Financial Services Division · 2013-09-28 · An effective accounting system provides the...

Accounting Conceptsfor CASES21 FinanceFinancial Services Division

Accounting Concepts for CASES21 Finance – Version 1.22

Published by the Financial Services Division, Department of Education and Early Childhood

GPO Box 4367, Melbourne, Vic. 3001, Australia.

ISBN 07594 0202 7.

© State of Victoria, September 2008

The Department of Education and Early Childhood Development welcomes any use of this

publication within the constraints of the Copyright Act 1968. Provided acknowledgment is

made to the source, Victorian government schools are permitted to copy material freely.

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Address inquiries to:

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Foreword 3

Introduction 3

Financial Reports 4

Performance Management 4

Cash/Accrual 6

CASES21 Finance 7

Accounting Principles 8

Chart of Accounts 9

Accounting Rules and Concepts 9

Understanding Debit and Credit 11

Financial Documents and Debit/Credit 14

Introduction to CASES21 Finance Reports 16

Matching Revenue and Expenditure 17

Journals in the Accounting Process 18

Glossary 59

Contents

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Accounting Concepts for CASES21 Finance – Version 1.2 3

ForewordThis publication is designed to assist

school principals and administrative staff

in reinforcing and understanding the

accounting concepts that form the basis

of the CASES21 Finance system.

Effective understanding and application

of these concepts will assist in the

development of appropriate financial

management practices in schools.

It should be noted that CASES21

Finance system provides the

functionality for recording the

vast majority of schools’ financial

transactions. However, an appreciation

of why and how these transactions are

processed by the system in terms of

accounting concepts, will help improve

confidence and competence of all

relevant school personnel.

Accurate and timely financial data entry

results in relevant and reliable financial

reports that allows for in depth

interpretation and analysis that is

required for effective decision making

and the optimum allocation of resources

to improve student outcomes.

Several useful finance resources can

be located on the School Financial

Management website at

http://www.education.vic.gov.au/

management/financial

The “CASES21 Finance Business Process

Guide” is available on EduLibrary.

IntroductionSchools constantly interact with

public and business undertakings,

and individuals, in purchasing and

providing goods and services that

result in claims that are settled by

the receipt or payment of cash. These

settlements represent accounting

transactions which are classified

into groups of related receipts and

expenses and recorded in school

financial statements.

The school accounting system

facilitates the conversion of accounting

transactions into accounting information

that can be used by school leaders and

administrators and other education

stakeholders. Essentially the accounting

system is an important reflection

of policy views on the methods and

processes to be employed to identify,

assemble, record and report on a

school’s financial activities. Financial

information is generated from the

system in the form of financial

statements to enable managers to

monitor financial performance and

to make decisions that will guide the

future resource allocation processes.

http://www.education.vic.gov.au/management/financial



Financial ReportingAmongst other reports, the end

products of the accounting system are

a schools’ key financial statements:

The Operating Statement and Balance

Sheet. These statements are a record

of stewardship for the resources

under the control of a school and also

an important source of information

for decision making. Legislative

requirements and accounting

standards play an important role

in shaping the form and content of

financial statements and external

auditors attest to the maintenance

of these standards through the school

audit process.

More information on these two

reports can be found in:

• “Operating Statement: A Practical

Example and Explanation” and

• “The Balance Sheet: A Practical

Example and Explanation”

These two publications are accessible

via the School Financial Management

website: http://www.education.vic.gov.

au/management/financial

Performance ManagementThis introduction would not be complete

without reference to the important role

of financial management in the overall

performance management cycle of

every school. Commencing with the

development of the school’s strategic

plan, the cycle establishes transparent

links with resource allocations reflected

in school budgets, the progressive

monitoring of outcomes against plans,

the reporting of actual results and the

evaluation of achievements.

An effective accounting system provides

the ingredients for good financial

management reporting. The relevance,

reliability and timing of financial

information depend on system design

and the dependable processing

of financial data.

The diagram that accompanies this

introduction portrays the various stages

in the performance cycle and the close

connections that are necessary to

identify the need for and nature of any

interventions.




