Copyright
International Correspondence Schools.

Accounting ... online

. (page 18 of 29)
Online LibraryInternational Correspondence SchoolsAccounting ... → online text (page 18 of 29)
Font size
QR-code for this ebook


ledger account, Current Surplus, shows a credit balance which
will be offset by this debit entry. During the year this account
will be debited with charges or payments on account of
expenses of prior years, unless a reserve or some other pro-
vision has been made to meet such charges and payments. At
the end of the fiscal year there will be transferred to this
account the amounts of the debit balances in the accounts
called Estimated Revenues and Appropriated Revenues.

During the year Current Surplus will be credited with the
amounts of reserves cancelled which exceed the reserves set
up. At the end of the fiscal year there will be transferred to
Current Surplus the credit balances in the accounts known as
Current Revenues — Estimated, Current Revenues — Unesti-
mated, and the credit balance in the account known as Cur-
rent Appropriations, which balance represents unencumbered
balances of all current appropriation accounts.

At the close of the fiscal year and when the entries described
have been made, the account will show either a debit or credit
balance. A debit balance means a current deficit, or, in other
words, that expenses have exceeded revenues. A credit balance
means a current surplus, or an excess of revenues over expenses.

Where a deficit appears, the amount thereof is carried for-
ward and included in the succeeding tax levy. The amount
of a surplus, if such be shown, is carried forward and applied
in whole or in part to the reduction of the tax levy.



Digitized by



Google



§ 39 MUNICIPAL ACCOUNTING 25

39. Estimated Revenues in the General Ledger is
debited with amount of revenues which the appropriating board
has estimated will be received during the current year and
which has been applied in reduction of the tax levy. If during
the year revenues in excess of the amounts estimated are
derived from estimated sources and are applied or transferred
to the credit of appropriations or other accounts, they are
debited to Estimated Revenues. At the end of the year this
account will be closed by a credit entry, the amount of which
will at the same time be debited to Current Surplus.

During the year and until the books are balanced, the Esti-
mated Revenues account will show a debit balance, which,
when contrasted with the credit balance in the account called
Current Revemves — Estimated, indicates either the amount of
anticipated revenues which must accrue or be received in order
to meet the requirements of the budget and subsequent appro-
priations from such revenues, or an excess of current revenues
from estimated sources over the amounts anticipated and
appropriated.

Care should be taken to avoid confusion between the titles
of the ledger accounts, Estimated Revenues, and Current
Revenues — Estimated. The title Estimated Revenues, as has
been explained, refers to the revenues which the appropriating
board has estimated will be received during the fiscal year and
the amount of which as estimated has been applied to reduce
the tax levy.

The term Current Revenues — Estimated refers to revenues
of the same character as those included in Estimated Revenues,
but which have actually accrued or been collected.

Current Revenues — Unestimated means revenues collected
or accrued, which were not considered when the budget was
prepared.

The account Estimated Revenues will not be required in
those cities whose charters do not permit the making of appro-
priations based on estimated revenues as well as on taxes.

40. The account known as Sinking: Fund Contribu-
tion Required is charged (debited) with the amount esti-



Digitized by



Google



26 MUNICIPAL ACCOUNTING §39

mated in the budget as the contribution of the sinking funds to
meet maturities of bended debt provided for in the budget.

The same account will be credited when payments are made
from sinking funds to the current accounts to meet the esti-
mated requirements.

A debit balance, if any, indicates the amount of contributions
from sinking funds remaining tmpaid.

41. The account known as Taxes Receivable will be
debited with the amount of the tax levy and with such addi-
tional items as may be charged against taxpayers and collected
with the taxes.

This account will also be debited with the amounts refunded
on account of erroneous or excessive payments, not including,
however, such refunds as may be made only after authoriza-
tion by the proper board and appropriation therefor.

From time to time this account will be credited with the
amounts collected on account of current taxes, with amounts
cancelled, and with amounts transferred to Tax Sale account.

A debit balance remaining in this account indicates the
amount of uncollected taxes and should correspond with the
amount of unpaid taxes on the current tax roll.

42. Current Appropriations is a controlling account
and should be supported by items in a subsWiary ledger, known
as the Appropriation Ledger or Ledger A,

In the General Ledger, Current Appropriations is credited
with the total of the appropriations in the budget, and from
time to time with such transfers or additional appropriations as
may be made under authority of the appropriating board, and
with refunds of erroneous payments.

