accounting 101

ACCOUNTING101

What accounting do I need to know

as a School Nutrition

Supervisor?

HOUSEKEEPING

Restrooms: There are restrooms in the front of the building as well as down the side hallway.

Please put all cell phones on silent. Due to the metal building, cell phone reception can be very poor. Feel free to take calls just outside the conference room under the cover.

Attendance:How many non-School Nutrition attendees? Finance or other?How many School Nutrition Supervisors? Less than 3 years?

The LG work environment is a very quiet work environment due to the needs of our programmers. Please be respectful of that.

DO FINANCIAL STATEMENTS SCARE YOU???

Today’s Objective:

Be able to recognize and correct problems based

on the information in your Financial Statements.

PART ONE:

UNDERSTANDING MY

FINANCIAL STATEMENTS

CHART OF ACCOUNTS (COA)

143-73100-429-ELEM-ABC

TN State COA follows this format:Function

Function – 5 digit

Fund

Fund - 3 digit

Object

Object Code – 3 digit

Object Codes are only used on Expenditures

Cost Center

Sub Object

Cost Center – 5 digitSub Object – 3 digit

Cost Centers and Sub Objects are:OptionalCompletely user defined

ACCOUNTING 101DOUBLE ENTRY ACCOUNTING Double entry accounting is a

standard accounting method that requires each transaction to be recorded in at least two accounts.

Every debit balance must have an equal and off-setting credit balance for each transaction.

WHY DOES THAT MATTER ? ? ?

It provides for quick accuracy. Every transaction must balance.

ACCOUNTING 101What is the difference between a Calendar

year and a Fiscal Year?

The Calendar year is January 1 through December 31.

The Fiscal year is a period used for calculating annual (yearly) financial statements for businesses and other organizations. For Tennessee school systems, the Fiscal year is July 1 through June 30.

ACCOUNTING 101:THE BALANCE SHEET

ASSETS Bank Accounts Investment Accounts Receivables Inventory/Supplies Due From Other Funds Prepaid Expenses

ASSET ACCOUNTS Normally carry a

positive (debit) balance Debits increase the

ending balance Credits decrease the

ending balance

All Asset Function Numbers

begin with 1 (one)

ACCOUNTING 101What is an Accounts Receivable?

Accounts Receivable is revenue that has been earned for goods or services that you have provided for which you have not received payment. Accounts Receivable is an Asset on your Balance Sheet or Trial Balance. Example: USDA reimbursement requested for meals that have been provided but for which you have not received payment.

Generally, receivables are set up at the end of the year (June 30) in order to record revenues in the correct fiscal year.

When should I record an Accounts Receivable?


LIABILITIES Payables Due To Other Funds Payroll deductions Short Term Debt

LIABILITY ACCOUNTS Normally carry a

negative (credit) balance

Credits increase the ending balance

Debits decrease the ending balance

All Liability Function Numbers

begin with 2 (two)

ACCOUNTING 101What is an Accounts Payable?

Accounts Payable is an expense that has been incurred for which payment has not been made. Accounts Payable is a Liability on your Balance Sheet or Trial Balance.

Example: Supplies ordered and received in June that have not been paid for by June 30.

Generally, payables are set up at the end of the year (June 30) in order to record expenditures in the correct fiscal year.

When should I record Accounts Payable?


EQUITIES Inventory Long-Term Notes

Receivable Prepaid Items Restricted, Committed,

Assigned, and Unassigned Equity

EQUITY ACCOUNTS Normally carry a

negative (credit) balance

Credits increase the ending balance

Debits decrease the ending balance

All Equity Function Numbers

begin with 3 (three)

ACCOUNTING 101BASIC ACCOUNTING EQUATION

=AssetsLiabilities

+Equities/Fund

Balance

ACCOUNTING 101GASB 63 ACCOUNTING EQUATION

=Assets+

Deferred Outflows

Liabilities+

Deferred Inflows+

Equities/Fund Balance

(Not included in the discussion today)

ACCOUNTING 101

vs

Balance Sheet

Trial Balance


The Balance Sheet displays ending balances only

ACCOUNTING 101:THE TRIAL BALANCE

The Trial Balance shows Balance Sheet accounts with theirbeginning balances and activity.

ACCOUNTING 101:BENEFITS OF THE TRIAL BALANCE

Seeing the beginning balance is often helpful.

In this particular case, it tells us that the Due from Other Governments (receivable) has not been collected <OR> when

the amount was received, it was recorded incorrectly.

