly enter into legal or

contractual agreements
Eligibility requirements must be met

Asset

recognition

When eligibility requirements are met


Similar to government-mandated revenues plus any

other contractual requirements must have occurred

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

NONEXCHANGE TRANSACTIONS

Two distinctions for the use of


resources
1. Time requirements
2. Purpose restrictions

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

NONEXCHANGE TRANSACTIONS
Time

requirements affect the timing of


recognition and specify
When resources are required to be used
When use may begin
Or if resources are required to remain intact

indefinitely or until a specified date or event


occurs
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

NONEXCHANGE TRANSACTIONS
Purpose

restrictions specify the purpose


for which resources are to be used
Shouldnt affect recognition, however
Restrictions not completed result in

reporting resources as restricted or reserved

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE DEFINITION
Operating

revenues classified as all


increases in fund net assets, except
Interfund reimbursements
Interfund transfers
Compensation for loss of assets
Long-term debt issues

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

MAJOR REVENUE SOURCES


Property

taxes

Known when levied


Recorded on modified accrual basis
Sales

/ gas taxes

Known when returns are filed


Accrue upon sale
Income

taxes

Known when tax return filed


Accrue when income earned
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
CRITERIA
Most

revenues recognized on a
modified accrual basis
Revenues recognized only when

susceptible to accrual which means both


Objectively measurable and
Available to finance current expenditures

Others recognized
On a cash basis
Initially as deferred revenue
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
CRITERIA (Continued)
Available

means both

Collected during the period or soon

enough thereafter (i.e., 60 days) to be


used to pay current period liabilities
and

Legally available (usable) to finance

current period expenditures

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
CRITERIA (Continued)
Legally

available means both

Legal claim to resources established by

year end
and

Intended to finance current or prior

period expenditures

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
CRITERIA (Continued)
Establish

legal claims as follows:

For property taxes - levy of taxes


For charges for services - performing services
For sales taxes - taxable sale by business
For income taxes - taxpayer earning taxable income
For grants - expended for purpose
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
CRITERIA (Continued)
The

GASB notes that accrual


application requires:
1. Proper judgment
2. Consideration of materiality
3. Regard for practicality
4. Consistency in application

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

CLASSIFICATION OF
REVENUE ACCOUNTS
Classified

by source in order to:

1. Prepare and control the budget


2. Control collection of revenues
3. Prepare financial statements
4. Prepare financial statistics
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

COMMON GENERAL FUND


REVENUE CLASSIFICATIONS
Represent

broad classifications

Not actual general ledger accounts


Detail accounts established under

each classification

May

also apply to other funds

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

COMMON GENERAL FUND


REVENUE CLASSIFICATIONS
Taxes
Licenses

and permits
Intergovernmental revenues
Charges for services
Fines and forfeits
Investment income (unless immaterial)
Miscellaneous (e.g., investment income,
rents, contributions)
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE CLASSIFICATIONS
Fund

versus governmental unit revenues

Those not reported as revenues


Interfund transfers Other financing sources
Reimbursements Credit to expenditures

Those reported as fund revenues


Exchange-like interfund charges for services
Examples:

Internal Service Fund (i.e., for printing) revenues


Enterprise Fund (i.e., electricity) revenues
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

TAXES
Taxpayer-assessed

tax recognition

Recognize in accounting period susceptible

to accrual (i.e., measurable and available)


Taxpayer liability & collectibility established
Collectible within 60 days after year-end

Usual practice during the year is to


Recognize when cash received
Accrue at year-end when practical

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

SALES TAXES
GASB

guidelines for revenue recognition

Accrue in period sale occurs if


Collected and held by merchant or another government
Remitted within revenue cutoff period (i.e. 60 day period)

Consider comparability if received before or

after normal time


2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INCOME TAXES
Primarily

states, some cities and counties

Estimate revenues from analysis of


Current installments
Returns filed
Economy
Historical receivables and refunds
Recognize revenues if availability criteria met
Reduce revenues for refunds payable
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Recording

and recognition overview

Property tax revenue recorded net of:


Estimated uncollectible taxes receivable
Discounts on taxes
Property taxes recorded as deferred revenue if:
Taxes levied to finance subsequent year's budget
Current year taxes collected after > 60 days past year
end (or other shorter cutoff period)

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES

Recognition requires understanding of


the following steps in the process:
1.
2.
3.
4.
5.
6.
7.

