Report



Accounting Concepts for CASES21 Finance

Financial Services Division

Published by the

Communications Division

for Financial Services Division

Department of Education and Training

Melbourne

January 2015

©State of Victoria (Department of Education and Training) 2015

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An educational institution situated in Australia which is not conducted for profit, or a body responsible for administering such an institution may copy and communicate the materials, other than third party materials, for the educational purposes of the institution.

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1. Foreword 7

2. Introduction 7

3. Financial Reporting 8

4. Performance Management 8

Performance Management Cycle 9

5. Accrual Accounting 10

Matching of Revenue and Expenditure 10

End of Period Adjustments (Balance Day Adjustments) 10

Benefits of Accrual Accounting 10

6. CASES21 Finance 11

7. Accounting Principles 12

Explanation of the five major transactional categories 12

8. Chart of Accounts 13

9. Accounting Rules and Concepts 13

10. Understanding Debits and Credits 15

Debit and Credit Rules Examples: 16

11. Financial Documents and Debits/Credits 18

12. Introduction to CASES21 Finance Reports 19

Financial Statements 19

13. Matching Revenue and Expenses 20

14. Journals in the Accounting Process 21

Correcting Entries 21

Adjusting Entries 21

Balance Day Adjustments 21

Journal Generator 21

Examples of Correcting Journals 22

Sample Annual Subprogram Budget Report 25

Sample Annual Subprogram Budget Report 26

Sample Operating Statement 27

Sample Operating Statement 28

Example of Adjusting Entry: Provision for Non- Recoverable Subject Contributions 29

Sample Balance Sheet 53

Example of Adjusting Entry – Provision for Doubtful Debts: 54

Sample Operating Statement 55

Sample Operating Statement 56

Sample Balance Sheet 57

Example of Adjusting Entry Provision for Long Service Leave: 58

Foreword

This publication is designed to assist school principals and administrative staff in reinforcing and understanding the accounting concepts that form the basis of the CASES21 Finance system.

Effective understanding and application of these concepts will assist in the development of appropriate financial management practices in schools. It should be noted that CASES21 Finance system provides the functionality for recording the vast majority of schools’ financial transactions. However, an appreciation of why and how these transactions are processed by the system in terms of accounting concepts will help improve confidence and competence of all relevant school personnel.

Accurate and timely financial data entry results in relevant and reliable financial reports that allows for in depth interpretation and analysis that is required for effective decision making and the optimum allocation of resources to improve student outcomes.

Several useful finance resources, including the CASES21 Finance Business Process Guide can be located on the School Financial Management website at



Introduction

Schools constantly interact with public and business undertakings, and individuals, in purchasing and providing goods and services that result in claims that are settled by the receipt or payment of cash. These settlements represent accounting transactions which are classified into groups of related receipts and expenses and recorded in school financial statements.

The school accounting system facilitates the conversion of accounting transactions into accounting information that can be used by school leaders and administrators and other education stakeholders. Essentially the accounting system is an important reflection of policy views on the methods and processes to be employed to identify, assemble, record and report on a school’s financial activities. Financial information is generated from the system in the form of financial statements to enable managers to monitor financial performance and

to make decisions that will guide the future resource allocation processes.

Financial Reporting

Amongst other reports, the end products of the accounting system are the schools’ key financial statements: The Operating Statement and Balance Sheet. These statements are a record of stewardship for the resources under the control of a school and also an important source of information for decision making. Legislative requirements and accounting standards play an important role in shaping the form and content of financial statements and external auditors attest to the maintenance of these standards through the school audit process.

More information on these two reports can be found in:

• “Operating Statement: A Practical Example and Explanation” and

• “The Balance Sheet: A Practical Example and Explanation”

These two publications are accessible via the School Financial Management website:

Performance Management

This introduction would not be complete without reference to the important role of financial management in the overall performance management cycle of every school. Commencing with the development of the school’s strategic plan, the cycle establishes transparent links with resource allocations reflected in school budgets, the progressive monitoring of outcomes against plans, the reporting of actual results and the evaluation of achievements.

An effective accounting system provides the ingredients for good financial management reporting. The relevance, reliability and timing of financial information depend on system design and the dependable processing of financial data.

The diagram that accompanies this introduction portrays the various stages in the performance cycle and the close connections that are necessary to identify the need for and nature of any interventions.

Performance Management Cycle

Charter Goals and Objectives

Available

Resources

Strategic Planning Decisions

PLANNING

Program Priorities

Budget

Decision

Information

ALLOCATION

Resources

Continuous

Review

School Programs

MONITORING AND REPORTING

• School council

• Principal

• Staff

• Stakeholders

Decision

Information

EVALUATION

Performance

Evaluation

Accrual Accounting

The key role of an accounting system is to provide information that will assist decision making. The information should be relevant and reliable and produced in a timeframe that will permit informed choices amongst several possible courses of action.

In addition to the receipts and payments of cash, accrual accounting recognises undertakings given, by a school to other parties or by other parties to a school, to pay or receive cash at some future date.

In an accrual accounting environment these transactions are recorded immediately, irrespective of the fact that the obligations they represent are not satisfied by cash receipts or payments until some later date.

Most undertakings or promises to pay cash involve legal obligations and enter into a school’s accounting system via families – accounts receivable (amounts due to a school from families) or sundry debtors (amounts due to a school from non-family debtors). As cash is received or paid out the balances in the two accounts are reduced commensurately.

Invoicing families for levies/fees impacts significantly in an accrual accounting system. When the charges are entered on CASES21 Finance for all families, this is recorded and reported as 100% revenue earned immediately. The subsequent receipts by families are treated as reductions in amounts owed

(not the earning of revenue), and even though the collection rate may be well under 100%, only a journal to reduce the amount will accurately reflect the most realistic revenue.

Matching of Revenue and Expenditure

A feature of the accrual accounting approach is that transactions are brought to account in the period in which they occur, rather (as in cash accounting) in the period in which the cash is received or paid. The accruals approach, therefore, results in a better match between the recorded revenue and expenditure of a school during and at the end of the accounting period.

End of Period Adjustments (Balance Day Adjustments)

Consistent with achieving a better match between revenue and expenditure the accruals approach also requires some adjustments at month/year end (often referred to as balance day adjustments). For example, voluntary contributions invoiced late in the current year will have a direct benefit in the following year, when the services relating to the voluntary contributions will be provided by a school.

Under the accruals approach an adjustment is made (journal entry) to transfer the amount of the voluntary contribution(s) into the relevant year. Another example would be expenses paid in one year, that have

a benefit in the following year, i e payment in advance to secure a school camp booking. Journal entries separating these expenses into the relevant years of service result in a better match between the education services provided and the costs related to these services.

Benefits of Accrual Accounting

Queensland, South Australia, West Australia, Tasmania, Northern Territory and the Australian Capital Territory school systems have adopted accrual accounting in one form or another.