ACCOUNTING 101:BENEFITS OF THE TRIAL BALANCE

The Trial Balance also shows accounts with a zero balance.

ACCOUNTING 101:SYSTEM GENERATED ASSET ACCOUNTS

Cumulative Budget entries for RevenueControlling account for Outstanding Current Year PO’s

Cumulative YTD ExpendituresCumulative Liquidated Prior Year PO’s

ACCOUNTING 101:SYSTEM GENERATED LIABILITY ACCOUNTS

Cumulative budget entries (BG) made to expenditure accounts

Cumulative YTD revenues

ACCOUNTING 101:SYSTEM GENERATED EQUITY ACCOUNTS

Prior Year Encumbrances (if any)Current Year Encumbrances

Cumulative Budget entries (BG) made to Restricted for Operation of Non-Instructional Services

EQUITY OR FUND BALANCERESTRICTED FOR OPERATION OF NON-INSTRUCTIONAL SERVICESHOW DOES CLOSING THE YEAR END AFFECT THE EQUITY?

Total Revenues are reversed through Restricted for Operation of Non-Instructional Services which increases Equity

Total Expenditures are reversed through Restricted for Operation of Non-Instructional Services which decreases Equity

The difference (net gain or net loss) remains in Restricted for Operation of Non-Instructional Services

EQUITY OR FUND BALANCERESTRICTED FOR OPERATION OF NON-INSTRUCTIONAL SERVICES

EXAMPLE: Prior Year’s Balance Sheet

(572,239.49) Revenues 521,128.81 Expenses

$(125,515,12) After YE

Closing (see previous slide)

$(74,404.44) Restricted

ACCOUNTING 101EXPENDITURES

Purchases (Food, Supplies, Contracted Services)

Salaries and Wages Payroll Taxes (Employer’s portion of Social Security and Medicare) Insurance (Employer’s portion of health and dental)

Normally carry a positive (debit) balance

Equipment

Therefore, a debit will increase expenses and a credit will decrease expenses.

ACCOUNTING 101EXPENDITURES

Why are Expenditures the only account type that uses object codes? For example, 143-73100-499

Expenditures are the only account type segregated by department

The Function defines the department

The Object Code defines the type of expenditure within the department

STATEMENT OF EXPENDITURES AND ENCUMBRANCES

The Original Budget shows on the top line of the first columnBudget Amendments show on the bottom line of that column

The Total Budget (Original +/- Amendments) is in the next column

Budget Amounts

STATEMENT OF EXPENDITURES AND ENCUMBRANCES

YTD Expenditures are on the top of each expenditure line

YTD Encumbrances (PO’s) are below the expenditure

The available amount (total budget less YTD expenses and PO’s) is listed as the Unencumbered Balance

The Percent Used is listed below: Total expended (including PO’s) divided by the total budgeted

The final column show the current month’s actual expenses and PO’s

Actual Amounts

ACCOUNTING 101REVENUES

Lunch, Breakfast, Ala Carte

Normally carry a negative (credit) balance

Interest income Grants

Transfers in from other funds USDA Payments

Therefore, a debit will decrease a revenue but a credit will increase a

revenue.

ACCOUNTING 101:STATEMENT OF ESTIMATED,

REALIZED, AND UNREALIZED REVENUE

Similar to the Statement of Expenditures, the first columns are the budgeted amounts for Revenues

The next columns are the actual revenues received and the percentage that represents of the total budgeted

The Unrealized column is revenue budgeted but not collectedThe last column is the Current month’s revenue

ACCOUNTING 101REVIEW

Bank Accounts Investment Accounts Receivables Inventory/Supplies Due From Other Funds Prepaid Expenses


ASSETS

Debit

Credit


Payables Due To Other Funds Payroll deductions Short Term Debt


LIABILITIES

DebitCredit


InventoryLong-Term Notes ReceivablePrepaid ItemsRestricted, Committed, Assigned, and Unassigned Equity


EQUITIES

DebitCredit



Lunch, Breakfast, Ala Carte Interest incomeGrants

Transfers in from other fundsUSDA Payments

A debit will decrease a revenue but a credit will increase a revenue.

REVENUES



Purchases (Food, Supplies, Contracted Services)

Salaries and WagesPayroll Taxes (Employer’s portion of Social Security and Medicare)Insurance (Employer’s portion of health and dental)

Equipment

A debit will increase expenses and a credit will decrease expenses.