Performance Management Cycle

Resources

• Management Reports • Financial Statements

School Programs

Performance Evaluation

EVALUATION

PLANNING

Charter Goals and Objectives

Program Priorities

Budget

Strategic Planning Decisions

Available Resources

ALLOCATION

MONITORING AND REPORTING

Continuous Review

Decision Information

Decision Information

• School council • Principal • Staff • Stakeholders


a benefit in 2008 i e payment in advance

to secure a school camp booking.

Journal entries separating these

expenses into the relevant years of

service result in a better match between

the education services provided and the

costs related to these services.

Benefits of Accrual AccountingQueensland, South Australia, West

Australia, Tasmania, Northern Territory

and the Australian Capital Territory

school systems have adopted accrual

accounting in one form or another.

The accruals approach to accounting

also carries the endorsement of the

Victorian Auditor General. The overall

benefits of accrual accounting may be

summarised as follows:

1. Accountability

The better match of revenues

and expenditures improves the

disclosure in financial statements.

2. Improved knowledge of financial

performance

School managers are provided

with more meaningful information

about revenues and costs, opening

up opportunities for improved

evaluation of financial performance.

3. A better picture of resource

allocation

A more comprehensive record of

revenues and expenditures resulting

from the inclusion of transactions

which have a future cash bearing

for a school.

Accrual AccountingThe key role of an accounting system is

to provide information that will assist

decision making. The information should

be relevant and reliable and produced

in a timeframe that will permit informed

choices amongst several possible

courses of action.

In addition to the receipts and payments

of cash, accrual accounting recognises

undertakings given, by a school to other

parties or by other parties to a school, to

pay or receive cash at some future date.

In an accrual accounting environment

these transactions are recorded

immediately, irrespective of the fact that

the obligations they represent are not

satisfied by cash receipts or payments

until some later date.

Most undertakings or promises to pay

cash involve legal obligations and enter

into a school’s accounting system via

families – accounts receivable (amounts

due to a school from families) or sundry

debtors (amounts due to a school from

non-family debtors). As cash is received

or paid out the balances in the two

accounts are reduced commensurately.

Invoicing families for levies/fees

impacts significantly in an accrual

accounting system. When the charges

are entered on CASES21Finance for all

families, this is recorded and reported

as 100% revenue earned immediately.

The subsequent receipts by families are

treated as reductions in amounts owed

(not the earning of revenue), and even

though the collection rate may be well

under 100%, only a journal to reduce

the amount will accurately reflect the

most realistic revenue.

Matching of Revenues and ExpendituresA feature of the accrual accounting

approach is that transactions are

brought to account in the period

in which they occur, rather (as in cash

accounting) in the period in which the

cash is received or paid. The accruals

approach, therefore, results in a better

match between the recorded revenues

and expenditures of a school during and

at the end of the accounting period.

End of Period Adjustments (Balance Day Adjustments) Consistent with achieving a better match

between revenues and expenditures the

accruals approach also requires some

adjustments at month/year end

(often referred to as balance day

adjustments). For example, voluntary

contributions invoiced in late 2007

for 2008 will have a direct benefit in

2008, when the services relating to the

voluntary contributions will be provided

by a school.

Under the accruals approach an

adjustment is made (journal entry) to

transfer the amount of the voluntary

contribution(s) into the relevant year.

Another example would be expenses

paid in one year, say 2007 that have


4. Better information for decision

making

Accounting systems are designed

to produce information that will

be useful for decision making.

The recognition of revenues and

costs at the time they occur rather

than when they are received or paid

in cash results in a better matching

of revenues and costs: hence, the

financial outcome at year-end should

constitute a more representative

result for decision making (compared

to a cash system).

5. Resource management

School managers have a

responsibility for the resources

under their control. Both cash and

accrual accounting systems can

satisfy stewardship requirements.

However, the increased disclosure

and the better opportunities made

available by the accruals approach in

relation to the overview of financial

performance could be expected to

elevate stewardship standards.

CASES21 FinanceThe CASES21 Finance system builds

on the approach of schools’ previous

financial systems by enhancing, in

particular, the important stewardship,

accountability and reporting

relationships that benefit school

management and other education

stakeholders.