Certain debits and credits in this account in connection with
the issue of orders effecting commitments or charges against
appropriations, the cancellation of such items, and the audit of
claims will be more fully explained further on in Art. 51.

At the close of the fiscal year Current Appropriations
account will ordinarily show a credit balance, which represents
the unencumbered balance of appropriations and will be closed
into Current Surplus.



Digitized by



Google



(39



MUNICIPAL ACCOUNTING



The balance in Current Appropriations account should cor-
respond with the aggregate of the balances in the Appropria-
tion Ledger.

BNTRIBS RECORDING SUNDRY RBCBIPTS

43. From time to time the treasurer receives cash from
sundry sources and reports the same daily to the comptroller.

The comptroller records the receipts in a Cash Book properly
ruled to develop totals of the several classes of collections.
The details are posted item by item to proper accounts in the
subsidiary ledger (Ledger B) and the totals are posted peri-
odically to the controlling account.

The following entries illustrate the method of recording
receipts from taxes, estimated revenues, unestimated revenues,
sinking fund contributions, and the proceeds of temporary
loans issued in anticipation of taxes :

Current Cash $300,000.00

To Taxes Receivable . $300,000.00

Current Cash 10,000.00

To Sinking Fund Contribution Required 10,000.00

Current Cash 8,000.00

To ^Current Revenues— Estimated 8,000.00

Current Cash 3,000.00

To ^Current Revenues — Unestimated ' 3,000.00

Current Cash 50,000.00

To Current Loans 50,000.00

44. Cominents on the Fores:oins: Entries. — It is

elementary that cash account is debited when cash is received
and credited when cash is paid. In the current group the cash
account is called Current Cash and is so segregated to prevent
expenditure of the cash for other than current purposes.

45. The accounts known as Taxes Receivable and Sinking
Fund Contribution Required have been described in Arts. 40
and 41.

The entries illustrated mean that taxes of the current year
to the amount of $300,000.00 have been collected and the sum



Digitized by



Google



28 MUNICIPAL ACCOUNTING § 39

required of the sftiking funds has been transferred from Sink-
iag Fund accounts to the current group.

46. The account known as Current Revenues — Estimated
is credited with receipts of revenues from sources estimated in
the budget.

The same account will be debited^ with the amount of items
refunded and which had been previously credited.

At the close of the fiscal yeaj* a credit balance will be closed
into Current Surplus.

47. The account known as Current Revenues — Estimated
is substantially the same as the account Current Revenues —
Unestimated. The distinction between Current Revenues —
Estimated and Current Revenues — Unestimated is explained in
Art. 39.'

48. The account known as Current Loans is credited when
temporary loans in anticipation of taxes are issued.

The same account is debited when the loans are paid.
A credit balance indicates the amount of temporary loans
outstanding.

BNTRIES AFFECTING APPROPRIATIONS

49. When orders for riiaterials or supplies are presented
to the comptroller for his approval they are entered in an order
register. Details are posted item by item to the proper accounts
in the Appropriation Ledger, a column being provided on each
page for that purpose. Totals are posted periodically to
accounts in the General Ledger by means of the following form
of entry.

♦Current Appropriations $100,000.00

To ♦Reserve for Current Obligatiofts $100,000.00

Claims of the current year presented to the comptroller for
audit have annexed copies of the orders previously approved by
the comptroller. The claims are entered in a Claim Register,
of the form shown in Fig. 2, having columns in which to enter
the amount of the claim and the amount of the order cancelled.



Digitized by



Google



§ 39 MUNICIPAL ACCOUNTING 29

50. In each instance details are posted to columns provided
in the pages of the Appropriation Ledger and the totals are
posted periodically to accounts in the General Ledger by means
of entries as follows :

♦Reserve for Current Obligations $ 90,000.00

To ♦Current Appropriations $ 90,000.00

♦Current Appropriations 400,000.00 •

To Current Claims Audited 400,000.00

51. Coininents on the Fores:oing: Entries. — In

Art. 42 the account called Current Appropriations is described,
leaving for consideration here the phases of that account and
of the account called Reserve for Current Obligations indicated
by the foregoing entries.

