1. Not-for-Profit Accounting, 7e
Introduction to Governmental and
Not-for-Profit Accounting, 7e
Chapter 6: The Governmental Fund
Accounting Cycle
Capital Projects Funds, Debt Service Funds,
and Permanent Funds
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3. Introduction
There are five types of governmental funds: the General Fund, Special Revenue Funds, Capital Projects Funds, Debt Service Funds, and Permanent Funds.
In Chapters 4 and 5 , we focused on accounting for the General Fund and Special Revenue Funds.
Because accounting for all governmental funds is similar—they all have the same current financial resources measurement focus and use the modified accrual basis of accounting—accounting for Capital Projects Funds, Debt Service Funds, and Permanent Funds should seem familiar. The difference lies primarily in the types of transactions that are commonly accounted for in these funds, because they can be used only when financial resources are restricted or limited for a specific purpose.
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8. Governmental Funds: Permanent Funds
Permanent Funds are different from other governmental funds because they are used to report resources that are legally restricted so that only the earnings generated by investing the principal (or corpus of a gift), and not the principal itself, may be used to support the government’s own programs
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10. Capital Projects Funds : Operating Entries
Assume that the City of Ruby Ville decides to build a sports complex at a cost of $18,000,000 and includes the project in its 2012 capital budget.
Financing for the project consists of a general obligation bond issue for $10,000,000, which is restricted by debt covenant for expenditures associated with constructing the sports complex, and an $8,000,000 expenditure-driven grant from the state.
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11. Capital Projects Funds : Operating Entries
If grant proceeds are received from the state before project costs are incurred, receipt of the cash is recorded as follows:
When the contract with the architectural firm is signed, an encumbrance entry is made as follows:
The contract with the architectural firm requires the city to pay 90 percent of the fee when the plans are completed; the remainder of the fee will be paid upon completion of the project.
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12. Capital Projects Funds : Operating Entries
The contract with the architectural firm requires the city to pay 90 percent of the fee when the plans are completed; the remainder of the fee will be paid upon completion of the project.
The following entries are made when the plans for the sports complex are accepted:
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13. Capital Projects Funds : Operating Entries
After evaluating bids for the project submitted by various contractors, the city accepts the bid by TKP Construction Company of $17,600,000. After the contract is signed, the following entry is made:
Only part of the cash on hand is needed immediately, so the city invests $9,000,000 in short term securities:
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14. Capital Projects Funds : Operating Entries
As the project advances, the contractor sends a progress billing report to the city, requesting payment of $5,500,000 on the project. The payment is approved, less a 10 percent retained percentage .
The following entry is made to record payment of the construction voucher:
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15. Capital Projects Funds : Operating Entries
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16. Capital Projects Funds : Operating Entries
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17. Capital Projects Funds : Operating Entries
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18. Capital Projects Funds : Operating Entries
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19. Bonds: Issued at a Premium
• Proceeds used for the project:
• Premium must be used to retire debt:
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