Financial Planning and Management in Public Organizations by Alan Walter Steiss and Chukwuemeka O'C Nwagwu
ACCOUNTING SYSTEMS: TRADITIONAL MECHANISMS OF MANAGEMENT CONTROL
Henri Fayol has provided one of the better-known definitions of management control: "Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and principles established. It has for an object to point out weaknesses and errors in order to rectify and prevent recurrence." [1] Application of financial control mechanisms, which emphasize the need for corrective action when deviations occur from some predetermined course of events, has traditionally fallen within the purview of accountants and auditors. The primary objective of this chapter is to provide a basic understanding of financial accounting procedures so as to equip the financial manager who is not trained as an accountant or auditor with a vocabulary sufficient to be conversant with and benefit from the information derived from accounting systems.
Internal Control Systems
An internal control system consists of those measures taken to provide management with reasonable assurance that the fiscal operations of the organization are functioning efficiently and effectively. Such controls include: (1) assurances that financial transactions are properly authorized, classified, and recorded on a timely basis, in correct amounts, and for proper purposes; (2) limited access to assets; (3) procedures for approving the commitment of organizational resources; and (4) checks and balances among key fiscal duties (for example, the billing function versus the receipt of revenue). Good accounting procedures are the cornerstone of an effective internal control system, helpimg management achieve greater operating efficiencies.
Checks and Balances
Internal controls should encompass the proper accountability for assets from the initiation of financial transactions to financial reporting. Functional responsibilities for fiscal operations, such as the expenditure of funds, custody of revenue, and accounting for financial transactions, should be clearly delineated and segregated. Authorization procedures (signature authority) should be established to ensure reasonable control over assets, liabilities, revenues, and expenses. These checks and balances form the basis of an internal control system.
The primary objective of an internal control system is the prompt discovery of unintentional errors or irregularities, so that appropriate corrective action can be initiated on a timely basis. Good internal controls provide reasonable (but not absolute) assurance that errors and irregularities will be prevented or detected. This oversight provides more reliable accounting records and discourages fraud.
It is important to recognize, however, the inherent limitations of any internal control system:
(1) The extent of the internal controls adopted by any organization is limited by cost considerations.
(2) Any system of internal controls can be circumvented by employee collusion and management fraud.
An internal control system so perfect to preclude any possibility of fraud would be impractical to operate and would likely cost more than it would save. Thus the concept of reasonable assurance must be used in weighing the costs and benefits associated with such controls.
The development and maintenance of adequate internal controls are primary responsibilities of financial managers. To meet those responsibilities, management must remain cognizant of changing times and their impact on the organization's control environment. Internal controls must be adapted as circumstances dictate. Flexibility is critical to the continued operations of any entity that seeks to achieve overall success at acceptable levels of risk.
Financial Accounting as an Internal Control System
Accounting procedures traditionally have served as the major mechanisms of internal control in both public and private organizations. An effective accounting system provides quantitative information for three broad purposes: (1) external reporting of an organization's financial status to various constituencies or client groups (for example, stockholders, elected officials, regulatory bodies, and the general public); (2) internal reporting for use in planning and controlling routine operations; and (3) assisting in the formulation of overall policies and long-range plans. Traditional accounting procedures have served the first two purposes reasonably well, but have provided relatively little direct assistance in the activities of strategic planning.
An accounting system measures and records financial data and converts these data to information that is then analyzed, interpreted, and reported to various groups both within and outside the organization. These functions are closely associated with the control aspects of financial accounting--the process of ensuring efficient progress toward achieving predetermined fiscal objectives. Financial accounting is concerned with the historical results of fiscal transactions and the consequent financial position of the organizational entity. Financial transactions and events are systematically recorded in accounting ledgers and are classified according to some predetermined chart of accounts. Periodically, the data so recorded and classified are summarized through the preparation of financial statements and reports which describe the past financial operations of an organization as a whole.
One of the basic assumptions in providing financial statements to both internal and external users is that the accounting information comes from a particular accounting entity. The life of the entity is divided into accounting periods (usually not more than a year in length) so that measurements can be made at relevant intervals (i.e., quarterly, monthly, weekly). In both business and nonbusiness applications, the accounting entity often is related to the legal organization. The identity of the legal organization--the corporation, partnership, or individual proprietorship--is more clearly recognized in the private sector than in government and other nonbusiness situations. A city, for example, is not the appropriate accounting entity for financial reporting purposes. Neither is a college or university, hospital, health or welfare agency, labor union, or voluntary organization considered an appropriate accounting entity.
