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in sub-category 11 should be used. Department has purchased goods from a U.S firm for $50,000 USD. Authority Coding Rationale: See Section on Tangible Capital Assets for coding rationale. the individual is in school, the amount can be estimated and the transfer is authorized. Entries is used. circumstances. are impacted in the previous transaction. Object Rationale: Funds used to satisfy the requirements of restoration should be charged to "8225-Payments/ FRA Coding rationale: At this point the Department should recognize the revenue since the amount is Object coding rationale: As these are non-cash (non-expenditure) items, they have no effect on economic B11A - Program Vote, B12A Operating Vote, or A131 Spending of amounts equivalent to proceeds from disposal of surplus Crown The accrued interest charges are reversed and recorded Authority Coding Rationale: The expense is charged to the authority code that was used to record the for the research project. Authority coding rationale: Since the fair value of the transaction is greater than $100,000 the equipment The executory costs are coded to operating expenses. Such disbursements may be in the form of cheques, warrants or through All RG interface Control Revision - Unconditional Repayable Contributions - details of the example provided have changed. Contingent recoveries The expenditures are classified according to the type of resources (goods and services) acquired or the . liabilities are disclosure of contingent liabilities in the notes to the financial statements and recognition of liabilities Examples Since the payment is being requisitioned, the payable is reversed and instruments, may take a variety of forms and need not be in writing. Rationale: The FRAs used are the same with the exception of the addition of a suspense account (FRA 21627). The net result is that the appropriation is only charged for The same department also sold goods to a U.S firm for $100,000 USD. The debit of accounts payable. reported under the heading Liabilities in the Department's Statement of Financial Position. "6299 - Net For example, if a department used. Authority coding rationale: These expenses have already been charged against an authority hence there charged to an accountable advance account (an asset account). to affect accounts receivable with the new FIS Interdepartmental Settlement (IS) process, and to separate the billing process Alternatively, "F119-Expenditures previously a third party could donate a parcel of land, conditional that a building or other structure be built on it. whereas E captures those which are non-statutory. of many government programs. Liability accounts" is used to establish the amount owing. The cost of goods sold is reduced to reflect inventory items They shall be recognized that the amount must be reported as part of the Debt Service Reduction Account in the Public Account. The goods are counted, weighed or measured, then extended at unit costs to derive the inventory valuation. Authority coding rationale: (***) In this example, it is assumed the lease payment and operating expense Scenario B, entry 7, the object for or whether the invoice has been received), the Department would charge an appropriation (either the Program vote - B11A The difference results in a loss of $1,000 ($73,500-$72,500). the monthly charge to amortization expense and accumulated amortization would be $833 ($20,000/2yrs = $10,000/year; $10,000/12mths Authority coding rationale: (*) In this example it is assumed this purchase (equipment (new)) would or object "6099-Net Increases or Decreases in Other SPAs" depending on whether detailed object information is desired. FRA rationale: This transaction is strictly recorded for authority purposes only. expense and the amount is paid through the Payroll Control Account. D/E(**) as on rent (excludes rent paid to PWGSC) or is included as part of rent charges and hence should be recorded to the GST refundable inventory had been held for resale, the debit entry would be to FRA "15210 - inventories held for resale" with the credit amount. The Department has determined that the "F152 - Reallocation of capital asset expenditures" is used. On April 1, the Department makes an advance payment to an individual for research and development in the amount of $50,000. DR Amortization Expense - Infor Equip (leased), CR Accumulated Amortization - Infor Equip (leased), FRA coding rationale: The Department should record amortization expense and accumulated amortization Payable does not affect appropriations, R300 is used. "6299 - Net increase or decrease to other liability accounts" is used These SPAs include: Please see 3) Record periodic repayments of the loan, DR Cash in Hands of Depts awaiting deposits to RG. To indicate Control accounts are zero filled for authority purposes. crediting this amount. schedule. Object coding rationale: This is strictly and accrual accounting entry, there is no impact on objects, opening balance was $2,000). As a result, no journal entry is statements. would be used if the debt was forgiven. The amortization We and our partners use data for Personalised ads and content, ad and content measurement, audience insights and product development. Crediting the repayment back to the original loan appropriations does not give departments the for setting up an allowance for those loans they deem to be uncollectible. a settlement of accounts payable. What Is the Government Accounting Standards Board (GASB)? - Investopedia the notes to the financial statements as an indication of their existence. vote (B12A). entry can be performed. funded from departmental appropriations is charged to the SPA. To indicate the nil effect on the remainder of the transaction The fair (i.e., delivered goods or services of a specified nature and/or quality, etc). (*) In this example it is assumed this maintenance of the service potential of a capital asset is a repair, not a betterment. write-off, forgiveness, etc. Since the amount is yet to Deletion - Grants and Contributions - Section on contingent recoveries and Scenario B has been deleted. for government-wide statistical purposes. in revenues (FRA 426XX) and expenses (FRA 516XX) as applicable, in order to provide a more comprehensive reporting of the Department's behalf, either B11A or B12A could be used depending on the Department's vote structure. since the authority was charged when the operating expenses were recorded. 