The account called Current Appropriations is intended to
show at all times the limit of the city's spending power for
current purposes. That limit stands at the total of appropriar
tions, or, as sometimes called, authorizations, when the budget
is adopted. The limit is reduced when an order is issued and
approved by the comptroller. ^Orders are presented to the
comptroller for his certification to the effect that an unencum-
bered balance remains in the account, a fact he ascertains by
reference to the account in the subsidiary ledger. The orders
are made by the department in triplicate, one copy remaining
in the department files, one being left with the comptroller, and
the third being delivered to the party to whom it is directed, for
annexing to the claim.

The orders left with the comptroller are entered in an Order
Register ruled to produce totals for posting periodically to the
controlling accounts called Reserve for Current Obligations
and Current Appropriations, the details of the reserve being
posted by items to proper columns in the Appropriation Ledger.
The journal entry for totals is the one shown in Art. 49.

When the order is returned annexed to the claim, the reserve
is cancelled and the appropriation restored by reversing the
entry as shown In Art. 50. The information upon which this
entry is based is taken from the Claim Register. The Claim
Register is ruled to produce totals for posting periodically to



Digitized by



Google



30 MUNICIPAL ACCOUNTING §39

the controlling accounts, the details of cancellations being
posted by items to the -proper column in the Appropriation .
Ledger.

Cdincidentally, the total of the column in the Claim Register
showing claims audited is posted to the controlling account
(Current Appropriations), the details being posted to the
proper column in the Appropriation Ledger and the same
amount credited to an account in the General Ledger called
Current Claims Audited.

The total of current claims audited will usually exceed the
total of orders reserved and cancelled, for the reason that
current claims audited include salaries, payrolls, bonds, interest,
and other items for which no orders have been issued.

A credit balance in the account called Reserve for Current
Obligations shows the amount reserved for the payment of
claims not yet presented for audit, and at the close of the
fiscal year will be carried forward.

52. The account called Current Claims Audited is credited
with the totals of claims audited and debited with the totals of
warrants drawn in payment; A credit balance indicates the
amount of claims audited for which warrants have not yet
been drawn, and at the close of the fiscal year will be carried
forward.

53. If during the year the appropriations are increased by
resolution of the appropriating body, the record is entered in
the comptroller's books by an entry as follows :

♦Estimated Revenues $1,000.00

To ^Current Appropriations $1,000.00



ENTRIBS RECORDISTG PAYMENTS

54. Claims that are based on orders issued, salaries, pay-
rolls, maturing instalments of the bonded debt, interest on the
bonded debt, and all other items chargeable to appropriations,
are paid by means of warrants, and are charged to the account
called Current Claims Audited and credited to an account
called Current Warrants Payable as follows :



Digitized by



Google



§ 39 MUNICIPAL ACCOUNTING 31

Current Claims Audited $400,000.00

To Current Warrants Payable $400,000.00

When the warrants are presented to the city treasurer and
are paid and the fact reported to the comptroller, an entry is
made as follows:

Current Warrants Payable $300,000.00

To Current Cash $300,000.00

55. No provision is made in the budget for the payment of
loans issued in anticipation of taxes. Such loans are paid from
the taxes collected and payment^s recorded in the comptroller's
books by entries as follows :



Current Loans

To Current Claims Audited


$50,000.00

$50,000.00


Current Claims Audited
To Current Cash


50,000.00

50,000.00


or
Current Loans

To Current Cash


50,000.00

50,000.00



56. If from time to time it be foimd necessary to make
corrections, in the nature of refunds on account of erroneous
payments, the account benefited by the error is debited and
Current Claims Audited is credited in the following manner :



Taxes Receivable


$1,000.00


To Current Claims Audited


$1,000.00


or
♦Current Revenues — Estimated


1,000.00


To Current Claims Audited


1,000.00


or
♦Current Revenues — ^Unestimated


1,000.00


To Current Claims Audited


1,000.00



57. Comments on the Fore^roing: Entries. — The

account called Current Claims Audited has been described in
Arts. 52 and 54.

The account called Current Warrants Payable is credited
with the amount of audited claims for which warrants or
drafts on the treasurer are drawn, and is debited when the
warrants are paid. A credit balance indicates the amount of



Digitized by



Google



32 MUNICIPAL ACCOUNTING § 39

warrants outstanding, and at the close of the fiscal year should
be carried forward.