The revenue and expenditure in the

accrual based outcome above include

the actual cash received and paid by the

school, together with amounts which

represent financial obligations arising

during the 3 months period, but not

received or paid at balance date.

The example reflects the benefits of a

modified accrual accounting approach:

• Improved matching of individual costs

and income in the period

• An operating result that reflects the

total financial performance of the

school in the period

• Better financial information for the

assessment of performance and for

future planning

CASES21 introduces a modified form

of accrual accounting which will have

a positive bearing on the relevance,

reliability and consistency of financial

information appearing in school

financial statements.

Under cash accounting the receipt or

payment of cash is the sole determinant

for a transaction to be recorded in a

school’s financial accounts. In other

words, cash has to be received or paid

out before a transaction appears in a

financial statement.

Under a modified accruals approach

transactions are recognised at the time

they occur, irrespective of when the

claims they represent are received or

paid. The following example reflects

the different outcomes of a strictly

cash based system and a system based

on accruals:

Example: In the 3 months period

ended September 30, 2007, a school

was due to receive grants and subject

contributions amounting to $100,000

and to pay invoices amounting to

$80,000. The school actually received

$80,000 of the $100,000 due from

grants and subject contributions and

paid invoices to the value of $40,000

as at September 30, 2007.

(Cash Outcome) $

Receipts 80,000

Payments 40,000

Net Surplus 40,000

(Accrual Outcome) $

Revenue 100,000

Expenditure 80,000

Net Surplus 20,000


Liabilities

Liabilities are also categorised as

either Current Liabilities or Non-Current

Liabilites

Current Liabilities are debts owed

by the school that are expected to be

repaid within six to twelve months.

Examples: Accounts Payable; Revenue

in Advance; Accrued Expenses.

Non-Current Liabilities are debts owed

by the school that are expected to be

repaid after twelve months. Example:

Cooperative Loan.

Accumulated Equity

Accumulated Equity represents opening

balance information and results of

operations (net surplus/deficit) to date.

Example: Results of trading (revenue

less expenses or net profit/loss).

Accounting PrinciplesThe fundamental principle of accrual

accounting is that it is a double entry

accounting system. Like standard

commercial finance software, CASES21

Finance is programmed to reflect double

entry accounting principles and comply

with accounting standards.

Double entry accounting takes its name

from the fact that equal debit (DR) and

credit (CR) entries are made for every

transaction. If only two accounts are to

be updated then one account is debited

and another is credited for the same

amount. If more than two accounts are

affected by a transaction, the sum of the

debit entries must equal the sum of the

credit entries.

Remember: For every DEBIT there must

be a corresponding CREDIT.

Explanation of the five major transactional categoriesRevenue

Revenue is received by schools from

a variety of sources. The revenue can

be in the form of cash eg State or

Commonwealth grants, or charges/

invoices eg Families, Sundry Debtors.

It is important to understand that

actual receipts from families and sundry

debtors for charges/invoices are NOT

recognised as earning revenue

(which occurred when the charge/

invoice was raised).

These instances are the repayment of

a debt only. Other forms of revenue

include bank interest received and

discount earned.

Expenditure

Expenditure can be regarded as items

purchased or incurred in order to earn

revenue. The nature of expenditure is

that it is absorbed within 12 months

(recurrent expenditure), otherwise it

is classified as an asset (refer below).

Categories of recurrent expenditure

include Salaries and Allowances,

School Requisites, Officer/Teacher

Requisites, Class Materials and

Communication Costs.

Assets

Assets are categorised as either Current

Assets or Non Current Assets.

Current Assets are items of value

retained in the school and are generally

in the form of cash or expected to be

converted to cash within 12 months.

These include: Cash at Bank; Accounts

Receivable; Stock (consumables

eg uniforms, canteen stock); Prepaid

Expenses and Accrued Revenue

(as a result of journals for “balance

day adjustments”), Petty Cash

Advance; Short term Investments

(up to 6–12 months).

Non Current Assets are items of value

retained by the school and expected

to remain for more than twelve months

(similar to capital acquisitions as per

ATO definition for BAS). These include

items of a capital nature such as

Furniture; Equipment; Library (books

etc); Motor Vehicles.