EXPENDITURES

PART TWO:

UNDERSTANDING HOW

TRANSACTIONS AFFECT MY FINANCIAL

STATEMENTS

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ACCOUNTING 101TRANSACTIONS THAT INCREASE ASSETS

Setting up Accounts Receivable

DR Due from Other Governments

CR Revenue (This also increases your Revenues)

ACCOUNTING 101TRANSACTIONS THAT INCREASE ASSETS

Receipting of Revenue Sources

DR Cash on Hand

CR Lunch Revenue

Record Bank Deposit

DR Cash in Bank

CR Cash on Hand

(This also increases your Revenues)

ACCOUNTING 101TRANSACTIONS THAT DECREASE ASSETS

Payroll

DR Gross salary expense

CR Payroll Liabilities

CR Cash in Bank

Writing Checks

DR Expenditure or Liability Accounts

CR Cash in Bank (These transactions also increase your

Expenditures)

ACCOUNTING 101TRANSACTIONS THAT INCREASE

LIABILITIES

Payroll

DR Gross salary expense

CR Payroll Liabilities

CR Cash

Setting Up EOY Payables

DR Expenditure Accounts

CR Accounts Payable

(These transactions also increase your Expenditures)

ACCOUNTING 101TRANSACTIONS THAT DECREASE

LIABILITIES

Paying Vendors for Vol. Ded. withheld & other Payables DR Employee Deduction or Payable Accounts

CR Cash in Bank(This also decreases your

Assets.)

PART THREE:

RECOGNIZING AND

CORRECTING PROBLEMS


ACCOUNTING 101

Asset accounts with negative balances warrant investigation

Our software indicates a debit balance as a positive number

Assets normally have a debit balance

ACCOUNTING 101Liabilities normally have a credit balance

Our software indicates a credit balance as a negative number

Liability accounts with positive balances warrant investigation

ACCOUNTING 101

Expenditures on lines where there is no Budget need reclassification or a Budget Amendment

ACCOUNTING 101

Expenditures on lines where the Unencumbered Balance is positive (the Percent Used is >100%) may require

reclassification or a Budget Amendment.

ACCOUNTING 101:STATEMENT OF EXPENDITURES AND

ENCUMBRANCES

When the Unencumbered Balance is negative, there are still funds available (Percent Used < 100%)

When the Unencumbered Balance is positive, more has been spent than was budgeted (Percent Used > 100%)

OTHER FORMS & REPORTS


ACCOUNTING 101BANK RECONCILIATION

ACCOUNTING 101RECONCILED AND UNRECONCILED CHECKS

REPORT

ACCOUNTING 101RECONCILED AND UNRECONCILED CHECKS REPORT

ACCOUNTING 101PAYROLL DEDUCTIONS

How do I reconcile my payroll deductions?

ACCOUNTING 101PAYROLL DEDUCTIONS

TOTALS ON THIS REPORT SHOULD MATCH AMOUNT BILLED BY

INSURANCE COMPANY

ACCOUNTING 101COST CENTERS

What are Cost Centers?Cost Centers are User-defined codes in the Chart of Accounts

Why do I need to use Cost Centers?

Cost centers allow you to track Revenues and Expenditures by school

For example: 143-73100-422-ELEM


Cost Centers allow you to track revenues and expenses by school

NOTE: If a summary line has actual expenditures or revenues recorded, the Cost Center has not been properly keyed.


Reports can be run with Summarized information


Reports can be run with Cost Center detail


And reports can be run by individual Cost Centers


When the Total Ending Balance is a negative, the Equity and Revenues exceed the Expenditures.

Negative is Good

ACCOUNTING 101BUDGETING

Things I need to know about Budgets


Things I need to know about BudgetsBudgets are entered in reverse from a regular transaction

o Budgeted Revenues are entered as a

Debit

o Budgeted Expenditures are entered as a

Credit

Budgeted expenditure is negative-- a CreditActual expenditure is positive

-- a Debit


Things I need to know about BudgetsBudgets are entered by summarized Revenue or Expenditure line item rather than by Cost Center

Budgeted amount

Actual amount


Things I need to know about BudgetsWhen do I need to do a Budget Amendment for Revenues?

Review your Summarized statementsGenerally, Revenues are only amended if they exceed the anticipated amount AND additional revenues are necessary to cover an increase in Expenditures.

Revenues may also require an amendment if anticipated amounts are significantly lower due to decreased meal counts.