The use of the accounts for claims audited and for warrants
payable depends on the financial provisions of the charter and
on the procedure in each city. To illustrate : In one city, the
chamberlain does not receive any claims for audit, as he has
not the power of audit. Warrants are drawn on him for pay-
ment. He therefore does not require a claims-audited account,
as the warrants are credited directly to one of the warrants-
payable accounts, and at the same time the entry is made for
the cancellation of the reserve, if any, for orders or contracts
liquidated.

In another city, the commissioner of finance has both the
power of audit and payment, claims being paid after audit
without the use of any warrants. Here, all claims may be
credited to a claims-audited account and, when paid, are
credited directly to cash.

In a different city, neither of these accounts will be required,
as the chamberlain pays all warrants drawn on him as he
receives them from the city clerk, therefore making his credits
directly to cash.

In still another city, both these accounts may be used. The
comptroller of that city receives and audits claims and draws
warrants on the treasurer for their payment. Claims should
first be credited to a claims-audited account and then pass to
warrants-payable and then to cash.



ENTRIKS ILLUSTRATING TREATMENT OP UNCOLLECTED

TAXES

58. It has been shown in Art. 41 that when the amount of
taxes collectible in a fiscal year is determined, the account
called Taxes Receivable is debited. This account represents an
asset of the city which from time to time is converted into
cash to the extent of collections. The balance in the account is
reduced by the amount of collections entered as follows:

Current Cash

To Taxes Receivable



Digitized by



Google



§ 39 MUNICIPAL ACCOUNTING 33

69. At some date in the fiscal year, fixed by the charter,
the treasurer determines the amount unpaid on account of cur-
rent taxes, prepares a list of parcels of the real estate burdened
with the unpaid items, and closes the account called Taxes
Receivable into a Tax Sale account by means of the following :

Tax Sale (year)

To Taxes Receivable

60. If charter provisions permit other items chargeable
against individuals, such as unpaid water rents and special
assessments, to be included in the tax sale, the entry takes the
following form:

Tax Sale (year)

To Taxes Receivable
Water Rents Receivable
Due to Assessment Accounts

61. In the interval between the preparation of the tax-sale
list and the closing of Taxes Receivable, delinquents may pay
the treasurer, who records the same as follows :

Current Cash

To Tax Sale (year)

On the day of sale, tax-sale certificates are purchased by the
public and the items remaining unsold continue an asset of the
city to be subsequently redeemed by delinquents.

The following entry closes the tax-sale accounts :

Current Cash

♦Taxes Receivable — ^Arrears
To Tax Sale (year)

62. Comments on the Foregoing: Entries. — The

accounts called Current Cash and Taxes Receivable have,
already been described.

The account called Tax Sale (year) is debited with the
amount remaining unp'aid on account of current taxes and,
where authorized by the charter, with unpaid water rents and
unpaid assessments; it will be credited with the payments by
delinquents before the sale, and upon the day of sale or imme-
diately thereafter it will be credited with the amount of sales



Digitized by



Google



34 MUNICIPAL ACCOUNTING § 39

to individuals and the amount charged against parcels for
which there are no bidders or which are sold to the city. This
account is thereupon balanced. The city's interest in unpaid
taxes is shown in the account called Taxes Receivable —
Arrears.

63. The account called Taxes Reteivable — ^Arrears is
debited with the amount of taxes, water rents, and assessments,
not sold to individuals or purchased by the city. It will be
credited from time to time as items included therein are paid
or cancelled by court order or by resolution of the Common
Council.

The debit balance shows the amount of delinquent taxes
owned by the city and at the close of the fiscal year will be
carried forward.

Taxes Receivable-^r-Arrears is a controlling account and
should be supported by a subsidiary ledger, containing an
account with the arrears of taxes of each year. The balance
of this account should correspond to the aggregate of the
balances of the subsidiary accounts. Periodical proof of this
should be made.

64. The account called Due to Assessment Accounts may
sometimes be known as Due to some other accounts, the specific
account being named, as, for example. Due to Capital Account.
The account is intended to show the transfers to the cur-
rent group, of items from one or more of the other groups^
The entry in Art. 60 illustrates a transfer of unpaid assess-
ments from the assessment group to the current group, the
transfer being made for the purpose of bringing them all
together in the Tax Sale account.