The accruals approach to accounting also carries the endorsement of the Victorian Auditor General. The overall benefits of accrual accounting may be summarised as follows:

1. Accountability

The better match of revenue and expenditure improves the disclosure in financial statements.

2. Improved knowledge of financial performance

School managers are provided with more meaningful information about revenue and costs, opening up opportunities for improved evaluation of financial performance.

3. A better picture of resource allocation

A more comprehensive record of revenue and expenditure resulting from the inclusion of transactions which have a future cash bearing for a school.

4. Better information for decision making

Accounting systems are designed to produce information that will be useful for decision making. The recognition of revenue and costs at the time they occur rather than when they are received or paid in cash results in a better matching of revenue and costs: hence, the financial outcome at year-end should constitute a more representative result for decision making (compared to a cash system).

5. Resource management

School managers have a responsibility for the resources under their control. Both cash and accrual accounting systems can satisfy stewardship requirements. However, the increased disclosure and the better opportunities made available by the accruals approach in relation to the overview of financial performance could be expected to elevate stewardship standards.

CASES21 Finance

The CASES21 Finance system builds on the approach of schools’ previous financial systems by enhancing, in particular, the important stewardship, accountability and reporting relationships that benefit school management and other education stakeholders.

CASES21 introduces a modified form of accrual accounting which will have a positive bearing on the relevance, reliability and consistency of financial information appearing in school financial statements.

Under cash accounting the receipt or payment of cash is the sole determinant for a transaction to be recorded in a school’s financial accounts. In other words, cash has to be received or paid out before a transaction appears in a financial statement.

Under a modified accruals approach transactions are recognised at the time they occur, irrespective of when the claims they represent are received or paid. The following example reflects the different outcomes of a strictly cash based system and a system based on accruals:

Example: In the 3 months period ended September 30, a school was due to receive grants and subject contributions amounting to $100,000 and to pay invoices amounting to $80,000. The school actually received $80,000 of the $100,000 due from grants and subject contributions and paid invoices to the value of $40,000 as at September 30.

(Cash Outcome) $

Receipts 80,000 Payments 40,000 Net Surplus 40,000

(Accrual Outcome) $ Revenue 100,000

Expenditure 80,000

Net Surplus 20,000

The revenue and expenditure in the accrual based outcome above include the actual cash received and paid by the school, together with amounts which represent financial obligations arising during the 3 months period, but not received or paid at balance date.

The example reflects the benefits of a modified accrual accounting approach:

• Improved matching of individual costs and income in the period

• An operating result that reflects the total financial performance of the school in the period

• Better financial information for the assessment of performance and for future planning

Accounting Principles

The fundamental principle of accrual accounting is that it is a double entry accounting system. Like standard commercial finance software, CASES21 Finance is programmed to reflect double entry accounting principles and comply with accounting standards.

Double entry accounting takes its name from the fact that equal debit (DR) and credit (CR) entries are made for every transaction. If only two accounts are to be updated then one account is debited and another is credited for the same amount. If more than two accounts are affected by a transaction, the sum of the debit entries must equal the sum of the credit entries.

Remember: For every DEBIT there must be a corresponding CREDIT.

Explanation of the five major transactional categories

Revenue

Revenue is received by schools from a variety of sources. The revenue can be in the form of cash e.g. State or Commonwealth grants, or charges/ invoices e.g. Families, Sundry Debtors. It is important to understand that actual receipts from families and sundry debtors for charges/invoices are NOT recognised as earning revenue (which occurred when the charge/ invoice was raised).

These instances are the repayment of a debt only. Other forms of revenue include bank interest received and discount earned.

Expenditure

Expenditure can be regarded as items purchased or incurred in order to earn revenue. The nature of expenditure is that it is absorbed within 12 months (recurrent expenditure), otherwise it is classified as an asset (refer below). Categories of recurrent expenditure include Salaries and Allowances, School Requisites, Officer/Teacher Requisites, Class Materials and Communication Costs.

Assets

Assets are categorised as either Current Assets or Non Current Assets.

Current Assets are items of value retained in the school and are generally in the form of cash or expected to be converted to cash within 12 months. These include: Cash at Bank; Accounts Receivable; Stock (consumables e.g. uniforms, canteen stock); Prepaid Expenses and Accrued Revenue (as a result of journals for “balance day adjustments”), Petty Cash Advance; Short term Investments (up to 6–12 months).

Non Current Assets are items of value retained by the school and expected to remain for more than twelve months (similar to capital acquisitions as per ATO definition for BAS). These include items of a capital nature such as Furniture; Equipment; Library (books etc); Motor Vehicles.

Liabilities

Liabilities are also categorised as either Current Liabilities or Non-Current Liabilities

Current Liabilities are debts owed by the school that are expected to be repaid within six to twelve months. Examples: Accounts Payable; Revenue in Advance; Accrued Expenses.

Non-Current Liabilities are debts owed by the school that are expected to be repaid after twelve months. Example: Cooperative Loan.

Accumulated Equity

Accumulated Equity represents opening balance information and results of operations (net surplus/deficit) to date. Example: Results of trading (revenue less expenses or net profit/loss).

Chart of Accounts

The five transactional categories are reflected in the school “Chart of Accounts” which is a numerical listing of all account codes within these categories. For example:

Revenue: 70001 Cash Grant, 70002 Education Maintenance Allowance.

Expenditure: 80050 Teaching Support Staff, 80051 Teacher Aides.

Assets: 10001 High Yield Investment Account 10002 Official Account, 26212 Office Equipment $5,000

Liabilities: 32000 Payroll Clearing Account , 33000 Group Tax Clearing Account, 40001 Cooperative Loan.

Accumulated Equity: 50001 Accumulated Funds

The first digit in the code indicates the relevant category, for example, all revenue commences with 7; all recurrent expenditure commences with 8, all current assets with 1, all noncurrent assets with 2, all current liabilities with 3, all noncurrent liabilities with 4 and all accumulated equity with 5.

Accounting Rules and Concepts

The five chart of account categories are fundamental in ensuring that the double entry concept of accrual accounting is correctly implemented and maintained. The “Accounting Equation” assists users and decision makers in determining whether the double entry concept has been maintained accurately.

The Accounting Equation is expressed as follows

Accumulated Equity = Assets – Liabilities

In a formal manner, this equation is represented by a report called a “Balance Sheet” which sets out the school’s Assets, Liabilities and resulting Accumulated Equity.