Assessment of the property


Review of assessments
Assessment equalization
Levy of the tax
Billing taxpayers
Collecting taxes
Tax enforcement

Steps 4-7 require accounting entries and


recognition of property tax revenues
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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PROPERTY TAXES
What

are property (ad valorem) taxes?

Tax levied on assessed value of property


Typically, the largest and most important

revenue of many
Cities, towns, villages
School districts
Counties

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Assessment

of the property

Local assessor performs the assessment


Based on property values of all taxable

property in each jurisdiction

Result is provided on an assessment

role provided to each jurisdiction

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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PROPERTY TAXES
Review

and equalization of assessments

Review
Property owners notified of assessment
Owners have right of appeal to a review board
Board may adjust values
Adjusted assessment role provided to localities
Equalization
Attempt made at state level to equalize a wide
variety of assessed valuations compared to
market values
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Levying

the tax

Legislative body passes a tax act / ordinance

(a local law) to set the tax rate(s)


Provides property tax revenue for the year
Levy may be for unrestricted general purposes

Recorded in the General Fund

Some levies may be restricted; examples


Parks recorded in Special Revenue (Parks) Fund
Schools - recorded in Special Revenue (School) Fund
Repay debt recorded in Debt Service Fund

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Determining

the tax rate

Total assessed valuation divided by the

required levy amount to balance the budget


Assessed Valuation = $10 billion = $0.025 = rate
Required Amount = $250 million = total levy
Or 25 mills per dollar of assessed value

Must consider any limit on tax rates

prescribed in many governments


2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Distributing

the tax revenue

Using the total $250 million tax levy example:


$150 million General Fund
$ 10 million Special Revenue (Parks) Fund
$ 50 million Special Revenue (Schools) Fund
$ 40 million Debt Service Fund
$250 million Total tax levy

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Billing

taxpayers

Amount due equals:


Assessed value of each property
Multiplied by the levied tax rate

Result is recorded on the tax role for

each tax (fiscal) year

Serves as the subsidiary ledger for each years


Taxes Receivable in general ledger

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Recording

taxes receivable / tax revenues

Revenue should be recorded net of estimated

uncollectible taxes
Dr Taxes receivable-current

Cr Allowance for uncollectible taxes-current

Cr Revenues-Property taxes

Note: No bad debts; revenue recorded net


2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Recording

tax collections

Separate collections between current

and delinquent taxes receivable

Dr Cash

Cr Taxes receivable-current

Cr Taxes receivable-delinquent

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES
Discounts

on taxes

Some governments allow discounts if paid

before specified dates


Discounts recorded as revenue reductions;
not interest expenditures
Dr Taxes receivable-current

Cr Allowance for uncollectible taxes-current

Cr Allowance for discounts on taxes

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES

Taxes levied but not available

Recorded as deferred revenue when:


1.

2.

Taxes levied at the end of one year (Year 1) to


finance the next fiscal years (Year 2) operations
(therefore, not legally available)
Taxes will not be collected within 60 days into the
next year (Year 3) and therefore are not available
to finance current-year (Year 2) expenditures

Entry when levied would be:

Dr Taxes receivable-current
Cr Allowance for uncollectible taxes-current
Dr Deferred revenues

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES

Taxes collected in advance


Some taxpayers will pay next years

taxes prior to the levy date


Represent revenue of the next year,
therefore, not recognized as revenue in
the current year
Entry when collected to identify those
taxes collected before they were levied

