You are the Controller of MetroCity. The new Mayor Cara Carter has limited knowl

Question

You are the Controller of MetroCity. The new Mayor Cara Carter has limited knowledge of Government Accounting. She is particulary confused about the following two issues: 1. The recording of the budget in the accounting records. 2. The recording of encumbrances when purchase orders are issued. Write a one page letter to Mayor Carter explaining these two unique elements of government accounting. Remember that although Mayor Carter is bright she has limited knowledge of government accounting. Therefore, your explanation should be detailed.

Explanation / Answer

Budgetary basis accounting is often used in governmental accounting. Budgetary accounts to record the budget. It never impact the fund accounts. it is different from buisness Financial Accountng.They have opposite Debit and credit account .

INFLOWS

1. Estimated revenue control: Inflows into municipality. Revenue that donot have to be repaid

Dr (+) Cr(-)

2.Estimate other financing source:Issuing long term debt , selling Capital Asset, interfund transfering option.

OUTFLOWS

1.Appropriation control: expense outflow

Dr(-) CR(+)

2 Estimating other financing source.: Source outflow , Interfund operating , transfer out to other governmental fund

3.Budgetery fund balance: closing balance

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