A practical example of the calculation of the “Accounting Equation” is demonstrated below (because we know the assets and the liabilities values, these are used to determine accumulated funds).

|Assets |– |Liabilities | |= Accumulated Funds | |

|Bank |$39,000 |Accounts Payable Control |$4,000 | | |

|Acc Receivable Control |$5,000 |Cooperative Loan |$29,000 | | |

|Stock |$10,000 | | | | |

| |$54,000 |less |$33,000 |equals |$21,000 |

An equivalent Balance Sheet to reflect the above equation would be as follows:

| |

|XYZ Primary School |

|Balance Sheet |

| |

| |

|As at dd/mm/yyyy |

|Accumulated Funds |

| | |

|Accumulated Funds |21,000 |

| | |

|Total Funds | |

| |21,000 |

|Represented by: |

|Non Current Assets |

|Equipment 10,000 |

|Current Assets |

|Official Account |19,000 |

|High Yield Investment Account |20,000 |

|Accounts Receivable Control | |

| |5,000 |

|Total Assets 54,000 |

|Current Liabilities |

|Accounts Payable Control 4,000 |

|Non Current Liabilities |

|Cooperative Loan |29,000 |

|Total Liabilities | |

| | |

| | |

|Net Assets | |

| |33,000 |

| |21,000 |

Understanding Debits and Credits

Accrual based accounting software packages are programmed to allocate debit and credit as part of the recording functionality. However, an understanding of the debit and credit rules as they apply to accounting transactions not only assists the operator to confirm the accuracy and validity of data, but when a journal entry is required e.g. correction to a coding error, a debit and corresponding credit have to be determined at the data entry level by the operator. The key concept that operators need to be aware of is whether an amount within the

five chart of account categories is to be a debit or credit, or whether the transaction will have a positive or a negative effect on the balance of the particular account.

The following accounting rules will assist when deciding whether the transaction should be a debit or a credit:

• To increase the value (balance) of any asset or expense account, debit the account*

• To decrease the value (balance) of any asset or expense account, credit the account*

• To increase the value (balance) of any liability, income or accumulated equity account credit the account

• To decrease the value (balance) of any liability, income or accumulated equity account debit the account

The table below summarises the above and will assist with understanding the various rules:

Classification of account Increase in value Decrease in value

Assets

Expenses

Liabilities

Accumulated Equity Income/Revenue

Debit Credit

Credit Debit

* You will know from your personal dealings with banks that bank statements actually indicate that the opposite to these accounting rules is true ie a credit balance – not a debit balance – is favourable. This is because bank statements are generated by the bank, not by the school. Therefore, what is a credit to the bank is a debit to the school and vice versa (positive funds in a bank account makes the account owner a creditor to the bank, hence the credit balance).

Debit and Credit Rules Examples:

Example 1: Accumulated Funds:

Opening balances in the following accounts identified: Bank $10,000, Accounts Receivable $8,000, Furniture $65,000, Equipment $140,000, Accounts Payable $5,000.

|Classification of account Increase in value Decrease in value |

|Assets Debit $10,000 |

|Official A/c |

|Expenses A/c Rec $8,000 |

|Furniture $65,000 |

|Equipment $140,000 |

|Liabilities Credit |

|Accumulated Equity Income/Revenue A/c Payable $5,000 |

|Acc Funds $218,000* |

*calculated by subtracting total liabilities from total assets or application of the accounting equation: Accumulated Equity = Assets - Liabilities

Assets are debited because they are increasing in value by their entry into accounting software.

Liabilities and Accumulated Equity are credited because they are also increasing in value by their entry into accounting software.

Example 2: Assets:

School purchases furniture for $5,000 by cheque.

DR Furniture (Asset) $5,000 because it is increasing in value.

CR Official A/c (Asset) $5,000 because it is decreasing in value.

Account Balance DR/CR Amount New Balance

Furniture (asset) 65,000 DR + 5,000 70,000

Official Account (asset) 10,000 CR – 5,000 5,000

Note: net effect of this transaction is that Accumulated Equity is still $218,000 (see Example 1) and total asset value is also unchanged because one asset (bank) has been replaced by another asset (furniture).

Example 3: Liabilities:

School pays tax invoice from ACE Office Supplies $300 (assumes $300 invoice has already been entered on accounting software therefore creating a $300 Accounts payable liability).

DR Accounts Payable (Liability) $300 because it is decreasing in value (i.e. the amount owing to ACE Office Supplies is reduced).

CR Official A/c (Asset) $300 because it is decreasing in value.

|Account |Balance |DR/CR |Amount |New Balance |

|Accounts Payable (liability) |5,000 |DR |– 300 |4,700 |

|Official Account (asset) |9,000 |CR |– 300 |8,700 |

Example 4: Revenue:

Students pay cash for lunches at the Canteen. Total of all receipts is $80.

DR Official A/c (Asset) $80 because bank is increasing in value.

CR Trading Operations (Revenue) $80 because revenue is increasing in value.

|Account |Balance |DR/CR |Amount |New Balance |

|Trading Operations (revenue) |0 |CR |+ 80 |80 |

|Official Account (asset) |8,700 |DR |+ 80 |8,780 |

Example 5: Expenses

School receives tax invoice for quarterly electricity account $600.

DR Electricity (Expense) $600 because the expense is increasing in value.

CR Accounts Payable (Liability) $600 because the liability is increasing in value (note, the account has not been paid, but under accrual accounting, the expense is recognized for reporting purposes at the time the creditor invoice is entered into the accounting software).

|Account |Balance |DR/CR |Amount |New Balance |

|Accounts Payable (liability) |4,700 |CR |+ 600 |5,300 |

|Electricity (expense) |0 |DR |+ 600 |600 |

Financial Documents and Debits/Credits

To further illustrate the concept of debits and credits in a practical manner, refer to the table below which identifies key documents found in a school. Specific information on the document determines whether an accounting transaction is ‘triggered’ in specific instances and if so, the corresponding debit and credit entries:

|Document Accounting DR/CR Reason |

|Transaction |

|Invoice issued to parent for Yes DR: Accounts Receivable Control Revenue is recognised as earned subject contributions (Asset) when invoice is |

|processed |

|CR: Subject Contributions |

|(Revenue) |

|Receipt issued by school to Yes DR: Official Account (Asset) Bank is increasing and family parent for subject contributions CR: Accounts Receivable|

|Control debt is decreasing |

|paid (Assets) |

|Creditor invoice received for Yes DR: Utilities (Expenditure) Creditor balance is increasing as gas account and entered into CR: Accounts Payable |

|Control well as utilities |

|CASES21 Finance (Liability) |

|Cheque to creditor to pay Yes DR: Accounts Payable Control Bank is reduced as well as |

|gas account invoice (Liability) liability to creditor |

|CR: Official Account (Asset) |

|Purchase Order for Class No N/A This document is generated by Requisites supplied by the school and not by a creditor. ABC Supplies It is an |

|official intent to purchase |

|items. |

|Invoice for Class Requisites from Yes DR: Class Requisites Creditor balance is increasing as |

|ABC Supplies CR: Accounts Payable Control well as class requisites |

|(Liability) |

|Invoice to YMCA for hire Yes DR: Sundry Debtors (Asset) Revenue is recognised as earned of school facilities CR: Hire of Facilities (Revenue) |

|when invoice is processed |

|Statement from Bank* Sometimes Statement is a summary of transactions but could include new revenue or expense |

|items eg interest, bank charges etc for processing on CASES21 Finance |

|Credit Note from Yes DR: Accounts Payable Control Correction to prior invoice that |

|ABC Supplies received (ABC Supplies) affects creditor balance and class |

|CR: Class Requisites requisites |

Introduction to CASES21 Finance Reports

Financial Statements

As emphasised throughout this publication, the major difference between cash and accrual accounting is evident in the reporting aspect of financial data. Reports comprise a varied collection of transaction, budget, YTD expenditure and exception reports by general ledger account, program, sub programs and initiative. High level CASES21 Finance reports will become the key management tools for school councils, principals and business managers to use to assist with resource planning and decision-making purposes. Some key reports that schools should use are outlined below:

• Operating Statement – Detailed

(GL21150)

A performance report that identifies all recurrent actual and budgeted revenue and expenditure by general ledger account code. The expenditure data is subtracted from the revenue data to determine the overall net operating surplus/deficit figure for the current month and year to date. This operating surplus/deficit figure does not represent the cash at bank balance (refer to Cash Flow Statement below) but is a combination of cash (grants) and invoices/charges transactions.

Equivalent budget data that has been entered against each general ledger

account code indicates a variance for monitoring and decision making purposes.

The balance of Outstanding Purchase Orders is shown separately below the net operating surplus/deficit to indicate possible future commitments.

Also below the operating surplus/ deficit is information relating to capital expenditure (assets) in the form of actual expenditure, budgeted expenditure and variance data for tracking purposes.

For more information refer to the publication “Operating Statement – A Practical Example and Explanation” available on the School Financial Management website:

• Balance Sheet (GL21160)

The Balance Sheet summarises the financial position of the school as at a particular date. It is regarded as a static report because it is a snapshot of the current financial position and changes on a daily basis due to movements in assets and liabilities. As the bank account figures in the balance sheet include unpresented cheques (unlike a Bank Statement), it is regarded as a better indicator of a school’s cash position.

For more information, refer to the publication “The Balance Sheet – A Practical Example and Explanation” available on the School Financial Management website:

• Cash Flow Statement (GL21151)

The Cash Flow Statement comprises an opening balance that has receipts (monthly and YTD) added to it and payments (monthly and YTD) subtracted from it to determine a YTD closing bank balance. This report can be run by separate bank account or for all bank accounts combined.

The Cash Flow Statement is an indicator of ‘liquidity’ (ability of the school to meet short term debts as they become due). This statement will assist schools in monitoring their cash position, and to help determine the cash component of the school’s net surplus/deficit from the Operating Statement described above.

For more information refer to the publication “Financial Reporting for Schools” on the School Financial Management website:

• Bank Account Movements

(GL21152)

This report lists the opening balance and cash movements activity (receipts and payments) by date and document number for a specified bank account or for all bank accounts. A running balance is calculated per line and the final line totals all receipts and payments for the date range selected. A closing balance is also determined.

For more information refer to the publication “Financial Reporting for Schools” on the School Financial Management website:

• Annual Sub Program Budget Report

(GL21157)

This report lists each sub program and compares the annual budget allocated per sub program against YTD actual details (cash and accrual) for revenue and expenditure. There is also provision to compare the current year with the previous year, as well as calculations for percentage budget received and expended. The expenditure section also includes outstanding orders and uncommitted balance per sub program. Note that outstanding orders are included as a separate column confirming that while purchase orders do not trigger an accounting transaction, it is important to be aware of the value of purchase orders processed in terms of possible future financial obligations. For program monitoring, a similar report is available (Annual Program Budget Report GL21158).

For more information refer to the publication “Financial Reporting for Schools” on the School Financial Management website:

• Annual Sub Program Budget Variance

Report (KGLSUB21003)

While the Annual Sub Program Budget Report outlined above provides information on the ‘bottom line’ of each sub program, the Annual Sub Program Budget Variance Report provides a detailed breakdown by individual sub program of all budgeted and actual sub program information for Coordinators/KLA’s to monitor.

It also incorporates outstanding orders, resulting in an uncommitted balance figure for the sub program. An equivalent report is available for programs (Annual Program Budget Variance Report KGLPROG21003). For more information refer to the publication “Financial Reporting for Schools” on the School Financial Management website:

Matching Revenue and Expenses

This is an important concept and one of the cornerstones of accrual accounting. Under a cash system, revenue and expenditure is only recognised when cash is received and an expense is paid. There is no consideration of the time period that the revenue/expenditure relates.

This is not a suitable basis for ensuring the performance of an entity as it does not match revenues and expenses for the same point in time e.g. hire of school facilities revenue may be received in advance for the next 12 months; if paid to the school in March and the reporting period is January to December, a cash system will overstate the revenue by 3 months, whereas an accrual system can allow the user to allocate 9 months of the receipt as revenue (Mar to Dec),

and 3 months as a prepayment (Jan to Mar).

Similarly, expenses can and should be matched’ so that the amount incurred is consistent with the amount paid.

Journals in the Accounting Process

A journal is an accounting entry used to adjust or correct a previous accounting entry or make a future provision. A journal must have a debit and a corresponding credit equal to the same dollar value.

Journal entries can be processed at any time during the year; however, certain journals are only processed at the end of a period (usually the end of the year). These entries are called “Balance Day Adjustments”. As the effect of a journal entry impacts on key reports (Operating Statement and possibly also the Balance Sheet), the principal needs to be aware of, and approve, all monthly journal batches by signing a copy the CASES21 Finance Journal Report (GL21006). This report should then be tabled at the next school finance committee meeting.

There are two types of journals that exist in CASES21 Finance:

• Automated Journals e.g. EMA Journal is system-generated from data input and requires no operator entries

• Manual Journals e.g. GST Journal is operator reliant to determine the accounts, amounts, programs, sub programs and initiatives affected.

As well as being used for adjusting and correcting entries, a journal can also be used for program/ sub program/initiative transfers of both revenue (if applicable).

and expenditure to ensure accurate reporting. More information on the use of journals can be found in section 5 – General Ledger of the CASES21 Finance Process Guide. The most common reasons for each type of journal are summarised below:

Correcting Entries

• Miscoding of revenue or expenditure

• Incorrect sub program or initiative used

• Incorrect GST code used. E.g. GST exclusive used instead of GST inclusive.

Once completed, these journal entries require no further work.

Adjusting Entries

• Subject Contributions balance needs to be adjusted to reflect a realistic collection amount. This is commonly referred to as a Provision for Non Recoverable Subject Contributions journal.

Once completed, this journal entry may need further adjustment throughout the year to increase or decrease the balance. For more information refer to section 1 – Families of the CASES21 Finance Process Guide.

Balance Day Adjustments

• Subject Contributions revenue received in the year preceding that to which the contributions relate (in advance)

• Prepaid Camp Expenses by the school for a camp to be conducted in the following year.

