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Accounting I: Introduction to University Accounting

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  1. Accounting I: Introduction to University Accounting Susan Moore Accounting & Financial Services General Accounting

  2. Agenda • Introductions • Course objectives • Topics • Accounting Concepts • Fund Accounting Overview • The Chart of Accounts • Financial Reporting • Questions and Answers General Accounting Division, Accounting & Financial Services

  3. Introductions General Accounting Division, Accounting & Financial Services

  4. CourseObjectives • By the end of class, you will be able to… • Talk like an accountant • Identify and classify university revenues • Identify and classify university expenses • Set up an account in DaFIS and find it in the Annual Schedules General Accounting Division, Accounting & Financial Services

  5. Accounting Concepts • Accounting Standards • Balance Sheet: Statement of Net Assets • Income Statement: Statement of Revenues, Expenses and Changes in Net Assets • Double Entry Accounting System • Restricted vs. Unrestricted Funds General Accounting Division, Accounting & Financial Services

  6. Accounting Standards • Why have them? • Reliability • Comparability • What are they? • GAAP – generally accepted accounting principals • GASB – Governmental Accounting Standards Board • FASB – Financial Accounting Standards Board • NACUBO – National Association of Colleges & University Business Officers General Accounting Division, Accounting & Financial Services

  7. Balance Sheet • Statement of Net Assets • Assets • Liabilities • Fund Balance • Permanent Accounts General Accounting Division, Accounting & Financial Services

  8. Assets • Probable future economic benefit • What you own • Normal balance = debit General Accounting Division, Accounting & Financial Services

  9. Assets • Examples: • Cash • Buildings & Capital Equipment • Prepaid Expense/Deferred Expense • Inventory • Accounts Receivable General Accounting Division, Accounting & Financial Services

  10. Liabilities • Probable future sacrifices of economic benefit arising from present obligations • What you owe • Normal balance = credit General Accounting Division, Accounting & Financial Services

  11. Liabilities • Examples: • Accounts Payable • Salaries • Deferred Income • Debt General Accounting Division, Accounting & Financial Services

  12. Exercise: Asset or Liability? • Bill for cellular phone service • Network server from Sun • Petty cash fund • Invoice to University of Nebraska for poultry diagnostic services • Purchase of textbooks for resale • Purchase of a copier on a lease-purchase agreement General Accounting Division, Accounting & Financial Services

  13. Fund Balance • Net Assets Beginning Balance + Income - Expense = Ending Balance • What you are worth • In private = retained earnings General Accounting Division, Accounting & Financial Services

  14. Income Statement • Statement of Revenues, Expenses and Changes in Net Assets • Statement of how you did each year • Income and expenses for the year • Closed at year end • Temporary Accounts General Accounting Division, Accounting & Financial Services

  15. Income Statement Revenues – Expenses = Net Income Net Income +/- Other Fund Balance Changes =Total Change in Net Assets General Accounting Division, Accounting & Financial Services

  16. Revenues • External income to the university • Examples: • State appropriations • Student fees • Contracts and grants • Patient fees • Sales and services to outside entities General Accounting Division, Accounting & Financial Services

  17. Expenses/Expenditures • Goods and services purchased to meet the mission of the university • Salaries and wages • Benefits • Goods and materials • Services General Accounting Division, Accounting & Financial Services

  18. Recharges • Charge to departments for goods and services provided internally • Like income to department providing the good/service • Internal rates = Recovery of costs incurred to provide goods/service (no profit) • When recharge and expense totaled across UC, net effect is original cost General Accounting Division, Accounting & Financial Services

  19. Expense Reimbursement • External payment for specific cost incurred by the university • Examples: • Reimbursement by employees for personal telephone calls • Not a revenue but a reduction of expense General Accounting Division, Accounting & Financial Services

  20. Liens and Encumbrances • Firm commitment or obligation placed against funds for goods or services not yet received • Reduces the balance in the fund • NOT in the Financial Statements General Accounting Division, Accounting & Financial Services

  21. Double Entry Accounting • Debits always equal credits • Every transaction has 2 entries: • Debit (+) • Credit (-) General Accounting Division, Accounting & Financial Services

  22. Debits • Generally shown as a positive (+) number • Assets • Expenses • Examples: • Cash • Equipment • Roads • Buildings • Books General Accounting Division, Accounting & Financial Services

  23. Credits • Generally shown as a negative (-) number • Liabilities • Revenues • Examples: • Student fees • Sale of genetically enhanced mice • Vacation time earned but not taken • Cash received before June 30th for July conference General Accounting Division, Accounting & Financial Services

  24. Exercise: DOUBLE ENTRY ACCOUNTING - Putting it all together General Accounting Division, Accounting & Financial Services