2) As part of the cost-sharing agreement, the Department shares 60/40 with the outside party in all expenses incurred by the department and others are recorded centrally by Treasury Board Secretariat. from 13219. (XYZ). For governmental entities to ensure the proper segregation of resources and to maintain proper accountability, the accounting system should be organized and operated on a fund basis. the research equipment is $49,000. the disbursement of the transfer payment. earmarked for a special purpose, and court awards that have been specifically earmarked by the court. the transactions and events occur, regardless of whether there has been a receipt or payment of cash or its equivalent. in cost of goods sold (for inventories held for resale) or operating expenses (for consumable inventories). awaiting deposit to RG". time as the related goods or services are recorded to the departmental accounting system. the amendment record sheet. At this point the Department is being charged GST on the vehicle, and in this particular Scenario. by using, "8171-Payment of GST on purchases". accounts receivable OGD. To achieve this effect on authorities both the debit to provide an advance to an employee - an outside party). The 2) $50,000 in expenses are incurred for the fish habitat. "0472 - Information Technology consultants" 62DDD Cash Deposit Control Accounts As the liability is for future time-off and not a future payment, the credit is to an allowance Accrued interest payable on capital leases does not affect the appropriations, Standard 3.1.1 on Software and not as a component of research and development costs. This Manual will be useful to all government departments as defined in Section 2 of the Financial Administration Act Other revenue not being credited to appropriations or other authorities at the same time" should be used for the revenue or service acquired the appropriate economic object in sub-categories 11 to 13 would be used. (PS 3310.01). provinces. related to the leased property from the lessor to the lessee. Materiality is a term used to describe the significance of financial statement information to users. 2) Departmental salaries are paid and a portion is allocated to the WIP account, 2a) Departmental Salaries and wages are paid. The payable was recorded at $72,500($50,000 x 1.45). treatment could result in the recognition of revenue which might never be realized. from disposal of surplus Crown assets. that do. Expenditures vote depending if a department has a separate vote or not. objects. point equipment has been donated, therefore 1243 would be used. Object coding rationale: To record the net impact on the SPA "6099-Net Increases or Decreases in Other aggregate present value of: Internally restricted entities: Internally restricted entities are separate legal entities, within the been paid when a transaction is processed by the Interdepartmental Settlement functionality of the Standard Payment System Object coding rationale: This is strictly an accrual accounting transaction with no impact on the economic and set up an accrual for a corresponding amount. The contribution who leaves the Government. FRA Coding Rationale: Since the asset is now ready for use, it also now must start being amortized. The receivable was recorded at $148,000 ($100,000 x 1.48). The amount owed of certain accounts where enabling legislation requires that revenues be earmarked, and that related payments and expenses It is one which collects, classify, record, summarize, and interpret all financial transactions comprising of revenues and expenditures of public offices. on authorities, the same authority code is used for the debit and credit. To ensure there is no effect on objects, Since the individual spent less than the $1,000 (accountable advance), an amount of $62.11 is collected from the employee. by debiting "Cash in Hands of Depts. Financial Assets and Non-Financial Assets. Since the applicable appropriation by reference to attributes such as physical output capacity, quality of output, associated operating costs, and useful life. For consumable inventories, acquisitions of inventory throughout the year may be charged to an expense account. 1) Consulting for the feasibility study has been completed. any departmental corporation (Schedule II), certain goods received or services rendered prior to or on, charges made by one government department on another; and. loan. west of Quebec (except Alberta where there is no PST), the PST payable is calculated as a percentage of the sales price it is set up as an advance under a special authority, G111. 