These journal entries must be ‘reversed’ by further journals in the year to which the revenue or expenses actually relate so as to return the revenue and/or expense back to the original account/s.

Journal Generator

The Journal Generator Tool was developed to assist schools to formulate journals prior to data entry on CASES21 Finance. All the above examples of transfers, corrections and adjustments used in schools have been incorporated into the Journal Generator tool. The tool can be accessed on School Financial Management website at:

Examples of Correcting Journals

In order to correct a transaction that has been incorrectly entered, into CASES21 Finance, it is necessary to ascertain the system generated debit and credit of the original transaction. The original batch audit trail is the best source of this information.

Consider the following examples:

1. A creditor invoice for $150.00 (ex GST) has been incorrectly coded to Class Materials 86104 rather than Class Sets 86202. The correct sub program has been used – 4101 English.

The Journal Generator entries would be as follows:

Note: In “Transaction Type” above, Creditor Invoice has been selected; however, selecting GL Payment would also produce the same result.

By outlining the details of the original transaction the Journal Generator Tool displays the debit and credit that are required to be processed in CASES21 Finance to ensure the expenditure is allocated against the correct expenditure account. In the example above the debit and credit to use in the General Ledger Journal (GL31081) would be as follows:

|Sub Program |GL |Initiative |Debit |Credit |

|4104 |86202 |0 |150.00 | |

|4104 |86104 |0 | |150.00 |

The before and after effects of this journal on the CASES21 Finance Operating Statement would be as follows:

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 January

| | |

| | |

|GL Code |Account Title |

|Sub Prog. |Title |

|Sub Prog. |Title |Last Year |

|Subject Contributions Revenue 74001 |$3000 | |

|Provision for Non-Recoverable Subject Contribution 12004 | |$3000 |

If the Journal Generator was utilised to confirm the journal the screen would appear as follows:

This journal entry would then be processed on CASES21 Finance. Note that there is an equal debit and credit amount.

Hint: To make it easier to refer back to this journal at a later date, process only one journal as part of the batch.

The before and after effects of this journal on the CASES21 Finance Operating Statement would be as follows:

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 March

| | | |Current Month | |

| | | |Budget | |

|GL Code |Account Title |Actual | |Variance |

| |Accumulated Funds |-280,224.49 |-266,213.27 | |

| |Total Funds |-280,224.49 |-266,213.27 | |

|Represented by: | | | | |

|Non Current Assets |Computers/IT equipment >$5000 |3,000.00 |3,000.00 | |

| |Musical Equipment >$5000 |3,000.00 |3,000.00 | |

| |Other Assets >$5000 |7,506.36 |7,506.36 | |

| | |13,506.36 |13,506.36 | |

| | | | | |

| | | | | |

|Current Assets |High Yield Investment Account |108,000.00 |95,000.00 | |

| |Official Account |98,000.00 |25,000.00 | |

| |Accounts Receivable Control |20,000.00 |650.00 | |

| |Sundry Debtors |50,000.00 |150.00 | | |

| |GST Purchases (Reclaimable) |1,243.10 |1,180.95 | | |

| |Prov for Non-Recov Subj Con |-3,000.00 |0.00 | | |

| | |274,243.10 |121,980.95 | | |

| |Total Assets |287,749.46 |135,487.31 | | |

| | | | | | |

| | | | | | |

|Current Liabilities |Group Tax Clearing Acc |-1,126.97 |-1,070.62 | | |

| |Accounts Payable Control |-5,312.00 |-65.00 | | |

| |GST on Sales |-1,086.00 |230.00 | | |

| | |-7,524.97 |-905.62 | | |

| | | | | | |

| | | | | | |

|Non Current | | | | | |

|Liabilities | | | | | |

| |Total Liabilities |-7,524.97 |-905.62 | | |

| |Net Assets |280,224.49 |134,581.68 | | |

What about the impact at a Sub program level?

Revenue Control Sub program (9499)* will be affected by a reduction of $3,000 actual revenue, however, the reduced net amount of $17,000 accurately matches the budget for Subject Contributions as confirmed in the Operating Statement – Detailed (GL21150).

*Best practice recommends the use of sub program 9499 for all curriculum-related revenue budget entries

What if the school’s estimated collection rate decreases to 80% later in the year (from 85%)?

This will require an increase in the provision of 5%. Another journal entry ‘topping up’ the provision by 5% can be processed. This is calculated as 5% of $20,000 = $1,000.

The accounting entries for the CASES21 Finance General Ledger Journal (GL31081S) adjustment would be as follows:

|Account |Debit |Credit |

|Subject Contributions Revenue 74001 |$1,000 | |

|Provision for Non-Recoverable Subj Cont 12004 | |$1,000 |

If the Journal Generator was utilised to confirm the journal the screen would appear as follows:

What if the school’s estimated collection rate increases by 5%?

The balance of the Provision should now be $4,000 ($3,000 + $1,000). This requires a decrease (reversal) in the Provision of $1,000 or the opposite of the above:

|Account |Debit |Credit |

|Provision for Non-Recoverable Subj Cont 12004 |$1,000 | |

|Subject Contributions Revenue 74001 | |$1,000 |

If the Journal Generator was utilised to confirm the journal the screen would appear as follows:

Note: In instances when a previous provision is reversed (that is, the amount collected increases, rather than decreases, use the lower half of the Journal Generator labelled: Non-recoverable Subject Contributions Reversal.

It is advisable that schools view an Operating Statement and Balance Sheet before and after the journal entry creating the Provision for Non recoverable Subject Contributions is processed to compare the difference between the two reports and confirm the accuracy of the entries. It is also best practice to ‘write off’ the balance of Subject Contributions prior to completing CASES21 Finance End of Year procedures.

Examples of Balance Day Adjustment – Revenue in Advance:

A Balance Day Adjustment for Revenue in Advance will need to be processed where family charges or sundry debtor invoices are raised in the year preceding that in which the service will be provided, (for example, subject contributions charges that are raised in late in one year that are to take effect in the following year).

The amount of the family charge or sundry debtor invoice that relates to the next year will need to be separated from the current year component of the charge and journalled to the next school year.

Processing this journal will ensure that key management reports accurately reflect the revenue earned for the current year and for the next year.

Section 10 – Balance Day Adjustments, of the CASES21 Finance Business Process Guide has detailed information on Balance Day Adjustments.

Consider the following example: Example Primary School creates families charges totalling $15,000 in November for subject contributions that relate to classes to be provided in the next year.

This amount is automatically recorded in the current year as revenue earned when it is entered in CASES21 Finance.

However, as this amount actually relates to a future period (the following year) it needs to be journalled as Revenue in Advance. This will ensure that the Subject Contributions revenue is correctly recognised in the year that it applies to.