Chart of AccountsThe five transactional categories (left)

are reflected in the school “Chart of

Accounts” which is a numerical listing

of all account codes within these

categories. For example:

Revenue: 70001 Cash Grant, 70002

Education Maintenance Allowance.

Expenditure: 80050 Teaching Support

Staff, 80051 Teacher Aides.

Assets: 10001 High Yield Investment

Account, 10002 Official Account, 26212

Office Equipment > $1000.

Liabilities: 32000 Payroll Clearing

Account, 33000 Group Tax Clearing

Account, 40001 Cooperative Loan.

Assets – Liabilities = Accumulated Funds

Bank $39,000

Acc Receivable Cont $5,000

Stock $10,000

Accounts Payable Control $4,000

Cooperative Loan $29,000

$54,000 less $33,000 equals $21,000

The five chart of account categories are

fundamental in ensuring that the double

entry concept of accrual accounting is

correctly implemented and maintained.

The “Accounting Equation” assists users

and decision makers in determining

whether the double entry concept has

been maintained accurately.

The Accounting Equation is expressed

as follows:

Accumulated Equity = Assets – Liabilities

In a formal manner, this equation

is represented by a report called a

“Balance Sheet” which sets out the

school’s Assets, Liabilities and resulting

Accumulated Equity.

Accumulated Equity: 50001

Accumulated Funds

The first digit in the code indicates

the relevant category, for example, all

revenues commence with 7; all recurrent

expenditure commences with 8, all

current assets with 1, all non current

assets with 2, all current liabilities with

3, all non current liabilities with 4 and

all accumulated equity with 5.

Accounting Rules and ConceptsA practical example of the calculation

of the “Accounting Equation” is

demonstrated below (because we

know the assets and the liabilities

values, these are used to determine

accumulated funds).


An equivalent Balance Sheet to reflect the above equation would be as follows:

XYZ Primary School

Balance Sheet

As at dd/mm/yyyy

Accumulated Funds

Accumulated Funds 21,000

Total Funds 21,000

Represented by:

Non Current Assets

Equipment 10,000

Current Assets

Official Account 19,000

High Yield Investment Account 20,000

Accounts Receivable Control 5,000

Total Assets 54,000

Current Liabilities

Accounts Payable Control 4,000

Non Current Liabilities

Cooperative Loan 29,000

Total Liabilities 33,000

Net Assets 21,000

Exercise 1:What if:

A. What would be the effect on the accounting equation above if the Official Account decreased by $10,000

and Equipment increased by $10,000?

B. What would be the effect on the accounting equation above if Official Account decreased by $3,000

and Accounts Payable Control decreased by $3,000?

(Answers at back of module)


Classification of account Increase in value Decrease in value

Assets

ExpensesDebit Credit

Liabilities

Accumulated Equity Income/RevenueCredit Debit

* You will know from you personal dealings with banks that bank statements actually indicate that the opposite to these accounting rules is true ie a credit balance – not a debit balance – is favourable. This is because bank statements are generated by the bank, not by the school. Therefore, what is a credit to the bank is a debit to the school and vice versa (positive funds in a bank account makes the account owner a creditor to the bank, hence the credit balance).

Accrual based accounting software

packages are programmed to

allocate debit and credit as part

of the recording functionality.

However, an understanding of the

debit and credit rules as they apply

to accounting transactions not only

assists the operator to confirm the

accuracy and validity of data, but

when a journal entry is required e.g

correction to a coding error, a debit

and corresponding credit have to be

determined at the data entry level

by the operator. The key concept

that operators need to be aware of

is whether an amount within the

Understanding Debits and Creditsfive chart of account categories is to

be a debit or credit, or whether the

transaction will have a positive or a

negative effect on the balance of the

particular account.

