Accounting Entries An Overview of Basic Year End and Accrual Entries 1

Steps for Closing the Year 1. Most importantly – Make sure your bank reconciliations agree to the general ledger. 2. Review the open order report and determine whether open orders are accounts payable or reserve for encumbrances Accounts Payable – Goods received or services rendered prior to June 30. Reserve for Encumbrances – Goods ordered prior to June 30 but not received as of June 30. Make sure the open order report balances agree to the general ledger balances 3. Analyze balance sheet accounts A detailed listing of what comprises the total account balance should be available for audit For example: a detailed list of what makes up the State Aid Receivable balance: Final state aid payment $100,000 Extraordinary aid $50,000 Non-public transportation aid $10,000 Total $160, Post accrual entries 5. Post adjusting entries 6. Post year end entries 2

Accrual Entries Accrual of revenues earned but not received as of June 30 Example 1 – Accrual of extraordinary aid Dr State Aid Receivable $50,000 Cr Revenue ( ) 50,000 Desc: To record extraordinary aid receivable 3

Accrual Entries (Cont’d) Accrual of revenues earned but not received as of June 30 (cont’d) Example 2 – Accrual of tuition receivable (from other LEA) Dr Intergovernmental Accounts Receivable-Other $5,000 Cr Revenue ( ) 5,000 Desc: To record tuition due from other LEA 4

Accrual Entries (Cont’d) Accrual of interfund receivable Example 3 – Accrual of interfund for interest received in capital projects fund due to debt service fund This entry assumes that the interest originally was posted as revenue in the capital projects fund Dr Interfund Accounts Receivable $100 Cr Revenue ( ) 100 Dr Revenue ( ) $100 Cr Interfund Accounts Payable 100 Desc: To record interest due to debt service fund 5

Adjusting Entries Example 1 - To record an increase to capital reserve (June Board resolution) Dr Unreserved Fund Balance $100,000 Cr Res. Fund Balance-Capital Reserve 100,000 Desc: To record increase to capital reserve Example 2 - To anticipate additional fund balance during the year To anticipate prior year extraordinary aid excluded from excess surplus Dr Unreserved Fund Balance $75,000 Cr Expenditures (budget account #) 75,000 Desc: To record anticipated fund balance 6

Adjusting Entries (Cont’d) Example 3 – To liquidate interfund To eliminate the interfund set up in accrual entry # 3 Make the following entry at the time the cash is transferred Dr Cash $100 Cr Interfund Accounts Receivable 100 Dr Interfund Accounts Payable $100 Cr Cash 100 Desc: To record liquidation of interfund 7

Year End Entries This is an overview of basic year end entries. Your general ledger software may or may not make these entries for you during the year end closing process General Fund Example 1 – To close budgeted and actual revenues and appropriations June 30 Balances: Estimated Revenues Dr. 50,000, Revenues Cr. 55,000, Budgeted Fund Balance Dr. 100, Appropriations Cr. 50,100, Expenditures Dr. 48,000, Encumbrances Dr. 5,000 8

Year End Entries (Cont’d) General Fund (Cont’d) Example 1 – To close budgeted revenues and appropriations (Cont’d) Dr Revenues $55,000,000 Cr Estimated Revenues 50,000,000 Cr Budgeted Fund Balance 100,000 Cr Unreserved Fund Balance 4,900,000 Desc: To close revenues Dr Appropriations $50,100,000 Cr Expenditures 48,000,000 Cr Encumbrances 5,000 Cr Unreserved Fund Balance 2,095,000 Desc: To close appropriations 9

Year End Entries (Cont’d) Special Revenue Fund - assumes revenue recorded on a cash basis Example 1 – To adjust revenues at year end Expenditures and encumbrances exceeded cash received by $10,000 Make entries for individual grants Use for State grants and for Federal grants Dr X Intergovernmental Accounts Rec. $10,000 Cr Revenues 10,000 Desc: To adjust revenues 10

Year End Entries (Cont’d) Special Revenue Fund – assumes revenue recorded on a cash basis Example 2 – To close actual revenues Cash received exceeded expenditures and encumbrances exceeded by $4,000; carryover is allowed Make entries for individual grants Dr Revenues $4,000 Cr Deferred Revenue 4,000 Desc: To adjust revenues 11

Year End Entries (Cont’d) Special Revenue Fund – assumes revenue recorded on a cash basis Example 3 – To close actual revenues Cash received exceeded expenditures and encumbrances exceeded by $3,500; carryover is NOT allowed Make entries for individual grants Use for State grants and for Federal grants Dr Revenues $3,500 Cr X Intergovernmental Accounts Payable 3,500 Desc: To adjust revenues 12

Year End Entries (Cont’d) Special Revenue Fund Example 4 – To close actual and actual revenues and appropriations After making the previous entries, the revenue and expenditures should be equal Dr Appropriations $4,100,000 Cr Estimated Revenues 4,100,000 Desc: To close budgeted revenues and appropriations Dr Revenues $4,100,000 Cr Expenditures 4,100,000 Desc: To close actual revenues and expenditures 13