The accounting entries for the balance day adjustment would be as follows, using the CASES21 General Ledger Journal (GL31081) format:

|Account |Debit |Credit |

|Subject Contributions Revenue 74001 |$15,000 | |

|Revenue In Advance 38002 | |$15,000 |

If the Journal Generator was utilised to confirm the journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the journal entry creating Revenue in Advance liability account is processed to compare the difference between the two reports and confirm the accuracy of the entries.

*Note: The balance day adjustment for Revenue in Advance is required to be reversed in the New Year AFTER CASES21 Finance End of Year Procedures to ensure that the revenue is correctly recognised in the correct year.

The accounting entries that would be required to reverse the original Revenue in Advance balance day adjustment would be as follows using the CASES21 General Ledger Journal (GL31081) format:

|Account |Debit |Credit |

|Revenue In Advance 38002 |$15,000 | |

|Subject Contributions Revenue 74001 | |$15,000 |

If the Journal Generator was utilised to confirm the journal to reverse the original Revenue in Advance balance day adjustment journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the journal entry reversing the Revenue in Advance liability account is processed to compare the difference between the two reports and confirm the accuracy of the entries.

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 30 November

| | | |

| | | |

|GL Code |Account Title |Actual |

|Camps/Excursions 74301 |$2,080 | |

|Revenue in Advance 38002 | |$2,080 |

If the Journal Generator was utilised to confirm the balance day adjustment journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the balance day adjustment journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 October

| | | |

| | | |

|GL Code |Account Title |Actual |

|Revenue in Advance 38002 |$2,080 | |

|Camps/Excursions 74301 | |$2,080 |

If the Journal Generator was utilised to confirm the balance day adjustment reversal journal the screen would appear as follows:

A sample Balance Sheet demonstrating the impact of the reversal entry can be seen below:

Sample Balance Sheet

|General Ledger |

|Balance Sheet (GL21160) |

| |As at 15 January | |

| | | | |

|Accumulated Funds Current Last Year | |

Liability removed

Example of Balance Day Adjustment – Prepaid Expenditure:

A Balance Day Adjustment for Prepaid Expenditure will need to be processed where expenditure is incurred in the year preceding that in which the expenditure relates for example part payments processed this year for a camp that will be held the following year.

The amount of the expenditure that relates to the next year will need to

be separated from the current year component of the expenditure and journalled to the next school year.

Processing this journal will ensure that key management reports accurately reflect the expenditure incurred for the current year and for the next year.

Consider the following example: To secure the Grade 6 Camp booking for the following year, Xyz PS forwarded the “Kids Camps Company” a $200 payment in October this year.

Without a General Ledger Journal (GL31081) entry to transfer this amount to the following year, the school’s reports will incorrectly reflect the expenditure as being incurred in the current year.

The journal entry required to ensure that the expenditure is recognised in the correct year would be as follows:

|Account |Debit |Credit |

|Prepaid Expenses 12005 |$200 | |

|Camps/Excursions 89302 | |$200 |

If the Journal Generator was utilised to confirm the balance day adjustment journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the balance day adjustment journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 October

Current

Month

Year to

Date

Last Year

GL Code Account Title Actual

EXPENDITURE

Budget Variance Actual

Budget Variance Annual Budget

Actual

Miscellaneous

89302 Camps/Excursions/Activities 200 – 200 12,200 15,000 -2,800 18,000 16,500

Before journal entry

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 October

Current

Month

Year to

Date

Last Year

GL Code Account Title Actual

EXPENDITURE

Budget Variance Actual

Budget Variance Annual Budget

Actual

Sample Balance Sheet

General Ledger Balance Sheet (GL21160) As at 31 October

|Accumulated Funds | |Current |Last Year | |

| |Accumulated Funds |-268,424.49 |0.00 | |

| |Total Funds |-268,424.49 |0.00 | |

|Represented by: | | | | |

|Non Current Assets |Computers/IT equipment >$5000 |3,000.00 |0.00 | |

| |Musical Equipment >$5000 |3,000.00 |0.00 | |

| |Other Assets >$5000 |7,506.36 |0.00 | |

| | |13,506.36 |0.00 | |

| | | | | |

| | | | | |

|Current Assets |High Yield Investment Account |108,000.00 |0.00 | |

| |Official Account |98,000.00 |0.00 | |

| |Accounts Receivable Control |20,000.00 |0.00 | |

| |Sundry Debtors |50,000.00 |0.00 | |

| |GST Purchases (Reclaimable) |1,243.10 |0.00 | |Asset created by journal |

| | | | | |entryentryentryescreates |

| |Prepaid Expenses |200.00 | | | |

| | | |0.00 | | |

| | | |0.00 | |

| | |277,443.10 | | |

| | | | | |

| |Total Assets |290,949.46 |0.00 | |

| | | | | | |

| | | | | | |

|Current Liabilities |Group Tax Clearing Acc |-1,126.97 |0.00 | | |

| |Accounts Payable Control |-5,312.00 |0.00 | | |

| |GST on Sales |-1,086.00 |0.00 | | |

| |Revenue in Advance |-15,000.00 |0.00 | | |

| | |-22,524.97 |0.00 | | |

| | | | | | |

| | | | | | |

|Non Current | | | | | |

|Liabilities | | | | | |

| |Total Liabilities |-22,524.97 |0.00 | | |

| |Net Assets |268,424.49 |0.00 | | |

As was the case with the Revenue in Advance balance day adjustment, a reversal entry of the General Ledger Journal is required in 2008 following CASES21 Finance End Of Year procedures.

The following General Ledger Journal (GL31081) entry would be required to do this:

|Account |Debit |Credit |

|Camps/Excursions 89302 |$200 | |

|Prepaid Expenses 12005 | |$200 |

If the Journal Generator was utilised to confirm the balance day adjustment journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the balance day adjustment reversing journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.

Sample Operating Statement

Next year date

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 January

Current Month Year to Date Annual Budget Last Year

Actual

GL Code Account Title Actual Budget Variance Actual Budget Variance

EXPENDITURE

Miscellaneous

89302 Camps/Excursions/Activities 200 14,500 -14,300 200 14,500 -14,300 14,500 14,800

Sample Balance Sheet

General Ledger Balance Sheet (GL21160)

As at 31 January

Accumulated Funds Current Last Year

Accumulated Funds -221,786.36 -218,347.49

Total Funds -221,786.36 -218,347.49

Represented by:

Non Current Assets Computers/IT equipment >$5000 3,000.00 3,000.00

Musical Equipment >$5000 3,000.00 3,000.00

Other Assets >$5000 7,506.36 7,506.36

13,506.36 13,506.36

Current Assets High Yield Investment Account 158,000.00 158,000.00

Official Account 49,150.00 48,000.00

Accounts Receivable Control 350.00 500.00

Sundry Debtors 930.00 1,200.00

GST Purchases (Reclaimable) 15.00 1,234.10

Prepaid Expenses 0.00 200.00

208,445.00 209,134.10

Total Assets 221,951.36 222,640.46

Current Liabilities Group Tax Clearing Acc 0.00 -1,126.97

Accounts Payable Control -165.00 0.00

GST on Sales 0.00 -1,086.00

Revenue in Advance 0.00 -2,080.00

-165.00 -4,292.97

Non Current Liabilities

Total Liabilities -165.00 -4,292.97

Net Assets 221,786.36 218,347.49

Example of Adjusting Entry – Provision for Doubtful Debts:

A provision for Doubtful Debts may need to be created by schools to account for the possible non-collection of revenue from sundry debtors.

