Chapter 18, Problem 18.16P

To determine

Introduction: Government accounting means accounting process of managing and recording financial transactions incurred by the government. Government accounting does not reflect the profit-making entities instead they are providing services without profit making motive.

General fund: General fund is the primary fund maintained by the companies for recording all inflows and outflows except which are associated with the special purpose funds. It is mostly the difference between assets and liabilities of the company’s fund.

Funds: It is the fiscal or accounting entities in the government unit. It is set of accounts with self-balancing to record the transactions.

The journal entries in all the funds affected for the year ended December 31, 20X8.

Explanation of Solution

The journal entries in all the funds affected for the year ended December 31, 20X8 is as follows:

Case 1:

Date	Particulars	Debit ($)	Credit ($)
October 31, 20X8	Cash	800,000
	To Other financing sources-Bond issued		800,000
	(Recording entry for issuing $800,000 bonds)
October 31, 20X8	Encumbrances	750,000
	To Budgetary fund balance- reserved		750,000
	(Recording entry for acceptance of contractor's bid)
December 31, 20X8	Budgetary fund balance- reserved	250,000
	To Encumbrances (750000*1/3)		250,000
	(Recording entry for completion of one-third of the contract)
December 31, 20X8	Expenditure	246,000
	To Contracts payable		246,000
	(Recording entry for actual construction cost incurred)

Case 2:

Date	Particulars	Debit ($)	Credit ($)
December 31, 20X8	Estimated revenue	112,000
	To Appropriations		108,000
	Budgetary fund balance-unreserved		4000
	(Recording entry for budgeted revenue and appropriations)
December 31, 20X8	Cash	109,000
	To revenue account		109,000
	(Recording entry for collection of hotel room taxes)
December 31, 20X8	Expenditures (81000+22000)	103,000
	To voucher payable		103,000
	(Recording entry for expense incurred for general promotion and purchase of motor vehicle)
December 31, 20X8	Vouchers payable	103,000
	To cash		103,000
	(Recording entry for payment of expenses)

Case 3:

Date	Particulars	Debit ($)	Credit ($)
December 31, 20X8	Transfer out-Debt service fund	313,500
	To cash		313,500
	(Recording entry for transfer of resources from general fund to debt service fund)
December 31, 20X8	Cash	313,500
	To Other financing sources-Transfer in general fund		313,500
	(Recording entry for closing nominal accounts)
December 31, 20X8	Expenditure-Interest	13,500
	To Interest payable		13,500
	(Recording entry for interest on bonds due)
December 31, 20X8	Expenditure-bond payable	300,000
	To bond payable		300,000
	(Recording entry for bonds due)
December 31, 20X8	Interest payable	13,500
	Bond payable	300,000
	To cash		313,500
	(Recording entry for payment of bonds and its interest)

Case 4:

Date	Particulars	Debit ($)	Credit ($)
December 31, 20X8	Budgetary fund balance- reserved	83,000
	To Encumbrances		83,000
	(Recording entry to close outstanding encumbrances)
December 31, 20X8	Fund balance-unreserved	83,000
	To Fund balance- Reserved for encumbrances		83,000
	(Recording entry to close outstanding encumbrances)

Case 5:

Date	Particulars	Debit ($)	Credit ($)
December 31, 20X8	Fund balance-reserved for inventories	3000
	To Inventories (45000-42000)		3000
	(Recording entry for adjustment of inventories at the end of the year)