Question

Journal entry questions: Give the entry needed, or explain why no entry is needed.

1.On the first day of the fiscal year, the town council passes a budget that expects $10 million in property tax revenues, and authorizes the spending of $7 million for salaries, and $2 million in other general expenditures.

2.On November 1, the town fire department orders a new truck for $200,000. The town uses encumbrance accounting. No payment is made at this point.

3.On December 1, the town fire department receives the new truck. No payment is made at this point. What entry or entries need to be made in the government fund accounts

4.On the first day of the fiscal year, the town sends out property tax bills totaling $10,500,000. It expects to collect 10 million either during the fiscal year, or within the following two months, it expects to collect another $300,000 after that time, and expects $200,000 to never be collected (3 points)

Short answer

5.It says budgets are much more important in government accounting than in business reporting. Why do you think this is true? Why would citizens care so much about budgets in the government environment? ?

Answer 1

PARTICULAR DEBIT ($) CREDIT ($)

1. Estimated revenues a/c..    Dr. 10 million   

  To Salaries a/c 07 million

To General expenditure a/c   02 million

To Unreserved fund balances a/c 01 million

2. (No entry is needed here because the payment for truck is not made yet.)

Following entry will be made at the time of payment:

Encumbrance a/c..    Dr. 2,00,000

To Truck a/c    2,00,000

3. (No entry is needed here also because though the receiving of truck

increases assets but no any payment is made in this respect, so

it will be recorded at the time of payment.)

4. (No entry will be made here also because the property tax bill is just

released only and the collections are expected in upcoming months

and not yet made, as the amout will be collected the entries will be passed)

5. SHORT NOTE:  

Budgets are much more important in government accounting than in business reporting because here, one of the primary purposes of budgeting is to provide control over the revenues and expenditures of the government. The budgets are an important part of maintaining control of a government's finances and are a means of achieving the financial reporting objective of accountability of government's transactions. In business reporting, a budget report is written to show how a business is managing its funding.

Citizens care so much about budgets in government environment to ensure economic growth and the growth of business and trading. A budget not only identifies areas of weakness and helps the government to allocate resources, but also regulates the imposition of taxes in various sectors. The public sector companies are also regulated by government through this.