The amount that needs to be provided for will be calculated by estimating the percentage of sundry debtor revenue that will remain uncollected. Making a provision for this amount will ensure that a school’s revenue and assets are not overstated on the Operating

Statement, Balance Sheet and Sub program reports.

The creation of this type of provision account relates to Sundry Debtors only. It is not to be used for non-recoverable subject contributions by families (refer to Provision for Non-Recoverable Subject Contributions above).

Consider the following example: Victory SC hires out the school hall to the local scout group for monthly meetings at an annual charge of $120 (GST inclusive) and the scout group is billed in January each year.

In June, the scout group manager advises the school that due to merging with another group of scouts, an alternative venue may result in discontinuing use of the school hall from July. This represents $60, or 50% of balance owing.

The accounts that will be impacted in making a provision for this possible non-collection of revenue are as follows, using the General Ledger Journal (GL31081) format

|Account |Debit |Credit |

|Hire of Facilities (revenue) 72401 |$60 | |

|Provision for Doubtful Debts (negative asset) 12003 | |$60 |

If the Journal Generator was utilised to confirm the provision journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the balance day adjustment reversing journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.

Sample Operating Statement

General

Operating Statement (GL21150) - Detail for the period ending 30 June

| | | |

| | | |

|GL Code |Account Title |Actual |

|Long Service Leave Expense 81002 |$679 | |

|Provision-Long Service Leave /Annual (Liability 38004 | |$679 |

If the Journal Generator was utilised to confirm the provision journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the provision account is created to compare the difference between the two reports and confirm the accuracy of the entries.

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 October

Current

Month

Year to

Date

Last Year

GL Code Account Title Actual

EXPENDITURE

Salaries and Allowances

81002 Long Service Leave

Budget Variance Actual

Budget Variance Annual Budget

679 -679 679

Actual

590

Sample Operating Statement

General Ledger

Operating Statement (GL21150) - Detail for the period ending 31 October

Current

Month

Year to

Date

Last Year

GL Code Account Title Actual

EXPENDITURE

Salaries and Allowances

81002 Long Service Leave 679

Budget Variance Actual

Budget Variance Annual Budget

679 -679 679

Actual

590

Sample Balance Sheet

General Ledger Balance Sheet (GL21160)

As at 31 October

Note: This journal is not reversed in the New Year. The provision accumulates over the years until the LSL is claimed by the school level payroll employee. When a person takes LSL, the net effect of the payroll transactions will be to reduce the LSL provision liability by the value of the leave that has been taken.

More information on creating a provision recognising long service leave entitlements and making long service leave payments to school level payroll employees can be found in the CASES21 Finance Process Guide Leave module (Section 7 – Payroll).

Glossary

Accrual Accounting

An accounting approach which identifies and records revenue and expenses in the period to which they relate, rather than the period in which they are paid or received. For example, revenue is recognised when there is an obligation for someone to pay the school while expenditure is recognised when the school has an obligation to pay a creditor.

Accumulated Equity

Represents the net assets of the organisation. It is normally represented by the equation: accumulated equity = assets (what is owned) minus liabilities (what is owed). It should be remembered though that CASES21 Finance does not include depreciation in the calculation of its asset amounts.

Assets

Items of value owned or controlled by the organisation classified as current assets (cash, debtors, inventories, short term investments) and non current assets (plant, equipment, buildings)

Balance Day Adjustments

Sometimes known as end-of-period adjustments. Common adjustments include revenue in advance and prepaid expenses.

Cash Accounting

A process that generates an accounting record only when cash is actually received or paid out.

Chart of Accounts

A list of all account titles in a sequential order arranged in categories. These also correspond to their arrangement in various accounting reports.

Control Accounts

Accounts set up to aggregate items of the same nature e.g. 100 debtors can be represented by a single General Ledger

account called Accounts Receivable Control. This eliminates a bulky General Ledger listing, however, there must be a subsidiary ledger operating to maintain individual details of each item in the Control account, whether it be debtors, creditors, stock etc.

Credit (CR)

The entry of a financial transaction to observe the fundamental rules of accounting e.g liabilities, income/revenue and accumulated equity increase when entered as a credit (system generated).

Debit (DR)

The entry of a financial transaction to observe the fundamental rules of accounting i.e. assets, expenses, increase when entered as a debit (system generated).

Expenditure

An outflow of resources in exchange for services or products. Recurrent expenditures produce benefits not extending beyond the accounting period (expenses); capital expenditures provide value extending into future accounting periods (asset purchases).

General Ledger (GL)

Accounting data is accumulated in accounts. The collection of all the individual accounts is referred to as the general ledger.

Income/Revenue

An inflow of resources resulting from the provision of services, trading and investing operations, property rentals etc.

Journal

A transaction that involves the manual entry of debits and credits.

Liabilities

Amounts owing by the organisation to external parties classified as current liabilities (amounts owing to creditors and expected to be paid in the accounting period) and non current liabilities (deferred commitments expected to be met in a future accounting period).

Matching

A concept that refers to the matching of costs and income in an accounting period to determine a surplus or deficit. Accrual accounting matches total costs and total revenue. Cash accounting matches cash paid out and cash received.

Subsidiary Ledgers

Debtors and creditors details where the balances equal the aggregate balances in the Accounts Receivable Control and Accounts Payable Control accounts respectively. Use of subsidiary ledgers eliminates the bulk of general ledger entries. Subsidiary ledgers are based on single entry and are system-generated.

Trial Balance

A list of ledger balances extracted at a given date in the order they appear in the Chart of Accounts. The purpose of a trial balance is to test the arithmetical accuracy of the ledgers, i.e. that the debits are equal to the credits. Trial Balances do NOT test the correctness of the accounting, for example, errors of omission, compensating errors, postings to an incorrect amount or account, will not be disclosed by a Trial Balance.

Variance

Difference between actual and budget data.

