Budgetary Accounting

Concept

Legally Required Budgets

Governments must adopt a legal budget. Budgetary accounting records the budget in the general ledger. Estimated Revenues (debit), Appropriations (credit), and Budgetary Fund Balance (plug). Encumbrances record commitments to spend — goods ordered but not yet received.

Example

Recording a Budget

City adopts budget: Estimated Revenues $5M, Appropriations $4.8M Debit: Estimated Revenues $5,000,000 Credit: Appropriations $4,800,000 Credit: Budgetary Fund Balance $200,000 The surplus indicates a balanced budget with a planned increase in fund balance.

Key Point

Encumbrances

When a purchase order is issued: Debit Encumbrances, Credit Reserve for Encumbrances. When goods arrive: reverse the encumbrance and record the actual expenditure. This prevents overspending beyond appropriations.

Government Financial Statements

Nonprofit Accounting

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Practice Questions