Dr Cash
Cr Taxes collected in advance

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES

Enforcing tax collections

Governments set delinquent tax dates


Unpaid taxes subject to penalties and interest and
recorded as follows:

Dr Interest and penalties receivable-delinquent taxes


Cr Allowance for uncollectible interest and penalties
Cr Revenues-property taxes

Taxes, penalties and interest become a lien against


the property

Property subject to sale after certain period


Any excess sale proceeds remitted to owner

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES

Accounting for tax sales


Tax liens on property with unpaid taxes

are established after set period


Recorded as follows:

Dr Tax liens receivable


Dr Allowance for uncollectible delinquent taxes
Dr Allowance for uncollectible interest and penalties
Cr Allowance for uncollectible tax liens
Cr Taxes receivable-delinquent
Cr Interest and penalties receivabledelinquent taxes

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

PROPERTY TAXES

Retaining property for government use


Properties not sold or redeemed are

sometimes retained and record as follows:

Dr Expenditures capital outlay (1)


Dr Allowance for uncollectible tax liens (2)
Cr Tax liens receivable

Notes:
(1) Lesser of salable value or tax lien receivable
(2) Difference between salable value and tax lien receivable
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
LICENSES AND PERMITS
Governments

have right to control


activities of individuals or corporations
Related revenue usually only recognized as

revenues when cash received

Amount usually not known until issued

Types of licenses and permits


Alcoholic beverage, occupational license
Building permits, driver license
Motor vehicle permit, marriage license
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INTERGOVERNMENTAL
REVENUES
Grants
A contribution from another government
For general use or for specified purpose
Restricted capital grants such as
Airport improvements, buses
Subway and wastewater treatment systems

Restricted operating grants such as

Social service, environmental programs

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INTERGOVERNMENTAL
REVENUES
Entitlements

and shared revenues

Entitlements
Payment based on a specified formula such as
State aid for local public schools
Federal aid for airport improvement programs

Shared revenues
Revenue received by one government and
shared on preset basis with another such as
Sales taxes
Gas taxes
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INTERGOVERNMENTAL
REVENUES
Payments

in lieu of taxes

Amounts paid by one government to

reimburse another for lost revenue from tax


exempt paying government
Examples:
Federal government to school districts near
military bases
State university to local government for police and
fire protection

Recorded in same manner as tax revenues


2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INTERGOVERNMENTAL
REVENUES
Fund identification
Purpose and restriction for use of revenue

required to record in proper fund, such as:


Special revenue fund for restricted revenues is common
for accountability purposes
General fund if legal requirements can be satisfied
Debt service fund for payment of principal or interest
on general long-term debt
Capital projects fund for general government capital
construction or acquisition
Proprietary funds for intergovernmental revenue
restricted for use in those funds

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INTERGOVERNMENTAL
REVENUES
Pass-through

grants

Primary recipient-receives grant, but


Cannot spend for own purposes
Must pass-through to secondary recipient
Sub recipient spends grant for specified

purposes or may pass it through to others


Recognize both revenues and
expenditures/expenses unless only a cash
conduit, then report in Agency Fund
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
INTERGOVERNMENTAL REVENUES
Recognize

in period they become

Susceptible to accrual, i.e., measurable and

available

If virtually unrestricted, recognize at receipt or


earlier if susceptible to accrual

If restricted to expenditure for specific purposes,


recognize when eligibility requirements are met

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

REVENUE RECOGNITION
INTERGOVERNMENTAL REVENUES
Grant

received before earned

When grant is received


Dr Cash

Cr Unearned revenues - grants


When conditions of the grant are met
Dr Expenditures

Cr Vouchers payable or cash


Dr Unearned revenues - grants

Cr Revenues - grants
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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REVENUE RECOGNITION
INTERGOVERNMENTAL REVENUES
Grant

earned before received

When government makes all

qualifying expenditures and meets


all eligibility requirements
Dr Expenditures

Cr Vouchers payable or cash


Dr Due from grantor

Cr Revenues - grants

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

CHARGES FOR SERVICES


Examples

services

of general government

Court costs, fees and charges


Recording legal documents
Zoning and subdivision fees
Sales of maps and publications
Building inspection fees
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

