Chapter 17, Problem 17.13P

General Fund Entries [AICPA Adapted]
The following information was abstacted from the accounts of the general fund of the City of Noble after the books had been closed for the fiscal year ended June 30, 20X2.

Additional Information
The budget for the fiscal year ended June 30, 20X2, provided for estimated revenue of $2,000,000 and appropriations of $1,940,000. Encumbrances of $1,070,000 were made during the year.

Required
Prepare proper journal entries to record the budgeted and actual transactions for the fiscal year ended June 30, 20X2. Include closing cities.

To determine

Concept introduction:

General fund: It accounts for all financial resources except for those accounted for in another fund. It includes transactions for general governmental services provided by the entity’s executive, legislative and judicial operations. The accounting for general fund, includes accounting for the inter fund activities on the general fund’s operating statement, the statement of revenues, expenditures, and changes in fund balance.

The entries to record budgeted and actual transactions for year ended June 30, 20X2.

Explanation of Solution

Particulars	Debit $	Credit $
Estimated Revenues control	2,000,000
Appropriations control		1,940,000
Budgetary fund balance − Unreserved		60,000
(Budgetary estimates recorded)
Taxes receivable	1,870,000
Allowance for uncollectible taxes		10,000
Property tax revenue		1,860,000
(Property tax levy recorded in tax receivable account)
Allowance for uncollectible taxes	8,000
Taxes receivable		8,000
(Some of the tax receivable written off)
Cash	1,820,000
Taxes receivable		1,820,000
(Received cash on account of property tax collections)
Encumbrances	1,070,000
Budgetary fund balance− Reserved for encumbrances		1,070,000
(Record purchase commitments)
Budgetary fund balance− Reserved for encumbrances	1,000,000
Encumbrances		1,000,000
(Reverse for purchase order received)
Expenditures	1,840,000
Vouchers payable		1,840,000
(Recording of expenditures)
Vouchers payable	1,852,000
Cash		1,852,000
(Payments of vouchers during the period)
Appropriations control	1,940,000
Budgetary fund balance− Unreserved	60,000
Estimated revenues control		2,000,000
(Closure of budgetary account)
Budgetary fund balance− Reserved for encumbrances	70,000
Encumbrances		70,000
(Closing of remaining encumbrances by reversal of budgetary balance)
Fund balance − Unreserved	70,000
Fund balance − Reserved for Encumbrances		70,000
(Reserved fund balance for outstanding purchase commitments)
Property tax revenue	1,860,000
Expenditures		1,840,000
Fund balance − Unreserved		20,000
(Closing of operating statement account)

1. The budget for the year is estimated to be $2,000,000 and appropriations were made for $1,940,000 and the balance amount is unreserved.
2. Taxes receivable is estimated to be $1,870,000 debited to receivable account and allowance for uncollectible is created remaining balance is credited to property tax revenue.
3. Tax receivable worth $8,000 is expected to be uncollectible and written off from allowance for uncollectible.
4. Property tax collections received debited to the cash account and credited to the tax receivable account.
5. Encumbrances for purchase commitment recorded.
6. Encumbrances of $1,000,000 reversed for purchase order received.
7. Expenditure for the year recognized by crediting to vouchers payable account.
8. Vouchers payable during the year paid and credited to the cash account.
9. Closing entries for appropriation passed by reversal of budgetary estimates and appropriations.
10. Encumbrances not met lapsed and closed by reversing the remaining balance.
11. Reserve created for the lapsed commitments in the current year to be meat in the next year.
12. Operating statement account closed by debiting revenue account and credit expenditure account, and excess of revenue over expenditure credited to fund balance − unreserved.