2) Goods/ services worth $5,000 are provided by the department and recognized as revenue, (Assumption: Sale takes place in Ontario. Accountability - Canada.ca The major difference is that, for sales of goods and services, the billing department of foreign currency assets and liabilities" would be the object used to reflect gains related to foreign exchange transactions. contracts, agreements or legislation. which is not necessarily the amount legally receivable. The economic object has captured the revenue in the previous journal entry. As the expenses are incurred, revenue would be recorded and the deferred revenue account reduced. It should only reflect the advances paid out in the old year for travel to be completed in the New Year. In other words, Revision - Foreign Currency Transactions - Scenario C. Entry 1, authority code for loss on foreign exchange has changed to A-126. Note: At the end of the project, the department is allowed to keep the asset under the terms of the See Accounts Payable section for related entries regarding settlement of payable. the book value of the asset given up. infrastructure assets, purchased computer software, in-house developed software, computer hardware, assets acquired by capital Object coding rationale: Object information was recorded at the time the expenses were incurred, hence Since the funds are to be used for goods and services on the Funding is no effect on appropriations. Please see section on Accounts Payable to see entries required for the settlement of the accounts payable. it will have a nil effect on objects. a general description of the nature and source of any external restrictions; the amounts of externally restricted inflows by major source; and. Currently acquisition of operating supplies etc. FRA coding rationale: Since the purchase of equipment is less than the $10,000 threshold the $4,000 As items of inventory are issued, the transaction is recorded in the accounts so that it carries a perpetual or The earnings of the trust will be credited to the same authority as when However, as the Department will eventually recover this amount from Canada Customs and Revenue FRA coding rationale: See journal entry Scenario A 1), Authority coding rationale: See journal entry Scenario A 1). Accrued receivables should be set up for estimated amounts for goods or services rendered but not recorded at the end Loan Vote, L15b, this account must be credited. Note: if the authority code used is D311 and your system As there in no impact on authorities for accounts payable and accrued interest payable The last three digits of the control account will A payable is set up for the amount owing. agreement contains specific repayment terms that set out the time and amount of payment(s) due. To record the net impact on Cash Accounts, 5299 would be used. The net result is that appropriation will only charged for $50,000, which consulting" would be used. For example, repayment may be Since GST is not to be charged to a departmental appropriation, authority G111 is used. Otherwise, information on the revenue charging authorities would be lost. sales and excise taxes should be recorded in the period when the sales are made, and transfer payments for shared cost agreements There is no impact on the authority side for the accounts payable but Assets under construction also include those assets that have been acquired but require additional work to get them ready restoration costs liability hence R300 - All other assets and liabilities" is used. therefore an I is used. (statutory) or P5xx - Other trusts and endowments for trusts that are established by a trust agreement (non-statutory). All GST and HST revenues are to be recorded in the Accounts of Canada on an accrual basis. is recorded at this point. must therefore be coded to R300-Total amounts of all other assets and liabilities. "5032 - Acquisition and Either N5xx - Other trust funds set up under various acts" for trusts that are established by legislation In this case either "5049- Other adjustments to advances" or "5032 - Acquisition and settlement of travel 4) To record payment of vehicle on April 15, 2000. Note: The amount to be reflected in this entry should only be for the advances whereby the travel is to occur in the administrative fees can be also charged to the account. The latter arises from a variety of transactions Object coding rationale: Economic object 1261 is used in this example since the purchase was a motor Object Rationale: There is no impact on economic objects. for financial statements. credit side. The Cash in Hands of Depts awaiting 5b) To charge the interest expense to the appropriation on January 1, 2006, CR Interest Component on capital lease pymt. the establishment of the accounts payable. as a restricted asset. 2b) Salaries related to the computer equipment ($20,000) are charged to the WIP account. it was originally charged in order for departments to complete the Source and Disposition of Authorities in Volume II Part is not over-charged when the payment of salaries is made in the new year. As at March 31, the exchange rate in place is $1.50. Addition - Capital Assets - Scenario E provides an example of an optional entry for trade-ins to adjust the authority The following is a partial listing of accounts that will be used to highlight the closing of items to Restricted and the SPA. FRA coding rationale: Once the land is used for the purpose specified, there is no longer a restriction prospect of recovery, the loan receivable should be reduced by the amount of that loss. It should be noted that Financial Reporting Accounts (FRAs) were developed as separate accounts in the Chart of Accounts The $10,000 credit is to a liability account that will remain until the restoration work is performed in ten years Although "H182" was used to record the advance in received for the asset. For FRA Coding Rationale: The unspent balance in the OGD Suspense Advance account is recorded as an earned on endowment funds were accounted for as consolidated SPAs. objects." This year the fund earned 5%. could be used: B11A - Program Vote or B12A Operating Vote. activities of the government entity, normally from the sale of goods, the rendering of services, and the earning of interest, Management has only decided they need the vehicles but have not entered into an For example, amortization policies are only justifiable The net revenue/deficit balance of these SPAs are reported separately as part of the accumulated However, the transactions covered together with the explanations should provide departmental personnel with the necessary on FRAs. For the time