Reference no: EM132766901

ACC 305 Governmental Accounting - Emirates College of Technology

LO 1: Describe governmental entities and chart of account used in UAE.

LO 2: Identify types of budgets used by governmental units anddiscuss the steps involved in preparing a budget.

LO 3: Discuss accounting standards applied in UAE for governmental entities

Question 1:

A. Using the following information, prepare the statement of revenues, expenditures, and changes in fund balance for the General Fund of the Abu Dhabi City for the fiscal year ended December 31, 2020.

1. Unreserved Fund Balance at January 1, 2020, $2,000,000.

2. Estimated revenues for the year were $10 million, appropriations were $11 million.

3. Fund balance reserves, January 1
A. For encumbrances $125,000
B. For inventory $100,000

4. Revenues recorded by the bookkeeper for 2020 included:
Property taxes, $6 million
License and permits, $550,000
Intergovernmental grant revenues, $1,300,000
Proceeds from sale of capital asset, $222,000
Transfer from enterprise fund, $600,000

Expenditures recorded by the bookkeeper for 2020 included:
General government expenditures, $2,300,000
Public safety expenditures, $3,000,000
Highways and streets expenditures, $2,500,000
Health and sanitation expenditures, $700,000
Short-term note principal retirement, $200,000
Short-term note interest, $15,000
Payment to provide initial financing for Landfill Enterprise Fund, $640,000
Lease payments on a capital lease (2ndyear of lease term), $92,000

Encumbrances outstanding at year end included:
Public safety, $30,000
Highways and streets, $276,000

A long-term note to be repaid from General Fund resources is scheduled to mature on January 31, 2021. The amount due will include the principal ($80,000) and one year's interest, $12,000.

B. The Government of Abu Dhabi's Chart of Accountsconsists of Entity Code, Cost Centre Code, Budget Group Code, Natural Account Code and Activity output/function Code.Explain the Natural Account Code.

Question 2:

(a) Describe the cost principle to purchase inventory asset by UAE federal government.

(b) Abu Dhabi Municipality purchased inventory of finished goods from UAE at a cash price of $1,500,000. Related expenditure consists sales tax $45,000, import duties $150,000 and, Cost Insurance and freight (CIF) $75,000 with trade discounts $30,000. The purchase was financed by borrowing $1,500,000 from ADIB bank at 6% for 3 years.

Required:
1. Compute the purchase cost of the inventory.
2. Prepare journal entry to record the purchase price.

(c) Explain the disclosure principle as applied by UAE federal government.

(d) Suppose Dubai federal entity has decided to change it's accounting policy for inventory from Weighted Average Cost method to First in-First out (FIFO) method. Explain to the accountant what to do after the change has taken place in relation to the application of the accounting disclosure principle.

Question 3:

Use the information presented below to answer the questions:
A. Record the following transactions in the Enterprise Fund of the country:

1. Services of $5,000,000 were provided and billed to outside customers.
2. Services of $750,000 were provided and billed to other funds.
3. $750,000 was collected from other funds, and $4,000,000 was collected on account.
4. $20,000 of accounts receivable were written off as uncollectible.
5. Estimated bad debts for the year were $100,000.

B. Compute the amount of sales revenues that should be reported for the Enterprise Fund.
C. Prepare entries to record the following selected transactions. If a transaction affects more than one fund, prepare entries for all affected funds:

1) The city's utility fund sends an invoice for $10,000 to the General Fund for electricity provided to the city's agencies, and the General Fund receives the invoice.
2) The General Fund sends its annual $150,000 cash subsidy to the water enterprise fund.
3) To undertake a major capital project, the city issues $950,000 of 10-year serial bonds. The bonds are sold at a discount, so the city realizes bond proceeds of $935,000.
4) A wealthy citizen donates $500,000 to the city. In a formal trust agreement, the citizen requires that the funds be held intact in perpetuity, but that any income from the funds must be used to buy books for the city library. The fund earns revenue of $23,000 from investing the donation and sends the cash to the Library Special Revenue Fund.

Question 4:

A. Discuss 3 key differences between accounting standards applied in UAE for governmental entities and IFRS.

B. Given the following information for the month of August from UAE Government entity accounts, prepare adjusting journal entries for accruals at 31st August:
1) At August 31st, the public company owed employees $80,000 in salaries that will be paid on September 1st.
2) On August 1st, the public entity borrowed $30 million from the central bank on a 15-year note; the annual interest is 10%.
3) Services revenue unrecorded in August total $11 million.
4) Monthly depreciation of government office equipment $40,000.

Required:
Prepare the adjusting entry needed at August 31.

Attachment:- Governmental Accounting.rar