^ The Due to Assessment Accounts is credited with the amount
of assets transferred from one or more of the other groups to
an account in the current group when the amount is not at the
same time offset by a transfer of cash. • It is debited with pay-
ments due to accounts in one or more of the other groups.
The balance debit or credit shows the amount due to or from
accounts in other groups, and at the close of the fiscal year is
carried forward.



Digitized by



Google



§39



MUNICIPAL ACCOUNTING



35



A similar account is sometimes required called "Due from
other accounts," which records transfers from an account in
the current group to accounts in one or more of the other
groups. The entries are the same as those last described. It
should be remembered, however, that one account shows the
transfer to the current group, while the other shows the
transfers from the current group.

65. Trial Balance. — A Trial Balance of Current
Accounts is prepared in the form shown herewith.

Trial Balance — Current Accounts *



.


Total of Entries


Balances




Debits


Credits


Debits


Credits


Current Stirplus.


$ 5,000.00




$ 5,000.00




Estimated Rev-










enues


11,000.00




11,000.00




Sinking Fund






Contributions










Required


10,000.00


$ 10,000.00






Taxes Receiv-










able — Current


401,000.00


300,000.00


101,000.00




Current Appro-










priations


500,000.00


516,000.00




$ 16,000.00


Current Cash —


371,000.00


350,000.00


21,000.00




Current Rev-










enues — ^Esti-










mated




8,000.00




8,000.00


Current Rev-






'




enues — ^Unesti-










mated




3,000.00




3,000.00


Current Loans. . .


50,000.00


50,000.00






Reserve for Cur-










rent Obliga-










tions


90,000.00


100,000.00




10,000.00


Current Claims






Audited


450,000.00


451,000.00




1,000.00


Current War-










rants Payable.


300,000.00


400,000.00


-


100,000.00


Totals


$2,188,000.00


$2,188,000.00


$138,000.00


$138,000.00



Digitized by



Google



36 MUNICIPAL ACCOUNTING §39



ACCOUNTS RECORDING TRANSACTIONS OF WATER
DEPARTMENT

66. In cities owning and operating a system of waterworks
the management usually devolves on the commissioner of pub-
lic works or may be committed to a Board of Water Commis-
sioners. The department should be self-sustaining ; and, except
to recoup losses or to pay the city's share of the cost of water
devoted to public use, such as street cleaning, sprinkling, etc.,
no part of the revenue of the water department is derived from
taxes.

The water accounts are a subdivision of the current group,
in independent balance, and with a separate cash account. The
following General Ledger accounts should be used :

Debits Credits

Water Department Cash Water Revenues

Water Rents Receivable Reserve for Water Department

Water Department Expenses Obligations

Water Department Fund

67. Entries Recording: the Transactions of the
Water Rent Roll. — Upon the completion of the Water Rent
Roll and delivery to the treasurer for collection, the total is
certified to the comptroller, who thereupon records the same
with entries as follows:

♦Water Rents Receivable $100,000.00

To Water Revenues $100,000.00

68. Water rents and other items collected are debited to
Water Department Cash and credited to Water Rents Receiv-
able or in the case of other items, such as interest and penalties
on water rents, charges for miscellaneous services, sales of
materials, etc., are credited to Water Revenues in the following
manner :

Water Department Cash $75,000.00

To *Water Rents Receivable $75,000.00

Water Department Cash 1,000.00

To Water Revenues 1,000.00 .



Digitized by



Google



§ 39 MUNICIPAL ACCOUNTING 37

If water charges be cancelled and refuijded or water rents be
refunded, the transactions are recorded as in the following
entries :

Water Revenues $100.00

♦Water Rents Receivable 150.00

To Water Department Cash $250.00

69. If charter provisions require certifications by the comp-
troller of orders issued by the department to vendors, the
entries are as follows :

Water Department Expenses $20,000.00

To Reserve for Water Department Obliga-
tions $20,000.00

Upon presentation to comptroller of the claim for audit
accompanied by the copy of the order, the reserve is cancelled
by reversing the entry last above as follows :



Online LibraryInternational Correspondence SchoolsAccounting ... → online text (page 18 of 29)