Subsidiary ledgers are being maintained by every government department to record and account for their part of budget appropriation and fund balance. Every time transactions take place an entry is made subsequently in the subsidiary ledger to account for the expenses and also ascertain the available or unexpended fund balance.
However it may be noted that appropriation are expendable. And once such appropriation is made purchase order or contracts are placed with respective vendor and contractors initiating liability and are being encumbered.
And when good or services are received they are recorded in encumbrance account and respective expenditure are accounted for simultaneously.
However, it is necessary to make corresponding entries accurately in subsidiary ledger for matching appropriations, encumbrance and expenditure account so that reconciliation is made and accounts are matched.
a) Journal entries are prepared, in respect of General fund of J County for 2012, as under.
Explanation: Estimated revenue is recognized and recorded by source.
Estimated revenue control is debited by source for receivables and budgetary fund balance is credited consequently.
Explanation: Budget appropriation is recognized and recorded.
Budgetary fund balance is debited for receipt of appropriation and Appropriation is credited towards receivable.
Explanation: Receipt of revenues in cash is recognized and recorded.
Cash is debited for receipt of revenues in cash and estimated revenue controls by source are credited for the same.
Explanation: Encumbrance of Contracts and purchase orders placed during the year is recognized and recorded.
Encumbrance control is debited towards initiation of liability of expenses and Budgetary fund balance -reserve is credited for the same by function.
Explanation: Goods and services received is recognized and recorded.
Budgetary fund balance -Reserve is debited by function towards receipt of goods and services and Encumbrance control is credited to utilization of the same.
Explanation: Increased inter governmental revenues by budget revision is recognized and recorded.
Estimated revenues control is debited towards increased inter governmental revenues by budget revision and budgetary balance is credited towards receivable.
Explanation: Budget revision to increase General government appropriation is recognized and recorded.
Budgetary fund balance is debited towards increased General government appropriation and appropriation General government is credited to increase expendable balance.
Explanation: Vouchers payable towards expenses is recognized and recorded.
Expenditure is debited towards occurrence of expenses and vouchers payable is credited towards liability to pay.
b) Following are the budgetary revenue, expenditure and encumbrance account.
c) Following are the Revenue and appropriations, expenditure and encumbrance subsidiary ledgers
d) Following is the budgetary comparison schedule for J County for the year 2012.
e) Following are the details of appropriation which are lapsed during 2012.
Thus the lapsed appropriation in total during 2012 is $306,000.