  25. For Profit vs. Not For Profit General Accounting Division, Accounting & Financial Services

  26. Restricted Resources • Generally unique to non-profit/public • Limitations on use • External conditions • Cannot restrict internally • Examples: • Donors • Contracts • Federal or other governmental entities General Accounting Division, Accounting & Financial Services

  27. Unrestricted Resources • No external conditions • Examples: • State Appropriations • Gifts without conditions General Accounting Division, Accounting & Financial Services

  28. Designated Resources • Not Restricted • Conditions placed by the University of California Regents, Office of the President or Chancellor • Examples: • Faculty Research Grants • Opportunity Funds General Accounting Division, Accounting & Financial Services

  29. Fund Accounting Overview • Tracks the receipt and use of resources by the source of the funds • Defines the “color” of the money • Used by all Higher Education institutions General Accounting Division, Accounting & Financial Services

  30. Fund Groups Summary • Current • Loan • Endowment • Annuity and Life Income • Plant • Agency General Accounting Division, Accounting & Financial Services

  31. Current Funds • Educational and general • Auxiliary enterprises • Hospital • Affiliated organizations General Accounting Division, Accounting & Financial Services

  32. Sources of Current Funds • State appropriations • Tuition and fees • Grants and contracts • Gifts • Endowment income • Overhead recovery funds • Sales and services General Accounting Division, Accounting & Financial Services

  33. State Appropriations • General Funds (19000-19XXX) • Appropriations from State General Fund as part of annual State budget process • UC General Funds General Accounting Division, Accounting & Financial Services

  34. Student Fees • Registration Fee (20000) • University Extension • Continuing Education General Accounting Division, Accounting & Financial Services

  35. Other Fees • Professional Degree Fees • Student Approved Mandatory Fees • Course Material Fees General Accounting Division, Accounting & Financial Services

  36. Extramural Funds • Contracts and Grants • Gifts • Endowment Income • Managed by Extramural General Accounting Division, Accounting & Financial Services

  37. Indirect Cost Recovery Funds • Educational Fund (05397) • Garamendi Funds – for research facilities • Off-the-Top Funds (69750) • Opportunity Funds (07427) General Accounting Division, Accounting & Financial Services

  38. Sales & Service: Educational Activities • Definition: • Revenue related only incidentally to the conduct of teaching, research and service • Funds (income) supports the activities General Accounting Division, Accounting & Financial Services

  39. Sales & Services: Auxiliary Enterprises • Residence halls • Student union • Parking and transportation • Bookstore • Athletics Revenues Must Cover Expenses General Accounting Division, Accounting & Financial Services

  40. Sale of genetically enhanced mouse “Autopsies of the Rich and Famous” continuing medical education Faculty research grant Sale of parking decal Grant from National Science Foundation Auxiliary General Funds Sales and Services- Educational Activites Contracts and Grants Student Fees Match Revenue to the Source Answers: 1-C, 2-E, 3-B, 4-A, 5-D General Accounting Division, Accounting & Financial Services

  41. Other Fund Groups • Loan • Endowment • Plant • Agency General Accounting Division, Accounting & Financial Services

  42. Loan Funds • Resources loaned to students, faculty or staff • Interest usually charged • Principal must be repaid General Accounting Division, Accounting & Financial Services

  43. Endowment and Similar Funds • Endowment funds • Term endowment funds • Quasi-endowment • Earnings (interest) moved to current funds to spend General Accounting Division, Accounting & Financial Services

  44. Plant Funds Subgroups • Unexpended • Renewals and replacements • Retirement of indebtedness • Investment in plant General Accounting Division, Accounting & Financial Services

  45. Agency Funds • Funds held for others • Student organizations • Other third-party • At year-end • Income less expenses = Cash (Asset) • Cash held for others = Liability The money does not belong to UC General Accounting Division, Accounting & Financial Services

  46. Identify the fund source … …by the OP Fund Number! General Accounting Division, Accounting & Financial Services

  47. OP Fund Numbers • 5 digits • Identifies the source of the revenue • Restricted vs. non restricted General Accounting Division, Accounting & Financial Services

  48. Use of Funds • Instruction • Research • Community Service General Accounting Division, Accounting & Financial Services

  49. Current Funds Expenditures • Expenditures defined by: • Higher Education Function Code (HEFC) and • Uniform Accounting Structure (UAS) • Applied to all Higher Education institutions General Accounting Division, Accounting & Financial Services

  50. Current Funds Expenditures • Expenditure Categories • Education and General • Auxiliary (Self Supporting) • Hospital General Accounting Division, Accounting & Financial Services