Within such public organizations, other accounting entities--called funds--are established for the purposes of maintaining records and preparing financial statements. A fund is an independent accounting and fiscal entity (and often a legal entity) to which resources are assigned, together with all related liabilities, obligations, reserves, and equities. Financial transactions are made between funds. Separate financial statements are prepared for each of the major funds, and combined statements of funds with similar purposes often are distributed.
A sound accounting system for governmental and other not-for-profit organizations generally is built around four central components:
(1) Funds--fiscal and accounting entities with self-balancing sets of accounts, together with all related liabilities, obligations, reserves, and equities.
(2) Major nonfund, self-balancing groups of accounts that focus on general fixed assets: and general long-term debt.
(3) Unified records systems consisting of a general ledger that contains summary accounts (posted as totals), with supporting details maintained in subsidiary ledgers.
(4) Basic accounting classifications that record revenue by fund and source and expenditures by fund, organizational unit, function, activity, character, and/or object.
The fund categories and account groups most commonly found in public organizations can be summarized in Exhibit 1.
Proprietary Funds | Account for the financing of services rendered primarily to the general public for compensation (such as the operation of a public utility). |
Governmental Funds | |
General Funds | Account for all financial resources, and activities financed by them, that are not accounted for in some special fund. Among the revenues normally included are property taxes, licenses, fees, permits, penalties, and fines. Expenditures are authorized in the general budget. |
Special Revenue Funds | Account for taxes and other revenues (except special assessments) that are legally restricted for a particular purpose (such as, schools, street improvements, parks). |
Debt Service Funds | Account for the financing of interest and retirement of principal of general long-term debt. |
Capital Project Funds | Account for the major improvements financed either on a "pay-as-you-go" basis or out of capital reserves, grants-in-aid, or transfers from other funds. Such funds are limited to an accounting of receipts and expenditures on capital projects paid out of current revenues. |
Special Assessment Funds | Account for the financing of improvements or services deemed to benefit properties against which the special assessments are levied. |
Fiduciary Funds | Account for assets held by a governmental unit as an agent or trustee for other governmental units, others funds, private organizations, or individuals (for example, employee pension funds). |
Account Groups | |
General Fixed Assets Account Group | Records all fixed assets--long-term resources of the governmental unit--acquired through Governmental Funds. |
Long-Term Debt Account Group | Records general long-term liabilities assumed by the governmental unit involving the commitment of Governmental Funds (except those associated with Special Assessment Funds). |
GASB Financial Reporting Model
The annual financial reports of local jurisdictions currently focus on the funds of government to provide information about various activities or sources of revenue. The number of funds established in any jurisdiction can run into dozens or even hundreds. Therefore, it sometimes is difficult to understand what the various financial statements mean, how they interact with one another, and how they relate to the government's overall financial well being.
In response to these issues, the Governmental Accounting Standards Board (GASB) has developed a new "model" for state and local government financial statements. The purpose of this project is to make financial statement more understandable and useful. An exposure draft proposal was disseminated for comments in 1997. The new GASB model was release in June, 1999. State and local governments have until 2001 to implement the new rules.
The new GASB guidelines change the way financial information is communicated to citizens, legislative oversight bodies, creditors, themedia, organizations that rate municipal bonds, and anyone else interested in how a government is doing financially. For the first time, for example, annual financial reports will show information about the full cost of providing government services. They will also show information about a government's infrastructureÑits bridges and roads. The rules also require a government to present in narrative form an analysis of the jurisdiction's financial activities during the year.
Citizens have invested a great deal of their resources in government, and therefore, they have the right to know the costs of services their government provides and who pays that cost. They have the right to know whether the government's financial health has improved or deteriorated. Companies making plant location decisions need to understand the government's finances. Investors and lenders, bond raters and financial analysts have a vested interest in knowing the financial well being of the governments that participate in the financial markets. Finally, state legislators, county board members, city council members and other elected and appointed officials need to know the impact their decisions have on both the short-term and long-term financial health of their governments. The GASB's new financial reporting guidelines provide anyone who uses government financial statements additional tools to find information to assist them in finding answers to their questions.
The new rules add important new information to the current fund accounting approach and provide financial information from a total government perspectiveÑan entirely new concept in government finance. This new approach will give much more useful, understandable information to those interested in the "big picture."