CHARGES FOR SERVICES


Distinguish

from licenses and permits as


charges for services are made for purpose of
recovering costs
Distinguish exchange-like interfund services
and reimbursements
Exchange-like
Revenues recognized in provider fund
Expenditures recognized in recipient fund
Reimbursements
Expenditures in fund receiving goods or services
Expenditure credit in fund providing
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

FINES & FORFEITURES


Not

a major revenue source

Parking fines
Fines levied by the courts
Commonly

basis

accounted for on a cash

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INVESTMENT INCOME
GASB

establishes fair value standards for the


following types of investments:
Participating investment contracts affected by

market interest rate changes since:

They are negotiable or transferable


Their redemption value considers market rates

External investment pools


Open-end mutual funds
Debt securities
Equity securities

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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INVESTMENT INCOME

The following exempted investments


may report at the lower of
Amortized cost or
2. Fair value
Nonparticipating, interest-earning investment
contracts
Money market investments with remaining
maturities at purchase < 1 year
Participating, interest-earning investment
contracts with remaining maturities at
purchase < 1 year
1.

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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INVESTMENT INCOME
What

is fair value?

Amount at which the investment may

be exchanged in a current transaction


between willing parties; other than a
forced or liquidation sale

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

INVESTMENT INCOME
Fair value

accounting standards

Investments reported at fair value in the

balance sheet
Changes in fair value reported as revenue
(investment income) in the operating statements
Investment income =
+ interest earned
+ dividends earned
+ change in fair value of investment

See Figures 5-2 and 5-3 for examples


2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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INVESTMENT INCOME

Report investment income using one of two


reporting options
1. Report investment income as single line item
2. Or in detail such as:
Interest and dividends
Net increase (decrease) in the
fair value of investments
Total investment income

$30,000
1,000
$31,000

Details of realized and unrealized gains and

losses may be disclosed in the statement notes


2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

SALES & COMPENSATION FOR LOSS


OF CAPITAL ASSETS
Capital

assets

Proceeds from the sale of or


Compensation for loss of

reported as other financing sources (nonrevenue) preferably in the fund that


financed the original acquisition, such as:
General fund
Capital projects fund
Internal service funds
Enterprise funds
Trust funds

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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NON TRANSFER PAYMENTS


FROM PUBLIC ENTERPRISES
Payments

made by enterprise funds in lieu of


property taxes from which they are exempt
Reported as payments in lieu of taxes (a revenue)
Provided they approximate the value of services

Otherwise

they are classified as transfers

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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ESCHEATS
Includes

reversions to the state of

Net assets of deceased persons dying in testate


Inactive checking accounts

Financial

assets recorded as revenues or


Capital assets received recorded in
General Capital Assets Accounts

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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PRIVATE CONTRIBUTIONS
Unrestricted

contributions (rare)

Recognized as General Fund revenues


Restricted

contributions

Usually recognized as revenue

depending on restriction in
Special Revenue Funds
Capital Projects Funds
Trust Funds

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

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REVENUE BUDGET REVISIONS


Potential

reasons

Receipt of grants not originally known


Actual revenues exceed original

estimates
Additional appropriations required

2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders

5-

CHANGES IN ACCOUNTING
PRINCIPLES
Retroactive

application

Required under new and revised GASB standards


Effective at beginning of year of change
Cumulative effect of accounting change reported as

fund balance restatement for earliest year presented


Revenues restated for each year presented
Change disclosed in notes
Prospective

application allowed when

New standard allows is to be applied prospectively


New standard implemented early
2003 Prentice Hall Publishing Governmental and NonProfit Accounting 7e Freeman / Shoulders
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