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

Solution to Q-1

No journal entry is required because budgeted figures are only estimates and no actual revenue is generated or expense has been incurred. Hence, there is no requirement for a journal entry.

Solution to Q-2

Since the town uses encumbrance accounting, no journal entry is to be paased. At this point, only order has been made for the truck but there is no actual transaction.

Solution to Q-3

Following journal entry is to be passed on Dec 1

Particulars. Dr. Cr.

Truck a/c. Dr. $200,000

To Vendor a/c. $200,000

(Being truck purchased from vendor)

Solution to Q-4

Following journal entry is to be passed

Particulars.    Dr. Cr.

Revenue from prop. tax billing Dr.  $10,500,000

To customer a/c. $10,500,000   

(Being property tax billings send and revenue recognised on accrual basis)

Provision for doubtful debts a/c Dr. $200,00

To Revenue for prop. Tax billings. $200,000

(Being provision created for the doubtful amount)