Financial Statements
Although financial statements represent the end-product of a financial accounting systems, they provide a good starting point to begin to understand the accounting process. Financial statement are used to convey to managers and other interested parties information regarding the operating results and financial position of an entity at the selected point of measurement. The three important financial statements in the private sector are: (1) an income statement, (2) a balance sheet, and (3) a statement of changes in financial position.
An income statement reflects the profit performance of an entity for some specific period of time. Revenue represents an inflow of money or other representations of value in return for the sale of goods or the provision of some type of service. Revenue in the private sector includes sale receipts, commissions, fees, rents, and dividends. Tax assessments, legislative appropriations, grant receipts, endowments and gifts represent revenue in the public sector. Expense represents the outflow of resources, or the incurring of obligations, for the goods and services required to generate revenue. Net income (or profit) is simply the excess of revenues over expenses. In the private sector, net income or net loss provides some indication of how well management has carried out its responsibilities. While income statements seldom are appropriate in governmental accounting, some public organizations do operate with proprietary funds and therefore, may generate retained earnings (i.e., funds that are carried over from one fiscal period to the next).
A balance sheet shows the financial position of an entity at a particular time, that is, the amount of resources available (assets) and liabilities (obligations and debts) outstanding. As the name implies, assets and liabilities in this financial statement must balance. In the public sector, the fund balance sheet provides information regarding the current financial resources (assets, liabilities, and fund balances) of each major government fund and for the non-major funds in the aggregate. An example of a fund balance sheet for the City of Rurbana is shown in Exhibit 2.
Some of the accounting terminology in this exhibit may require further definition. Assets may be in the form of cash, amounts owed to the entity by others (receivables), equipment and facilities, or other things of value owned by the entity. A balance sheet does not necessarily reflect the fair-market value of assets. Under prevailing accounting practices, assets are recorded on the basis of their total cost at the time of acquisition, since restating the value of assets each fiscal period would require frequent and difficult estimates. Liabilities represent obligations or debts of an entity and include amounts owned for goods and services purchased on credit, accounts or notes payable, salaries and wages owed to employees, taxes due, bonds payable, and other forms of debt.
For purposes of financial accounting, a distinction is made between a cost and an expense. Costs are incurred by an entity when expenditures and obligations are made. These costs are recognized as expenses when their value or utility has been consumed in generating revenue. Therefore, an expense is recognized when a complete transaction takes place rather than when cash is paid for the goods or services.
ASSETS | General Fund | Special Revenue Fund: Education | Special Revenue Fund: Federal | Sewer & Water Fund | Other Government Funds | Total Government Funds |
Cash and cash equivalents | $10,245,734 | $2,003,050 | $1,225,333 | $929,283 | $684,148 | $15,087,549 |
Investments | 2,561,434 | 140,214 | 61,267 | 292,928 | 34,207 | 3,090,049 |
Receivables, net | 61,474,404 | 10,325,371 | 4,104,889 | 75,904,664 | ||
Receivables from other funds | 222,072 | 406,216 | 628,288 | |||
Receivables from other governments | 6,122,569 | 22,213,730 | 7,352,000 | 3,788,860 | 39,477,159 | |
Total Assets | $80,404,141 | $24,356,994 | $8,638,600 | $11,547,582 | $8,612,105 | $133,559,422 |
LIABILITIES | ||||||
Accounts payable | $57,291,578 | $22,657,500 | $7,351,982 | $9,477,282 | $7,118,623 | $103,896,963 |
Payable to other funds | 5,456,789 | 125,000 | 275,000 | 5,856,789 | ||
Payable to other governments | 7,005,987 | 7,005,987 | ||||
Deferred revenue | 3,073,720 | 650,000 | 3,723,720 | |||
Total Liabilities
(See note 2) |
$72,828,074 | $22,657,500 | $7,351,982 | $9,602,282 | $8,043,623 | $120,483,459 |
FUND BALANCES | General Fund | Special Revenue Fund: Education | Special Revenue Fund: Federal | Sewer & Water Fund | Other Government Funds | Total Government Funds |
Reserved for: | ||||||
Noncurrent assets | 100,000 | 100,000 | ||||
Encumbrances | 1,256,000 | 950,000 | 2,206,000 | |||
Debt service | 2,557,724 | 1,450,000 | 4,007,724 | |||
Other purposes | 395,300 | 568,482 | 963,782 | |||
Unreserved, reported in: | ||||||
General fund | 1,302,750 | 1,302,750 | ||||
Special revenue funds | 1,699,494 | 336,618 | 2,036,112 | |||
Capital projects funds | 3,788,597 | 3,788,597 | ||||
Total fund balances | $8,905,071 | $1,699,494 | $1,286,618 | $1945,300 | $568,482 | $14,404,965 |
Total liabilities and fund balances | $81,733,145 | $24,356,994 | $8,638,600 | $11,547,582 | $8,612,105 | $134,888,424 |
Any unused utility in costs that have been incurred continues to be recognized as an asset until it is consumed. Items purchased and held as inventory, for example, continue to tracked as an asset until they are actually consumed, even though the purchase of these items represents a cost to the organization. The cost of equipment and buildings used in the operations of an organization usually have a high initial cost and are used over an extended time period. As these resources are committed to operations, a portion of their usefulness is consumed, and a part of the original cost is allocated as an expense. This type of expense is called depreciation.
