accounting 101

1. accounting101 What accounting do I need to know as a School Nutrition Supervisor?

2. housekeeping • The LG work environment is a very quiet work environment due to the needs of our programmers. Please be respectful of that. • 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. • Restrooms: There are restrooms in the front of the building as well as down the side hallway. • Attendance: How many non-School Nutrition attendees? Finance or other? How many School Nutrition Supervisors? Less than 3 years?

3. dO financial statements scare you???

4. Today’s Objective: Be able to recognize and correct problems based on the information in your Financial Statements.

5. PART ONE:UNDERSTANDING MY FINANCIAL STATEMENTS

6. Chart of accounts (Coa) 143-73100-429-ELEM-ABC Function Object Cost Center Sub Object Fund • TN State COA follows this format: • Fund - 3 digit • Function – 5 digit • Object Code – 3 digit • Cost Center – 5 digit • Sub Object – 3 digit • Object Codes are only used on Expenditures • Cost Centers and Sub Objects are: • Optional • Completely user defined

7. Accounting 101double entry accounting • Double entry accounting is a standard accounting method that requires each transaction to be recorded in at least two accounts. WHY DOES THAT MATTER ? ? ? • Every debit balance must have an equal and off-setting credit balance for each transaction. • It provides for quick accuracy. Every transaction must balance.

8. ACCOUNTING 101 What 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.

9. Accounting 101:the balance sheet All Asset Function Numbers begin with 1 (one) 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

10. ACCOUNTING 101 What 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. When should I record an Accounts Receivable? Generally, receivables are set up at the end of the year (June 30) in order to record revenues in the correct fiscal year.

11. Accounting 101:the balance sheet All Liability Function Numbers begin with 2 (two) 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

12. ACCOUNTING 101 What 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. When should I record Accounts Payable? Generally, payables are set up at the end of the year (June 30) in order to record expenditures in the correct fiscal year.

13. Accounting 101:the balance sheet All Equity Function Numbers begin with 3 (three) 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

14. Accounting 101basic accounting equation Liabilities + Equities/Fund Balance = Assets

15. Accounting 101GASB 63 accounting equation Liabilities + Deferred Inflows + Equities/Fund Balance Assets + Deferred Outflows = (Not included in the discussion today)

16. Accounting 101 Balance Sheet vs Trial Balance

17. Accounting 101:the balance sheet The Balance Sheet displays ending balances only

18. Accounting 101:the trial balance The Trial Balance shows Balance Sheet accounts with their beginning balances and activity.

19. 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.

20. Accounting 101:benefits of the trial balance The Trial Balance also shows accounts with a zero balance.

21. Accounting 101:system generated asset accounts Cumulative Budget entries for Revenue Controlling account for Outstanding Current Year PO’s Cumulative YTD Expenditures Cumulative Liquidated Prior Year PO’s

22. Accounting 101:system generated liability accounts Cumulative budget entries (BG) made to expenditure accounts Cumulative YTD revenues

23. Accounting 101:system generated equity accounts Current Year Encumbrances Prior Year Encumbrances (if any) Cumulative Budget entries (BG) made to Restricted for Operation of Non-Instructional Services

24. Equity or fund balanceRestricted for Operation of Non-Instructional Services HOW 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

25. Equity or fund balanceRestricted for Operation of Non-Instructional Services EXAMPLE: Prior Year’s Balance Sheet $(74,404.44) Restricted (572,239.49) Revenues 521,128.81 Expenses $(125,515,12) After YE Closing (see previous slide)

26. Accounting 101expenditures • Salaries and Wages • Payroll Taxes (Employer’s portion of Social Security and Medicare) • Insurance (Employer’s portion of health and dental) • Purchases (Food, Supplies, Contracted Services) • Equipment Normally carry a positive (debit) balance Therefore, a debit will increase expenses and a credit will decrease expenses.

27. 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

28. Statement of expenditures and encumbrances Budget Amounts The Original Budget shows on the top line of the first column Budget Amendments show on the bottom line of that column The Total Budget (Original +/- Amendments) is in the next column

29. Statement of expenditures and encumbrances Actual Amounts 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 final column show the current month’s actual expenses and PO’s The Percent Used is listed below: Total expended (including PO’s) divided by the total budgeted

30. Accounting 101revenues • Lunch, Breakfast, Ala Carte • Interest income • Grants • USDA Payments • Transfers in from other funds Normally carry a negative (credit) balance Therefore, a debit will decrease a revenue but a credit will increase a revenue.

31. 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 collected The last column is the Current month’s revenue

32. Accounting 101review ASSETS • Bank Accounts • Investment Accounts • Receivables • Inventory/Supplies • Due From Other Funds • Prepaid Expenses Debit Credit Normally carry a positive (debit) balance

33. Accounting 101review • Payables • Due To Other Funds • Payroll deductions • Short Term Debt LIABILITIES Debit Credit Normally carry a negative (credit) balance

34. Accounting 101review EQUITIES • Inventory • Long-Term Notes Receivable • Prepaid Items • Restricted, Committed, Assigned, and Unassigned Equity Debit Credit Normally carry a negative (credit) balance

35. Accounting 101review REVENUES • Lunch, Breakfast, Ala Carte • Interest income • Grants • USDA Payments • Transfers in from other funds Normally carry a negative (credit) balance A debit will decrease a revenue but a credit will increase a revenue.

36. Accounting 101REVIEW EXPENDITURES • Salaries and Wages • Payroll Taxes (Employer’s portion of Social Security and Medicare) • Insurance (Employer’s portion of health and dental) • Purchases (Food, Supplies, Contracted Services) • Equipment Normally carry a positive (debit) balance A debit will increase expenses and a credit will decrease expenses.

37. PART two:understanding how transactions affect my financial statements

38. Accounting 101transactions THAT INCREASE ASSETS Setting up Accounts Receivable DR Due from Other Governments CR Revenue (This also increases your Revenues)

39. 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)

40. 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)

41. 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)

42. 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.)

43. PART three:recognizing and correcting problems

44. Accounting 101 Assets normally have a debit balance Asset accounts with negative balances warrant investigation Our software indicates a debit balance as a positive number

45. Accounting 101 Liabilities normally have a credit balance Liability accounts with positive balances warrant investigation Our software indicates a credit balance as a negative number

46. Accounting 101 Expenditures on lines where there is no Budget need reclassification or a Budget Amendment

47. Accounting 101 Expenditures on lines where the Unencumbered Balance is positive (the Percent Used is >100%) may require reclassification or a Budget Amendment.

48. 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%)

49. Other forms & rEPORTS

50. Accounting 101bank reconciliation