Using Multiple Bases of Accounting
Purpose
You are required to account for some funds on a different basis of accounting than others. In addition, full accrual accounting must be performed for all funds to meet the requirements of
GASB Statements 34 and 35. Certain types of postings are different under modified accrual accounting than are made for full accrual accounting. These postings can be captured against separate GL accounts, included or excluded in reporting as required, and carried forward to future fiscal years for reconciliation and reporting purposes.Transactions can be posted and isolated in Financial Accounting (FI) through separate GL accounts, fund balance (retained earnings) accounts, and contra accounts to facilitate reporting and reconciliation of different accounting bases (full accrual compared to modified accrual) in FI.
Prerequisites
You must create GL accounts in FI specifically for full accrual use. You decide whether these accounts are reflected in Controlling (CO), Project System (PS), and Funds Management (FM), depending on your cost accounting and budgetary accounting needs. If you do not want to record them in CO / PS, do not create cost elements for these accounts. If you do not want to record them in FM, link the GL accounts to commitment items with a financial transaction 50.
You should create separate P&L statement account types in FI and link the related GL accounts to the separate fund balance (retained earnings) accounts for carryforward from year to year. The separate fund balance accounts should reflect those categories of timing or permanent differences that you are required to report.
To reconcile full accrual accounting to budgetary accounting, you can also create separate carryforward item categories in FM, linking the accrual-related GL accounts to statistical commitment items, and linking the statistical commitment item(s) to separate fund balance commitment items for carryforward from year to year.
For more information on the configuration and processing of GL accounts, commitment items, and balance carryforwards, see the Financial Accounting and Funds Management documentation.
Process Flow
You must comply with GASB Statement Number 34, requiring you to report on a modified accrual basis for your governmental funds and on a full accrual basis for your general governmental activities. This requires bond principal payments to be recorded as expenditure (under modified accrual accounting) and as a reduction of a liability (under full accrual accounting).
Modified Accrual:
483100 Debt Principal Expense $1,000,000 DR
110000 Cash $1,000,000 CR
Adjustment to Full Accrual:
483199 Debt Principal Expense-Contra $1,000,000 CR
179000 Bonds Payable $1,000,000 DR
You can map the debt principal expense and contra accounts to individual fund balance (retained earnings) accounts to segregate them as balance carryforwards from year to year.
GL Account P&L Statement Account Type & Related Fund Balance Account
483100 ED >> Fund Balance-Modified Accrual-Expend-Debt Principal
483199 PC >> Net Assets-Full Accrual-GAAP-Debt Principal Contra
You can post both entries in FI and track this as a permanent difference from year to year. You can report on the different bases of accounting by including or excluding the related GL accounts, as necessary.
Initial Year Results:
Fiscal Year Fund GL Account Amount
XXXX DEBT 483100 $1,000,000DR
XXXX DEBT 483199 $1,000,000CR
Fiscal Year XXXX Fund Balance: DEBT Component: FI (Modified Accrual)
GL Account 483100 $1,000,000DR
Total Ending Fund Balance $1,000,000DR
Fiscal Year XXXX Fund Balance: DEBT Component: FI (Full Accrual)
GL Account 483100 $1,000,000DR
GL Account 483199 $1,000,000CR
Total Ending Fund Balance $ -
Subsequent Year Results:
Fiscal Year Fund GL Account Amount
XXXX+1 DEBT 483100 $ 500,000DR
XXXX+1 DEBT 483199 $ 500,000CR
Fiscal Year XXXX+1 Fund Balance: DEBT Component: FI (Modified Accrual)
Beginning Fund Balance:
Fund Balance-Modified Accrual-Expend-Debt Principal $1,000,000DR
GL Account 483100 500,000DR
Total Ending Fund Balance $1,500,000DR
Fiscal Year XXXX+1 Fund Balance: DEBT Component: FI (Full Accrual)
Beginning Fund Balance:
Fund Balance-Modified Accrual-Expend-Debt Principal $1,000,000DR
Net Assets-Full Accrual-GAAP-Debt Principal Contra $1,000,000CR
Total Beginning Fund Balance -
GL Account 483100 500,000DR
GL Account 483199 500,000CR
Total Ending Fund Balance $ -