Owner's equity is an important concept in commercial accounting and is sometimes called net worth, capital, or proprietorship. This equity comes from two sources: (1) earnings which have been retained in the business or commercial entity, and (2) investments that have been made in the entity (for example, through the sale of stock). In accounting for governmental agencies, the concept of fund equity or fund balance is substituted for owner's equity. The fund balance represents the residual amount in the fund after the various obligations have been deducted. Equity is always equal to the assets minus the liabilities of an entity.
The statement of changes in financial position has come into general use because of the need for information concerning the financing and investing activities of an entity. Such statements can be derived from analyses of the income statement and balance sheet. This statement provides information about inflows, outflows and balances of current financial resources, including: sources of funds; operations (revenue minus expenses); sales of equipment used in operations; long-term loans; additional investment by the governing group; distribution of income; purchase of equipment; and payment of loans. In state and local government, this combined statement is generally referred to as the Statement of Revenues, Expenditures and Changes in Fund Balances.
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REVENUES | General Fund | Special Revenue Fund: Education | Special Revenue Fund: Federal | Sewer & Water Fund | Other Government Funds | Total Government Funds |
Property taxes | $60,858,888 | $6,890,982 | $67,749,870 | |||
Other taxes | 38,593,170 | 38,593,170 | ||||
Fees & fines | 4,034,944 | $520,000 | 190,630 | 4,745,574 | ||
Licenses & permits | 3,541,137 | 621,801 | 4,162,938 | |||
Intergovernment | 12,245,138 | $44,427,460 | $14,704,000 | 500,000 | 7,577,720 | 79,454,318 |
Service charges | 2,539,440 | 20,650,741 | 23,190,181 | |||
Interest | 2,204,065 | 888,549 | 294,080 | 506,366 | 3,893,060 | |
Miscellaneous | 444,145 | 444,145 | ||||
Capital Reserves | 4,089,326 | 4,089,326 | ||||
Total Revenue | $124,016,782 | $45,316,009 | $14,998,080 | $26,204,211 | $15,787,499 | $226,322,581 |
EXPENDITURES | ||||||
Current operating: | ||||||
General govern. | $5,741,506 | 5,741,506 | ||||
Public Safety | 13,232,204 | 13,232,204 | ||||
Public Works | 5,838,785 | 1,730,785 | 7,569,570 | |||
Community development | 1,692,623 | 1,692,623 | ||||
Corrections | 1,687,181 | 1,687,818 | ||||
Parks & recreat. | 3,755,486 | 3,755,486 | ||||
Libraries | 3,489,677 | 3,489,677 | ||||
Public health | 3,344,767 | $7,515,211 | 10,859,978 | |||
Public welfare | 2,983,048 | 7,188,752 | 10,171,800 | |||
Sewer & water | $19,161,517 | 19,161,517 | ||||
Sanitation | 3,573,479 | 3,573,479 | ||||
Education | 42,504,765 | $45,315,000 | 87,819,765 | |||
Debt service: | ||||||
Principal | 25,883,158 | 2,000,000 | 27,883,158 | |||
Interest | 8,245,276 | 900,000 | 9,145,276 | |||
Capital outlay | 17,848,485 | $4,089,326 | 21,937,811 | |||
Total Expenditures | $127,314,617 | $45,315,000 | $14,703,963 | $26,150,843 | $14,237,245 | $227,721,668 |
Excess (deficiency) | (3,297,835) | 1,009 | 294,117 | 53,368 | 1,550,254 | (1,399,087) |
General Fund | Special Revenue Fund: Education | Special Revenue Fund: Federal | Sewer & Water Fund | Other Government Funds | Total Government Funds | |
OTHER FINANCING SOURCES (USES) | ||||||
Proceeds of refunding bonds | 38,050,000 | 38,050,000 | ||||
Payment to bond refunding escrow agent | (37,584,144) | (37,584,144) | ||||
Transfers in | 247,290 | 551,187 | 250,076 | 1,048,553 | ||
Transfers out | (2,100,303) | (294,117) | (250,076) | (551,187) | (3,195,683) | |
Total other financing sources (uses) | (1,853,013) | (294,117) | 766,067 | (301,111) | (1,681,274) | |
SPECIAL ITEMS | ||||||
Proceeds from sale of public lands | 3,482,500 | 3,482,500 | ||||
Net change in fund balances | (1,668,348) | 1,009 | 0 | 820,335 | 1,249,143 | 402,139 |
Fund balances- beginning | 3,007,078 | 35,367 | 14,567 | 31,500 | (456,980) | 2,631,532 |
Fund balances- ending | $1,338,730 | $36,376 | $14,567 | $851,835 | $792,163 | $3,033,671 |
Reconciliation