Things I need to know about BudgetsWhen do I need to do a Budget Amendment for Expenditures?

Local policy dictates when amendments are requiredGenerally, actual expenditures should not exceed the budget in any Function (e.g., 73100) or any Fund (143).


Things I need to know about BudgetsWhen do I need to do a Budget Amendment for Expenditures?

Line item expenditures generally require amendment based on amount or percentage of overage—refer to local policy.

Line item not amended. Amount of overage is < $500.

Line item amended to prevent overage > 5% and $500.

ACCOUNTING 101

OTHER USEFUL TOOLS AND REPORTS

Vendor payment verification

The SEARCH function

The Account Analysis report

ACCOUNTING 101VENDOR PAYMENTS

Where can I look if a Vendor says he/she has not been paid?

ACCOUNTING 101VENDOR PAYMENTS

You can also look at your Reconciled/Unreconciled checks in your Bank Reconciliation

ACCOUNTING 101ACCOUNT ANALYSIS

What is wrong with this expenditure?

Note that the account in question is 143-73100-422- -ELEM


To see detail entries posted to an account,

you can run an Account Analysis

For the account in question, there has been a refund issued which explains the credit to an expense account.


An Account Analysis report can be run for a month, quarter or year.

While it may be a lengthy report, it can be a valuable tool for reviewing all transactions made to Fund 143.

ACCOUNTING 101SEARCH FUNCTION

How can I find a transaction if I know the

amount?

To search for other transactions in the same amount, hit F3

SCHOOL NUTRITIONANNUAL FINANCIAL REPORT

Finding the right numbers

What is the purpose of the Annual Financial Report?

Determination of Excess Balance



The Ending Balance from the prior year automatically rolls forward into the current year report as the Starting

Balance.



The Starting Balance is automatically rolled forward from the prior year report.

Any difference in Starting Balance will have to be run through Current Year income or expenses. In this case,

Expenses will be increased by $307.67


Finding the right numbersWhat would cause my starting balance to be

different?Audit adjustments made after the books were closed.

Voided check that was outstanding from the prior year.

Prior year purchase orders (entered in the system) voided or closed out for amounts different than original amount.



Total Income is your total current year revenues.



Trial Balance



Statement of Revenues



Total Expenses is your total current year expenditures.



Trial Balance

Remember, expenditures were increased by $307.67 on the annual report because of the Starting Balance difference.



Statement of Expenditures

$307.67



The Ending Balance should equal the Fund Balance amount after closing the books for year end.

ACCOUNTING 101IN CONCLUSION

Asset Accounts

- Debit balance- Debits to increase- Credits to decrease

Liability Accounts

- Credit balance- Credits to increase- Debits to decrease

Equity Accounts

- Credit balance- Credits to increase- Debits to decrease

Monthly Tasks (at minimum)

- Reconcile Bank Accounts- Reconcile Liability Accounts- Review Trial Balance, Statement of Expenditures and Encumbrances, and Statement of Revenues

Annual Financial Report

- Check the Starting Balance and make necessary adjustments- Verify the Ending Balance

TAKE CONTROL AND TAKE THE “SCARY” OUT OF YOUR FINANCIAL STATEMENTS

QUESTIONS & ANSWERS

QUESTIONS & ANSWERSBALANCE SHEETS AND TRIAL BALANCE

REPORTS

Why do those balances roll over when Revenue and Expenditures don’t?

Where does Fund Balance come from?

Why do YTD Debits and Credits only increase, never decrease?What are payables and do I have to journalize them if I do PO’s?Would Full Accrual accounting benefit me?

What are Control Accounts and where did they come from?Why do some accounts show up on a Trial Balance but not on the Balance Sheet?

QUESTIONS & ANSWERSEXPENDITURE AND REVENUE REPORTS

What is each column in the expenditure report telling me?

Why is there activity in an account but no amount budgeted?

Do I care if one account is over budget but the total by CC is not?Why are there two budget amounts showing up instead of one?Why are numbers stacked on top of each other?How do I know if I am over budget?Is there a more concise or one line report showing budget information?My Revenue/Expense Statement shows a negative ending balance. Is that good or bad?

QUESTIONS & ANSWERSMISCELLANEOUS TOPICS

How do most LEA’s track school revenues and expenditures?

How do I set up Cost Centers?

How do I reconcile my payroll liability accounts?

Are there payroll reports that show people paid out of the wrong program?

QUESTIONS & ANSWERS

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accounting 101