What’s the difference between expenses and expenditures as they are used in government accounting?
Expenditures refer to governmental funds while expenses concern proprietary funds. Expenditures refer to decreases in net financial resources, while expenses refer to decreases in net economic resources. Generally, an asset acquired is considered an expense. It is accepted that an asset is used as an expense.
The government anticipates that it will pay its current fiscal year’s electric bill sometime in the next year. A government official asks for your opinion on whether the payment should be considered an expenditure of the current year or the next. What would you say?
The government should keep track of its electric bill to be paid the next year. The encumbrance will reduce the budgeted expenditure amount, while the unreserved fund balance will be reserved for the encumbrance.
While many governments prepare budgets to finance capital projects and debt service funds, and then integrate them into their accounts and budgets, budgetary control is not as important as for other government funds. Are you in agreement? Explain. Describe.
I disagree with the assertion that budgetary control for capital projects and debt service funds is not as important as it is for other government funds. Although budgetary entries for service and project funds are not meant to affect the year-end financial statements but serve an internal control function, it is important to keep budgetary control in order to avoid spending beyond authorized limits. These budgets are different from those for other funds because capital project funds are not stationary and can be kept for longer periods of time.
How can governments report capital projects and debt service activities to their government-wide statements?
Governments should declare their capital projects and debt service activity in their government-wide statements. This is long-term reporting as combined funds, which includes all other funds within the governmental activities column.