being there are no accounting entries required for employees transferred from department to department. Object coding rationale: This is strictly and accrual accounting entry, there is no impact on objects, Standing Advances are recorded directly against PWGSC Loan Vote L15b Appropriation Act No. There is no impact on authorities/appropriations other penalty charges" would be used to record the interest expense. section of the manual for examples of how these revenues and expenses are closed into restricted net assets/liabilities). DR Loss on Foreign exchange re-valuations at y/e, FRA Coding Rationale: The payable was originally recorded on the books at $72,500. Authority coding rationale: (*) In this example it is assumed this purchase would be charged to the as unrestricted assets and liabilities. Grants and contributions will be recorded as expenses in the Department's Statement of Operations. added to Scenario B, Journal Entry 1 and the FRA Coding Rationale was modified. (Tax revenues are not addressed in this manual, as they one option would be to debit and credit the same authority for the same amount. It is basically a type of receivable, which is included under Loans, Investments of the future event(s) is likely and the amount of settlement can be reasonably estimated. Purchases are debited directly to the inventory control account and concurrently entered into the detailed inventory As the loan is repaid "5015 - Settlement of loans with the revenue is actually received (i.e. FY 2001-02 FIS Transition Period -Transition Protocol and Accounting Financial statements should disclose in the notes or schedules: Cost-sharing agreements are arrangements whereby the parties involved agree to share specified costs but not to participate of public money to the credit of the Receiver General for Canada. and bequest accounts" and 51624 will now be Payments from endowment accounts" (note that 51624 code is not used in the All RG interface Control Accounts are zero filled (0000), with the exception related to this area. of existing commitments would be accompanied by the estimated total cost of the project. 1b) Assuming the circumstance is the same as above except the Department decides to sell the asset for $3,000, on November modifications. is used. If there is no impact on "6299-Net Increase or Decrease to Other Liability Accounts" is used to establish while others will result in non-budgetary payments. $100,000/5years= $20,000/yr $20,000/12mths=$1,666.67/mth. economic object in sub-categories 01 to 13 would be used. 7021 is used for Allowance have little, if any, discretion to avoid, usually because the agreement is enforceable at law. Note: Entries required when the accounts receivable is paid are covered in the Accounts Receivable section of this manual. A disbursement is an outlay of cash. Extraordinary item: items which result from transactions or events that have all of the following characteristics: Fair value: the amount of the consideration that would be agreed upon in an arm's length transaction amortization, bad debts and provision Authorities are not affected here at all. This money is deposited in a SPA. These accounts are used to record the deposit of money belonging to third parties or the receipt of securities when guarantees a contribution agreement that is subject to being accounted for and audited (Transfer Payment Policy). This can be accomplished through setting up an accrued or accounts receivable. payment to the lender and an expense is incurred. Same as a write-off for an Account Receivable. Once goods or services are received, a commitment Please note: if material, the interest expense would recorded on a monthly basis. Accounts Payable does not affect appropriations, R300 is used. FRA Coding Rationale: Interest earned of $25,000 (5% x $500,000) on the endowment is a public debt charge with a suspense account in the middle, CR Suspense acct: Proceeds from Asset Sale. This section sets out the objectives of financial management within a framework of relevant functions. FY 2001-02 FIS Transition Period -Transition Protocol and Accounting Requirements The Department must set up a payable for the amount owing. economic object for an asset, the cost of freight may be coded to the same object code as the asset. Addition - Funds Administered by Departments on Behalf of OGD's has been added as section 9.9. The entries related to the settlement of PST payable (which is treated like any trade payable) can be found in the Accounts authority code specific to the endowment, either an "L" code for statutory accounts or an "M" code for non-statutory accounts. 1) A trust account is established to hold $100,000 for J. Doe. Statement of Financial Position. the old year, it should not be used in the new year entry. They have not paid for the goods at this point. account, since it is above the $10,000 threshold. To avoid the excess expenditures beyond the limit of the budget approved by the government. PS 3150.12, Capitalization of costs ceases, however, when a tangible capital asset is ready for use. Authority Coding Rationale: In this example the grant is charged to the B15A(*) - Grant and Contribution amount owing. Since GST is not to be charged to a departmental appropriation, equipment has a net book value of $42,000 (cost $64,000 less $22,000 accumulated depreciation). (PS 1800.40), Designated assets: assets that have been formally designated by the government to indicate the government's must be used in the same amount for both the debit and credit sides of the entry. Requirements party which calls for the latter to perform the equivalent of $50,000 of research at its own facilities and expense and transaction. Note: other reasons supporting the need for the write-down of an asset can be found in PS 3150.36. The minimum lease payments are $119,908.10 ($23,981.62 x 5) and the amount capitalized as leased assets is $100,000, either D218 and E218 be used in this transaction and that the authority code used to set up the revenue transaction not At the object level, all RG interface control accounts are zero filled (0000), with the exception of I/S Control Accounts. loan receivables. Authority code rationale: Since there are no impacts on the authorities for payables and receivables The balance Budgetary Votes are those for expenditures which are charged to either a program vote, operating vote, to Bad Debt Expense since the department does not set up an allowance for doubtful loans with respect to those loans. charge the cost of the expenses to either the Program vote - B11A or the Operating Vote- B12A. continuing balance of the goods that should be on hand at each date. with the unamortized discount. (See TBAS 3.6 Contingencies), 2a) Year 2 - Borrower defaults and Department pays out loan guarantee to lender, (See section on Accounts Payable for the entries required for settlement of accounts payable). those funds can the transactions be recognized as actual revenue. It should be noted that Departments will not set-up an allowance for uncollectible loans receivables Asset: An economic resource controlled by a government as a result of past transactions or events and on the nature of the item. At this The authority code rationale in Journal Entry 1 in Scenario B1 applies to the entry to recognize revenue used in the Details of these SPAs are presented in section 6 - Interest- Bearing In this particular instance the expenses relate to the repairs of an office building, therefore, "0630 - Transitional Protocol and Accounting Requirements, Policy On Accounting For Costs And Liabilities Related To Contaminated Sites. Purpose Accounts". be of limited usefulness if it were not for the going concern principle. result in fairer presentations of financial results. The research to transfer these amounts to CCRA on the last working day of March so that CCRA can prepare the Tax Remission Order to authorize They may be used by departments as departmental line objects, but departments advances still outstanding at year-end are credited back against the operating or program appropriation and are charged Authority code rationale: D/E(*) See Scenario A1, Journal Entry 1, Authority Code Rationale. DR Interest Component on capital lease pymt, CR Accrued Interest Payable on Capital Leases. Accountable advances are broken into two categories, each of which is accounted for differently. account (Unamortized Discount on RC) is reallocated to the "Amortization of Discounts on Repayable Contributions" account, FRA coding rationale: The department must capitalize these assets as a debit to the capital asset (vehicle), 2b) Pay new year overtime ($50,000) and old year overtime ($100,000). Accounts receivable has no impact on appropriations; therefore R300 is used. Basics Objectives of Governmental Accounting All the responsibilities of a government accountant are streamlined for these purposes, which include: Prepare comprehensive budgets considering the public policy priorities. is removed from the books by debiting Allowance for Doubtful Loans, crediting Loans Receivable - URC and debiting any remaining the Transfer Payment Expense and Unamortized Discount on Transfers. For example, user fees are recorded in the period when the goods or services are provided, sales when the sales are made appropriation for this purpose, it may use this appropriation (i.e. Note that up until the 2000-2001 year-end, bequests, donations, gifts, and the interest Since the requirement to buy a truck has not been met, the cash received must be recorded A third party donates $15,000. require the individual to be in school only the first instalment can be recognized. The outside party requests a refund prior to the Department performing the required service or providing the required must be recorded for the amount owing. June 01, 2001. Accounts payable does not impact appropriations, therefore, R300 is used. In this case the department must write and amount. So in this As per the Canadian Institute of Chartered Accountants Public Sector Accounting Handbook (PS) 1500.88, expenditures Rationale: The FRAs used are the same with the exception of the addition of a suspense account (FRA 21627). These do not affect appropriations, and no further entries for authorities or misstatement would influence or change a decision. Any interest earned is accumulated in the trust account. write this amount off, the approval of TBS would be required as well as a charge to an appropriation. Capital Asset: comprising property, plant and equipment and intangible properties, are identifiable Transactions recorded in a trust account are limited as follows: Notwithstanding PSAB 1300.33, Departments will record trusts as a liability. Furthermore, the PS and CICA Handbooks in each department. the establishment of the accrued payable. of each month, for any material amounts. is recorded to reverse the appropriation for the unused portion of the money for reporting and remitting provincial sales taxes. FRA Coding Rationale: In the new year, $25,000 of vacation pay is cashed out to an employee. Authority coding rationale: (*) In this example it is assumed this purchase would be charged to the "F111 - Expenditures previously charged to appropriations/Amortization The generally accepted accounting principles for contingent as an authority under "Other Specified Purpose Accounts". Expenses include the costs associated with: To further clarify the difference, an expenditure refers to the acquisition of a good or service whereas (CICA 3065.03), Expenditure: Expenditures are the cost of goods and services acquired in the period whether or not payment value of $135,000 (cost $150,000 less accumulated depreciation $15,000) for the XYZ model - research equipment with a fair

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