A primary objective of presenting information about major funds is to develop an understanding of how these funds relate to the government as a whole. One way to demonstrate that relationship, in a concise manner, is to provide a "crosswalk" explanation on the face of the fund financial statement or in an accompanying schedule. This approach has been recommended by the GASB as part of the new standards. This reconciliation should focus on reclassification and differences arising from the use of different bases of accounting and related measurement techniques, beginning with total fund balances for the combined governmental funds (Balance Sheet) and net change in fund balances for the combined governmental funds (Statements of Revenues, Expenditures and Changes in Fund Balances). The information presented on the face of the financial statements will be highly aggregated. Additional discussion of these reclassifications and difference may be required in the notes to the financial statements if the summarized reconciliation obscures the nature of the individual elements of a particular category.
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Basic Accounting Equation
The elements reported in financial statements form the basic accounting equation, which can be expressed as follows:
Assets = Liabilities + Fund Equity + Revenue - Expense
Whereas profit-seeking entities strive to generate net income, not-for-profit organizations seek to "break even," that is, to balance revenues and expenses.
The Double Entry or T-Form
The so-called double-entry or T-form provides a standardized method for recording increases and decreases in the components of the accounting equation. A T-form account has a debit (or increase) side and a credit (or decrease) side. Debits must equal credits--the effect on the accounting system is described in terms of double-entry mechanics.
According to W. A. Paton, considered by many to be the "father" of modern accounting principles:
The terms debit and credit are doubtless etymologically related to the expressions debtor and creditor. The latter words have a more definitive intrinsic meaning than the others, however, particularly from a legal point of view. A debtor is one who owes, is indebted to the particular party or enterprise through whose eyes, or from whose standpoint, the situation is being viewed. . . . The borrower is a debtor; the lender is a creditor. Those who owe are debtors and the amount owed are their debts. Those who are owed are creditors, and the amounts due measure their claims. [2]
As used in modern accounting, however, debit does not connote the debtor status, or at least is not restricted to such meaning. Similarly, credit does not exclusively, or even commonly, indicate the creditor status. A debit indicates: (1) an increase in assets to the organization and (2) a decrease in equities. A credit indicates: (1) a decrease in assets and (2) an increase in equities. As Charles Horngren has observed:
Debit means one thing and one thing only--"left" (not "bad," "something coming," etc.). Credit means one thing and one thing only--"right" (not "good," "something owed," etc.). The word charge is often used instead of debit, but no single word is used as a synonym for credit. [3]
A common impression is that the double-entry method is duplicate bookkeeping--that it is a scheme whereby each fact is recorded twice, with the resulting advantage that one record may be checked against another to ensure accuracy. Double-entry is not duplicate, carbon-copy accounting, however. Rather, it is a method by which each significant fact regarding a transaction is recorded once, and only once. The two-fold aspect is vested in the fact that every transaction involves at least two separate elements.
To illustrate the double-entry mechanisms of the basic accounting equation, considered the following scenario. The City of Rurbana decides to establish an agency to make travel arrangements for its personnel. At the beginning of the fiscal year, $60,000 is allocated to the agency from the general fund budget. The agency purchases equipment costing $30,000 and leases office space, paying $2,400 in advance on the lease. Stationery and other forms are purchased from the city print shop at a cost of $1,000. These charges are recorded (billed) on an interdepartmental service form.
In recording these transactions, the initial budget allocation of $60,000 would be decreased (credited) by $30,000 for the equipment purchase and $2,400 for the prepaid rent. This would leave the "cash position" of the agency at $27,600. However, equivalent entries would record (debit) assets of $30,000 for equipment and $2,400 for the rented space. The forms and stationery would also represent an asset worth $1,000, offset by a liability in accounts payable of $1,000.
