PA 375 Chapter Notes - Chapter 2: Operating Budget, Fiscal Year, Strategic Planning

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pucewater-buffalo683

14 Feb 2017

School

GVSU

Department

Public and Nonprofit Administration

Course

PA 375

Professor

Dejonge

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Document Summary

Revenues: the resources that organization receives in exchange for providing goods or sources. Expenses: the resources consumes in the process of providing goods and services. Fiscal year: one-year period defined for financial purposes. A fiscal year may start at any point during the calendar year and finish on year later. , capital budget operating budget: operating budget: plan for the day-in and day-out operating revenues and expenses of the organization. Long-range budget: plan that covers a period of time longer than one year, typically three, five, or ten years. Capital budget: plan for the acquisition of buildings and equipment that will be used by the organization in one or more years beyond the year of acquisition. Public, health care, and not-for-profit organizations have missions that relate to providing a public service. The example from chapter 1 of meals for the homeless" is a fictional nonprofit that would need a mission statements, as do all nonprofits.

Related Questions

Financial Accounting.â¨1. Answer T (true) or F (false) for each of the following statements

1. Revenue is a measure of expected inflow cash from selling goods and providing services.

2. Expenses are a measure of expected outflow of cash consumed, in the process of generating revenues.

3. Dividends represent distributions of earnings and decrease ownersâ equity.

4. Depreciation expense reflects used/consumption of fixed assets.

5. Depreciation associated with land is dependent on the life and eventual use of the land

6. Assets = Liabilities + Contributed Capital + Retained Earnings

7. Under the accrual basis of accounting, revenue is recognized in the period when the cash is received as opposed to when the patient service is made.

Textbook healthcare finance 6th edition L Gapenski & K Reiter (2016)

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Please build the answer based on following text from studyingbook:

Expense Accounts. Expenses are costs incurredby an organization in the process of earning revenue during a givenperiod of time. Typical expense accounts related to payroll wouldinclude such items as wages, salaries, employer payroll expenses,and group insurance benefit expenses. Payroll expenses have adirect impact on the profitability of an organization.

In an expense account, debit entries increase the expensebalance and credit entries decrease the expense balance. Amounts inthe expense accounts are cleared to zero (or restarted at zero) atthe fiscal year-end. This is the same way the employeesâ totals inthe payroll register are cleared to zero at the taxationyear-end.

Expense accounts include expenses incurred by an organization inthe process of earning revenue during a given time period. Thesalary expense account details the debits (for example, employeesalaries and wages) and credits (for example, accrual reversals,recalls and cancelled pays) posted on the journal entries for theperiod. Entries are posted to the General Ledger at theorganization or department total level, rather than with theindividual employee details.

Since expense accounts continue to build over time and are notcleared until the end of the fiscal period, the most commonreconciliation methods used for theseaccounts are:
- reasonableness
- year-over-year comparison

A reasonableness test requires anindividual to examine the General Ledger account in detail and toensure that all the postings are in balance and seem valid.

By examining the payroll register or other reports providingdetails of the total amount posted to an account, it should beanalyzed whether the amount shown in the account is correct.Recalled pays, cancelled cheques and manual cheques should berecorded as they occur so that accounts reflect the most currentdata.

Cost accounting plays a significant role in expense accountreconciliation as well. An organization that uses cost accountingwill charge expenses to a department, a project or a contract,according to their internal requirements. If an employee istransferred from one department or branch to another, and thepaperwork is not processed when the change is effective, theemployeeâs salary, and any associated employer expenses, will beexpensed incorrectly. A journal entry will be required to move theexpenses to the correct accounts.

As expense accounts normally have a debit balance, to reduce theexpense you credit the account and to increase the expense youdebit the account.

A year-over-year comparison wouldcompare each expense account for a certain time frame to determineif there have been material changes.

Question :

List three expense accounts related to payroll.Describe when you would expect the account to be cleared to zero.Explain the methods you could use to reconcile theseaccounts.

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1. Which standard issued by the Governmental AccountingStandards Board in 1999 requires two distinct sets of financialstatements for state and local governments?

A) GASB Statement No. 32
B) GASB Statement No. 33
C) GASB Statement No. 34
D) GASB Statement No. 35
E) GASB Statement No. 36

2. Which group of governmental financial statements reports allrevenues and all costs of providing services each year?

A) GAAP-Based Financial Statements
B) Fund-Based Financial Statements
C) Cost-Based Financial Statements
D) Government-Wide Financial Statements
E) General Fund Financial Statements

3. Proprietary fundsare

A) Funds used to account for the activities of a government thatare carried out primarily to provide services to citizens
B) Funds used to account for a government's ongoing organizationsand activities that are similar to those operated by for-profitorganizations
C) Funds used to account for monies held by the government in atrustee capacity
D) Funds used to account for all financial resources except thoserequired to be accounted for in another fund
E) Funds used to account for revenues that have been legallyrestricted as to expenditure

4. Fiduciary fundsare

5. The term "current financial resources" refers to

A) Those assets that can quickly be converted into cash
B) Monetary assets that are available to meet the government'sneeds
C) The government's current assets and current liabilities
D) The current value of all net assets owned by the governmentalunit
E) Financial resources used to provide electricity to localcitizens

6. Which group of financial statements is prepared using the"modified accrual accounting" approach?

A) GAAP-Based Financial Statements
B) Fund-Based Financial Statements
C) Cost-Based Financial Statements
D) Government-Wide Financial Statements
E) General Purpose Financial Statements

7. Under modified accrual accounting, when should anexpenditure to recognize interest on long-term debt berecorded?

A) At the end of each accounting period
B) When payment is due within one fiscal year
C) When payment is due
D) When cash is available to pay the interest
E) When the interest is incurred

8. Revenue from property taxesshould be recorded in the General Fund

A) when received
B) when there is an enforceable legal claim
C) when they are available for recognition
D) in the period for which they are required or permitted to beused
E) in the period in which the tax bills are mailed

9. A city received a grant of$5,000,000 from a private agency. The money was to be used to builda new city library. In which fund should the money be recorded forthe Fund-Based Financial Statements?

A) The General Fund
B) An Expendable Trust Fund
C) A Capital Projects Fund
D) An Agency Fund
E) A Permanent Fund

10. For government-wide financialstatements, what account is credited when a piece of equipment isleased on a capital lease?

A) Equipment - Capital Lease
B) Encumbrances - Long Term
C) Encumbrances - Lease Obligations
D) Capital Lease Obligation
E) The lease is not recorded

11. Jones College, a publicinstitution of higher education, must prepare financialstatements

A) As if the college was an enterprise fund
B) Following the same rules as state and local governments
C) According to GAAP
D) As if the college was a fiduciary fund
E) In the same manner as private colleges anduniversities

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PA 375 Chapter Notes - Chapter 2: Operating Budget, Fiscal Year, Strategic Planning

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