Year to Date (YTD)

Data accumulation from start of reporting year (January 1) to present

-----------------------

• Management Reports

• Financial Statements | | | | | | | | |

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Miscoding of invoice

Correct Coding of Invoice

[pic]

Incorrect sub program

Correct sub program

[pic]

Incorrect Amount

Correct Amount

[pic]

Before journal entry

After $3000 adjusting journal entry

Outstanding family balances

Offset to show net $17,000 expected collections

[pic]

[pic]

[pic]

[pic]

Before journal entry

After journal entry

Accumulated Funds | |Current |Last Year | | |Accumulated Funds |-283,224.49 |0.00 | | |Total Funds |-283,224.49 |0.00 | |Represented by:

Non Current Assets |

Computers/IT equipment >$5000 |

3,000.00 |

0.00 | | |Musical Equipment >$5000 |3,000.00 |0.00 | | |Other Assets >$5000 |7,506.36 |0.00 | | | |13,506.36 |0.00 | |

Current Assets |

High Yield Investment Account |

108,000.00 |

0.00 | | |Official Account |98,000.00 |0.00 | | |Accounts Receivable Control |20,000.00 |0.00 | | |Sundry Debtors |

50,000.00 |0.00 | | |GST Purchases (Reclaimable) |1,243.10 |0.00 | | | |277,243.10 |0.00 | | |Total Assets |290,749.46 |0.00 | |

Current Liabilities |

Group Tax Clearing Acc |

-1,126.97 |

0.00 | | |Accounts Payable Control |-5,312.00 |0.00 | | |GST on Sales |-1,086.00 |0.00 | | | |-7,524.97 |0.00 | |

Non Current Liabilities | | | | | |Total Liabilities |-7,524.97 |0.00 | | |Net Assets |283,224.49 |0.00 | |

Family balances include $15,000 of next year revenue

Accumulated Funds | |Current |Last Year | | |Accumulated Funds |-268,224.49 | | | |Total Funds |-283,224.49 |0.00 | |Represented by:

Non Current Assets |

Computers/IT equipment >$5000 |

3,000.00 |

0.00 | | |Musical Equipment >$5000 |3,000.00 |0.00 | | |Other Assets >$5000 |7,506.36 |0.00 | | | |13,506.36 |0.00 | |

Current Assets |

High Yield Investment Account |

108,000.00 |

0.00 | | |Official Account |98,000.00 |0.00 | | |Accounts Receivable Control |20,000.00 |0.00 | | |Sundry Debtors |

50,000.00 |0.00 | | |GST Purchases (Reclaimable) |1,243.10 |0.00 | | | |277,243.10 |0.00 | | |Total Assets |290,749.46 |0.00 | |

Current Liabilities |

Group Tax Clearing Acc |

-1,126.97 |

0.00 | | |Accounts Payable Control |-5,312.00 |0.00 | | |GST on Sales |-1,086.00 |0.00

0.00

| | | |-22,524.97 |0.00 | |

Non Current Liabilities | | | | | |Total Liabilities |22,524.97 |0.00 | | |Net Assets |268,224.49 |0.00 | |

Revenue in Advance now shows, and can be compared to the Accounts Receivable figure.

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Before journal entry

After Journal entry

Accumulated Funds | |Current |Last Year | | |Accumulated Funds |-281,144.49 |0.00 | | |Total Funds |-281,144.49 |0.00 | |Represented by:

Non Current Assets |

Computers/IT equipment >$5000 |

3,000.00 |

0.00 | | |Musical Equipment >$5000 |3,000.00 |0.00 | | |Other Assets >$5000 |7,506.36 |0.00 | | | |13,506.36 |0.00 | |

Current Assets |

High Yield Investment Account |

108,000.00 |

0.00 | | |Official Account |98,000.00 |0.00 | | |Accounts Receivable Control |20,000.00 |0.00 | | |Sundry Debtors |50,000.00 |0.00 | | |GST Purchases (Reclaimable) |1,243.10 |0.00 | | | |277,243.10 |0.00 | | |Total Assets |290,749.46 |0.00 | |

Current Liabilities |

Group Tax Clearing Acc |

-1,126.97 |

0.00 | | |Accounts Payable Control |-5,312.00 |0.00 | | |

GST on Sales |

-1,086.00 |

0.00 | | |Revenue in Advance |-2,080.00 |0.00 | | | |-9604.97 |0.00 | |

Non Current Liabilities | | | | | |Total Liabilities |-9604.97 |0.00 | | |Net Assets |281,144.49 |0.00 | |

Liability created by journal entry

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|Accumulated Funds |-221,786.36 |-218,147.49 | | |Total Funds |-221,786.36 |-218,147.49 | |Represented by:

Non Current Assets |

Computers/IT equipment >$5000 |

3,000.00 |

3,000.00 | | |Musical Equipment >$5000 |3,000.00 |3,000.00 | | |Other Assets >$5000 |7,506.36 |7,506.36 | | | |13,506.36 |13,506.36 | |

Current Assets |

High Yield Investment Account |

158,000.00 |

158,000.00 | | |Official Account |49,150.00 |48,000.00 | | |Accounts Receivable Control |350.00 |500.00 | | |Sundry Debtors |930.00 |1200.00 | | |GST Purchases (Reclaimable) |15.00 |1234.10 | | | |208,445.00 |208,934.10 | | |Total Assets |221,951.36 |222,440.46 | |

Current Liabilities |

Group Tax Clearing Acc Accounts Payable Control GST on Sales |

0.00

-165.00

0.00 |

-1,126.97

0.00

-1,086.00 | | |Revenue in Advance |0.00 |-2,080.00 | | | |-165.00 |-4292.97 | |

Non Current Liabilities | | | | | |Total Liabilities |-165.00 |-4292.97 | | |Net Assets |-221,786.36 |218,147.49 | |

Note new year date

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Miscellaneous

89302 Camps/Excursions/Activities – – –12,000 15,000 -3,000 18,000 16,500

After journal entry

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Reversing journal returns asset balance to zero

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Before journal entry

After journal entry

Provision can be offset against sundry debtors

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Before provision journal entry

After provision journal entry

Accumulated Funds | |Current |Last Year | | |Accumulated Funds |-282,545.49 |0.00 | | |Total Funds |-282,545.49 |0.00 | |Represented by:

Non Current Assets |

Computers/IT equipment >$5000 |

3,000.00 |

0.00 | | |Musical Equipment >$5000 |3,000.00 |0.00 | | |Other Assets >$5000 |7,506.36 |0.00 | | | |13,506.36 |0.00 | |

Current Assets |

High Yield Investment Account |

108,000.00 |

0.00 | | |Official Account |98,000.00 |0.00 | | |Accounts Receivable Control |20,000.00 |0.00 | | |Sundry Debtors |50,000.00 |0.00 | | |GST Purchases (Reclaimable) |1,243.10 |0.00 | | | |277,243.10 |0.00 | | |Total Assets |290,749.46 |0.00 | |

Current Liabilities |

Group Tax Clearing Acc |

-1,126.97 |

0.00 | | |Accounts Payable Control |-5,312.00 |0.00 | | |GST on Sales |1,086.00 |0.00 | | |

Leave Provision - LSL/Annual |

-679.00 |0.00 | | | |-8,203.97 |0.00 | |

Non Current Liabilities | | | | | |Total Liabilities |-8,203.97 |0.00 | | |Net Assets |282,545.49 |0.00 | |

Provision journal creates a liability

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