Capital Region ESD113, School Fiscal Service
Updated Aug 2015
Tips on Accrual Basis of Accounting
Districts with under 1,000 student FTE for the preceding year may report on a cash basis, but are encouraged to use
accrual accounting. Districts that elect accrual basis and those with greater than 1,000 student FTE must use the accrual
basis of accounting to prepare their F-196 Annual Financial Statements. Once the method of accounting is file and
approved by OSPI, it cannot be changed.
Does your district use the accrual basis?
If you are unsure whether your district has elected to use the accrual basis, refer to the current F-195 Budget
certification page, item C “ the Debt Service Fund budget is prepared on the modified accrual basis of accounting and all
other funds are prepared on the (cash or modified accrual) basis of accounting pursuant to RCW 28A.505”
Examples of accrual entries:
Revenues
Revenues earned in the current year (August) for which payment will not be received until the following year
(September) should be accrued, to the year in which they were earned.
Step 1: Accrue Revenue – Input journal entry to recognize revenue in the current year (August) and a receivable
account, such as Due from Other Governmental Units or Accounts Receivable. Accounting: DR 330/340, CR 960
Step 2: Reverse Accrual – Reverse the journal entry as accrued revenues are received. Post the reversing entry
in the new year.
After accruals are reversed, review your receivable GL accounts. If you have any remaining balances, you should review
to understand what those balances represent. Are these viable revenues?
TIP: Be very careful to reverse the accrued revenues as received. Once the accrued revenues are reversed, you may post
revenues in the current year as usual. If these accruals are not reversed in the new year the receivable accounts (Asset)
are overstated which also results in an overstated Fund Balance.
Expenditures
Example A – Utility payments
Invoices need to be entered to recognize the expenditure in the current year (August), but will not be paid until the
following year (September). In this scenario GL 601 Accounts Payable is utilized, as is done for normal invoice
processing.
Step 1: Invoice Entry – Invoices are entered with the default Accrual Code of 601, and posted to the current year
(August). Accounting: DR 530, CR 601
Step 2: Check Register – The check register process is run as usual in the month the warrants are issued
(September). Accounting: DR 601, CR 241
Example B – Goods or services purchased that will not be consumed in the current year Invoices need to be entered to
recognize the expenditure in the following year (September), but will be paid in the current year (August). In this
scenario GL 430 Prepaid Items is utilized. (Screen shot below.)
Step 1: Invoice Entry – Invoices are entered selecting the Accrual Code of 430 (Prepaid Items), and are posted to
the following year (September). Accounting: DR 530, CR 430
Step 2: Check Register – The check register process is run as usual in the month the warrants are issued
(August). Accounting: DR 430, CR 241
Check registers should always be posted to the month in which the warrants are issued.
In Summary
1. I want to post ahead to the following year (it’s August and booking it for next year)
a. Post the invoices to September.
b. If it’s a prepaid item, select the Accrual Summary Account 430.
c. Checks are always posted in the same month they are issued.
2. I want to post back to the preceding year (it’s September and booking it for the previous year)
a. Post the invoices to August.
b. Checks are always posted in the same month they are issued.
Prepaid Items
Generally, prepaid items refer to services to be provided (consumed) in a future fiscal period but
for which payment has been made in a prior fiscal period. Expenditures of these items are
prorated to the period during which the services were provided. The value of tangible materials acquired for
future fiscal period consumption may be debited to prepaid items when timing of the expenditure is relevant
to the proper recognition of expenditures. This situation arises primarily at the end of one fiscal period and
the beginning of another and generally involves districts using the periodic method of inventory.
2015-16 Accounting Manual, Chapter 3- Accounting Guidelines 3-17
Modified Accrual Basis. The accrual basis of accounting adapted to the governmental fund-type measurement focus.