In the first month, the agency receives $10,000 in revenue for tickets sold and pays out $9,000 in expenses for personnel and in payments to airlines and other service providers. The $10,000 in revenue is recorded as a debit under assets, and the $9,000 is shown as a credit, for a net of $1,000, increasing the cash position to $28,600. To bring the accounting equation into equilibrium, fund equity is recorded as $60,000 for the initial budget allocation, plus $10,000 for the revenue, minus $9,000 for the expenses (for a total of $61,000). Thus the assets of the agency at the end of the first month of operation are $62,000, balanced by a like amount in liabilities and equities, as follows:
Assets = $28,600 + $2,400 + $1,000 + $30,000 = $62,000
Liabilities and Equities = $1,000 + $61,000 = $62,000
Note that the $1,000 in inventory (forms and stationary) is shown as both an asset (unused utility) and a liability (account payable).
Each of these accounting transaction would be recorded in a general journal which includes information as to the date of the transaction, accounts to be debited and credited, an explanation of the nature of transaction, account number, and the financial effect on the accounts involved. Special journals often are established for various component agencies to separate duties and responsibilities and to improve management control.
Trial Balances
Trial balances provide proof that account ledgers are in balance. A trial balance does not verify that transactions have been correctly analyzed and recorded in the proper accounts, however. By comparing trial balances at the beginning and ending of a fiscal period (such as each month), it is possible to determine income and expense items that have been incurred during that period. A trial balance for the Rurbana Sewer and Water Utility Commission at the end of May is shown in Exhibit 4.
It may be noted that there is a difference of $292,410 between the trial balance at the end of May and the year-end balance sheet at the end of June. The value of the inventory was decreased by $5,350 in the year-end balance sheet to account for repair parts that were withdrawn in June and used in the maintenance of the physical plant. This amount is charged as an expense. Thus, expenses totaled $40,310 (that is, the $34,960 in expenses shown in the trial balance plus the $5,350 for the reduction of inventory). These expenses were subtracted from operating revenue, leaving a balance of $59,960. This balance, in turn, is added to the $520,210 in retained earnings shown in the trial balance.
The other adjustments include: (1) an additional $20,210 in accumulated depreciation for buildings not recorded in the trial balance; (2) an increase of $34,960 in accounts payable; and (3) a new employee hired at the beginning of June with an annual salary of $48,000 (or an additional $4,000 in monthly salaries and wages). Thus, the retained earnings on June 30 totaled $521,000 [$520,210 + $59,960) - ($20,210 + $34,960 + $4,000)], as reflected in the year-end balance sheet. Cash on hand was increased by $100,000 to reflect the equivalent reduction in accounts receivable.
Trial Balance | May 31, 200x | Balance Sheet | June 30, 200x | |||
Accounts | Debit | Credit | Assets | |||
Cash | $104,500 | Cash | $204,500 | |||
Accounts receivable | 1,010,000 | Accounts receivable | 910,000 | |||
Parts inventory | 20,000 | Parts inventory | 14,650 | |||
Prepaid expense | 32,000 | Prepaid expense | 32,000 | |||
Land | 400,000 | Total Current Assets | $1,161,150 | |||
Buildings | 4,850,000 | Land | 400,000 | |||
Acc. depreciation (building) | 222,290 | Building | 4,850,000 | |||
Equipment | 120,000 | Equipment | 120,000 | |||
Acc. depreciation (equip.) | 9,600 | Less: Depreciation | 252,100 | |||
Salary expense | 850,500 | Total Property, Plant & Equipment | $5,117,900 | |||
Energy expense | 20,000 | Total Assets | $6,279,050 | |||
Truck expense | 1,520 | Liabilities & Fund Balance | ||||
Office expense | 13,440 | Salaries & wages | $854,500 | |||
Accounts payable | 344,540 | Accounts payable | 379,500 | |||
Customer deposits | 260,000 | Customer deposits | 260,000 | |||
Operating revenue | 100,270 | Total Current Liabilities | $1,494,000 | |||
Residual interest | 4,264,050 | Residual interest | $4,264,050 | |||
Retained earnings | 520,210 | Retained earnings | 521,000 | |||
Total Fund Balance | $4,785,050 | |||||
Totals | $6,571,460 | $6,571,460 | Total Liabilities & Fund Balance | $6,279,050 |