Accounting for Government and Non-Profit: Journal Entries

This assignment solution focuses on government and non-profit accounting, specifically addressing the preparation of journal entries for Preston Village using both modified accrual and full accrual accounting methods. The solution details journal entries for various transactions, including bond issuance, building purchases, depreciation, fund transfers, debt payments, and land sales. Part 1 presents journal entries under the modified accrual basis, while Part 2 demonstrates the same transactions using the full accrual method. The assignment also justifies the preparation of two sets of financial statements, one reflecting budgetary requirements and the other presenting the entity as a whole, emphasizing inter-period equity. The conclusion highlights the importance of accurate accounting practices for government entities, similar to corporate entities, and references relevant accounting principles and standards, including GASB 34.

Government and non-profit
accounting

TABLE OF CONTENTS
Introduction................................................................................................................................3
Part 1..........................................................................................................................................3
Part 2..........................................................................................................................................4
Part 3..........................................................................................................................................6
Conclusion..................................................................................................................................6
References..................................................................................................................................7

INTRODUCTION
The present study is based on preparing journal entries for Preston Village for recording it in
the appropriate government funds by considering both Modified accrual accounting and full
accrual accounting method. Further prepared journal entries for reflecting the transactions on
government-wide statements will be justified by describing significant for both sets of
financial statements.
PART 1
Modified accrual accounting is meant for realizing proceeds when they turn into accessible
and measurable having some exceptions while recognizing expenses during the occurrence of
liabilities (McKinney, 2015).
Journal entries according to modified accrual basis are as follows:
1. Preston Village issued $20million to acquire a new building for municipal office in a
capital project fund; the profits were recorded.
Cash a/c Dr. $20,000,000
Bonds a/c Cr. $20,000,000
2. The company purchased the specified building by giving the amount of $20 million.
Expenditure a/c Dr. $20,000,000
Cash a/c Cr. $20,000,000
3. The company recorded the transaction by making depreciation on $300000 on the
municipal vehicles.
A) Modified accrual – none
4. Transfer of $2060000 has been made from general fund to debt service fund.
Transfer out to debt service fund a/c Dr. $2,060,000
Cash a/c Cr. $2,060,000
Cash a/c Dr. $2,060,000

Transfer from general fund $2,060,000
5. The company made a payment of $60000 with interest on a long-term debt while repaying
$2 million on the same debt.
Expenditure-principle a/c Dr. $2,000,000
Expenditure-interest a/c Dr. $60,000
Cash a/c Cr. $2,060,000
6. A village land was sold for $5 million which has been purchased for $4million. The profits
were further recorded in the general fund.
Cash a/c Dr. $5,000,000
Proceeds-land a/c Cr. $5,000,000
PART 2
The full accrual basis of accounting is meant for recognizing financial impacts of activities on
an entity on an accounting period, despite the fact that, if or if not the cash was earned or
spent (Bloch, 2016). In context with business, full accrual accounting is used to identify an
appropriate net profit, to evaluate the financial performance of the business and to consider
income with expenditures during an accounting period (Cunha, 2015). In context with
business, the measurement of net profit is not considered as the main objective, however, in
accordance with the GASB 34, GWFS are showed by making use of full accrual method.
Journal entries according to full accrual basis are as follows:
1. Preston Village issued $20million to acquire a new building for a municipal office. In a
capital project fund, the profits were recorded.
Cash a/c Dr. $20,000,000
Bonds payable a/c Cr. $20,000,000
2. The company purchased the specified building by giving the amount of $20 million.
Building a/c Dr. $20,000,000
Cash a/c Cr. $20,000,000

3. The company recorded the transaction by making depreciation on $300000 on the
municipal vehicles.
Depreciation expense a/c Dr. $300,000
Accum dep’n a/c Cr. $300,000
4. Transfer of $2060000 has been made from general fund to debt service fund
B). none
5. . The company made a payment of $60000 with interest on a long-term debt while
repaying $2 million on the same debt.
Expenditure-bond a/c Dr. $60,000
Bonds payable a/c Dr. $2,000,000
Cash a/c Cr. $2,060,000
6. A village land was sold for $5 million which has been purchased for $4million. The profits
were further recorded in the general fund.
B) None
PART 3
Given that, the government entities are justified in preparing two sets of financial statements,
as these deliver different rationales for entities (Granof, Khumawala & Smith, 2016). One
financial statement is meant to reflect the budgetary requirements for entities during the
reporting period, and the another reports the entity as a large and its achievements on inter-
period equity
CONCLUSION
In accordance with the present study conclusion can be drawn that similar to corporate
entities, government entities are also required to record their accounting transactions in an
appropriate manner. By considering accounting principles of South Africa, government
entities are justified in preparing two sets of financial statements, one financial statement

offers a holistic image of government as well as the full accrual both based on the inter-
period equity. Further, the other fund statement gives more consideration towards the budget.