Under it, revenues and other financial resource increments (e.g., bond issue proceeds) are recognized when they
become susceptible to accrual, which is when they become both “measurable” and “available to finance expenditures of
the current period.” “Available” means collectable in the current period or soon enough thereafter to be used to pay
liabilities of the current period. Expenditures are recognized when the fund liability is incurred except for (1)
inventories of materials and supplies that may be considered expenditures either when purchased or when used and
(2) prepaid insurance and similar items that may be considered expenditures either when paid or when consumed. All
governmental type funds are accounted for using the modified accrual basis of accounting. An exception to this method
is when a school district with 1,000 or less full-time equivalent students makes an election to use the cash basis of
accounting: 2015-16 Accounting Manual, Appendix A-Glossary of Terms A-37
Examples of Accrual Entries
Revenues:
TAXES RECEIVABLERecognize outstanding property tax as of August 31
POST TO AUGUST
REVERSE IN SEPTEMBER
GENERAL
LEDGER
310
760
SUBSIDIARY
ACCOUNTS
GENERAL
LEDGER
760
310
SUBSIDIARY
ACCOUNTS
DESCRIPTION
Taxes Receivable
Unavailable Revenue TR
DEBIT
$ 1,000.00
DESCRIPTION
Unavailable Revenue TR
Taxes Receivable
DEBIT
$ 1,000.00
CREDIT
$ 1,000.00
CREDIT
$ 1,000.00
DUE FROM OTHER GOVT UNTS (GL 330)/ACCOUNTS RECEIVABLE (GL 340)
Revenues earned in August, but not received until September; i.e. late grant claims (330)
POST TO AUGUST
POST TO SEPTEMBER
GENERAL
LEDGER
330
960
SUBSIDIARY
ACCOUNTS
GENERAL
LEDGER
230
330
SUBSIDIARY
ACCOUNTS
Yes
DESCRIPTION
Due from Other Govt
Revenue
DESCRIPTION
Cash on Hand
Due from Other Govt
$
DEBIT
500.00
CREDIT
$
DEBIT
$ 500.00
500.00
CREDIT
$
500.00
UNAVAILABLE INFLOWS OF REVENUE (GL 750)
Revenues received in August, but not available to use until September; i.e.: tuition, lunch money
POST TO AUGUST
POST TO SEPTEMBER
GENERAL
LEDGER
230
750
SUBSIDIARY
ACCOUNTS
GENERAL
LEDGER
750
960
SUBSIDIARY
ACCOUNTS
Yes
DESCRIPTION
Cash on Hand
Unavailable Revenue
DEBIT
$ 500.00
DESCRIPTION
Unavailable Revenue
Revenue
DEBIT
$ 500.00
CREDIT
$
500.00
CREDIT
$
500.00
Expenditures:
PREPAID ITEMS
Items paid for in August, but recognized in September. This can be processed through the AP system.
POST TO AUGUST
Checks issued this month
POST TO SEPTEMBER
Invoices recognized
GENERAL
LEDGER
430
241
SUBSIDIARY
ACCOUNTS
GENERAL
LEDGER
530
430
SUBSIDIARY
ACCOUNTS
Yes
DESCRIPTION
Prepaid Items
Warrants Outstanding
DEBIT
$ 1,000.00
DESCRIPTION
Expenditures
Prepaid Items
DEBIT
$ 1,000.00
CREDIT
$ 1,000.00
CREDIT
$ 1,000.00
INVOICES RECOGNIZED IN AUGUST, BUT NOT PAID UNTIL SEPTEMBER
Utility payments and other services, supplies and materials. This can be processed through the AP system.
POST TO AUGUST
Invoice is posted to August
POST TO SEPTEMBER
Check Register processed in
September
GENERAL
LEDGER
530
601
SUBSIDIARY
ACCOUNTS
Yes
GENERAL
LEDGER
601
241
SUBSIDIARY
ACCOUNTS
DESCRIPTION
Expenditures
Accounts Payable
DESCRIPTION
Accounts Payable
Warrants Outstanding
DEBIT
$ 500.00
CREDIT
$
$
DEBIT
500.00
500.00
CREDIT
$
500.00