tailieunhanh - Lecture note Government and not-for-profit accounting: Concepts and practices (7/e) – Chapter 6: Accounting for capital projects and debt service
Chapter 6 - Accounting for capital projects and debt service. In this chapter, the learning objectives are: Why and how governments use capital projects funds, why and how governments use debt service funds, how governments account for special assessments, what arbitrage is, the nature of debt refundings. | Chapter 6 Accounting for Capital Projects and Debt Service © 2016 John Wiley & Sons, Inc. All rights reserved. 1 Learning Objectives Why and how governments use capital projects funds Why and how governments use debt service funds How governments account for special assessments What arbitrage is The nature of debt refundings © 2016 John Wiley & Sons, Inc. All rights reserved. 2 Capital Projects Funds(CPF)- Definition A fund that accounts for and report financial resources that are legally restricted and contractually required for the acquisition of capital assets. The primary purpose is to ensure and demonstrate the expenditure of the dedicated financial resource is both legally and contractually compliant. The total cost of a capital project is accumulated in a single expenditures account, which accumulates until the project is completed, at which time the fund ceases to exist. . Fund has a “Project-life focus,” not year-to-year focus. © 2016 John Wiley & Sons, Inc. All rights . | Chapter 6 Accounting for Capital Projects and Debt Service © 2016 John Wiley & Sons, Inc. All rights reserved. 1 Learning Objectives Why and how governments use capital projects funds Why and how governments use debt service funds How governments account for special assessments What arbitrage is The nature of debt refundings © 2016 John Wiley & Sons, Inc. All rights reserved. 2 Capital Projects Funds(CPF)- Definition A fund that accounts for and report financial resources that are legally restricted and contractually required for the acquisition of capital assets. The primary purpose is to ensure and demonstrate the expenditure of the dedicated financial resource is both legally and contractually compliant. The total cost of a capital project is accumulated in a single expenditures account, which accumulates until the project is completed, at which time the fund ceases to exist. . Fund has a “Project-life focus,” not year-to-year focus. © 2016 John Wiley & Sons, Inc. All rights reserved. 3 Overview Governments must maintain capital projects funds for resources that are legally restricted, committed, or assigned to expenditure for capital outlays. Basis of Accounting Fund Statements -- Modified accrual basis Government-wide statements -- Full accrual basis. Two types of capital projects General (public benefit) Examples: public buildings, roads, highways and bridges, park improvements, sewer systems, plant and equipment; etc. Special assessment (private benefit) Benefits citizens in a specified benefit district. Examples: street improvements, curbs, sidewalks, street lighting, sewage, etc. © 2016 John Wiley & Sons, Inc. All rights reserved. 4 4 CPF: Capital Assets- Acquisition Assume that Simple City proceeds with the creation of a capital equipment replacement fund (which would be considered a capital projects fund). To create the fund, the general fund transfers (this means to give – without the expectation of repayment) $1,000,000 to the new capital equipment
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