The following accounting rules will

assist when deciding whether the

transaction should be a debit or a

credit:

• To increase the value (balance)

of any asset or expense account,

debit the account*

• To decrease the value (balance)

of any asset or expense account,

credit the account*

• To increase the value (balance) of

any liability, income or accumulated

equity account credit the account

• To decrease the value (balance) of

any liability, income or accumulated

equity account debit the account

The table below summarises

the above and will assist with

understanding the various rules:


Debit and Credit Rules Examples:Example 1: Accumulated Funds:

Opening balances in the following accounts identified: Bank $10,000, Accounts Receivable $8,000, Furniture $65,000,

Equipment $140,000, Accounts Payable $5,000.

Classification of account Increase in value Decrease in value

Assets Debit Official A/c

$10,000

Expenses A/c Rec Furniture Equipment

$8,000 $65,000 $140,000

Liabilities

Accumulated Equity Income/Revenue

Credit A/c Payable Acc Funds

$5,000$218,000*

* calculated by subtracting total liabilities from total assets or application of the accounting equation:

Accumulated Equity = Assets - Liabilities

Assets are debited because they are increasing in value by their entry into accounting software.

Liabilities and Accumulated Equity are credited because they are also increasing in value by their entry into

accounting software.

Example 2: Assets:

School purchases furniture for $1,000 by cheque.

DR Furniture (Asset) $1,000 because it is increasing in value.

CR Official A/c (Asset) $1,000 because it is decreasing in value.

Account Balance DR/CR Amount New Balance

Furniture (asset) 65,000 DR + 1,000 66,000

Official Account (asset) 10,000 CR – 1,000 9,000

Note: net effect of this transaction is that Accumulated Equity is still $218,000 (see Example 1) and total asset value is also unchanged because one asset (bank) has been

replaced by another asset (furniture).

Example 3: Liabilities:

School pays tax invoice from ACE Office Supplies $300 (assumes $300 invoice has already been entered on

accounting software therefore creating a $300 Accounts payable liability).

DR Accounts Payable (Liability) $300 because it is decreasing in value (i.e. the amount owing to ACE Office

Supplies is reduced).

CR Official A/c (Asset) $300 because it is decreasing in value.



Accounts Payable (liability) 5,000 DR – 300 4,700

Official Account (asset) 9,000 CR – 300 8,700

Example 4: Revenue:

Students pay cash for lunches at the Canteen Total of all receipts is $80.

DR Official A/c (Asset) $80 because bank is increasing in value.

CR Trading Operations (Revenue) $80 because revenue is increasing in value.


Trading Operations (revenue) 0 CR + 80 80

Official Account (asset) 8,700 DR + 80 8,780

Example 5: Expenses

School receives tax invoice for quarterly electricity account $600.

DR Electricity (Expense) $600 because the expense is increasing in value.

CR Accounts Payable (Liability) $600 because the liability is increasing in value (note, the account has not been paid,

but under accrual accounting, the expense is recognized for reporting purposes at the time the creditor invoice

is entered into the accounting software).


Accounts Payable (liability) 4,700 CR + 600 5,300

Electricity (expense) 0 DR + 600 600

Exercise 2:Ensure the debit and credit rules have been applied correctly and consistently, to the above examples by:

• reviewing the rules on the previous page and reconfirming each transaction

• perform a mathematical calculation by adding all the debit entries, then adding all the credit entries.


The CASES21 Finance software will automatically allocate the debit and corresponding credit to the majority

of transactions entered. This is why the actual recording of transactions will not entail significantly different data entry

requirements. However, Example 5 above does, highlight that the reporting aspect of transactions under CASES21

Finance will be different because of the accrual accounting treatment of invoices.


Financial Documents and Debits/CreditsTo further illustrate the concept of debits and credits in a practical manner, refer to the table below which identifies

key documents found in a school. Specific information on the document determines whether an accounting transaction

is ‘triggered’ in specific instances and if so, the corresponding debit and credit entries:

Document Accounting Transaction

DR/CR Reason

Invoice issued to parent for subject contributions

Yes DR: Accounts Receivable Control (Asset)

CR: Subject Contributions (Revenue)

Revenue is recognised as earned when invoice is processed

Receipt issued by school to parent for subject contributions paid

Yes DR: Official Account (Asset)

CR: Accounts Receivable Control (Assets)

Bank is increasing and family debt is decreasing

Creditor invoice received for gas account and entered into CASES21 Finance

Yes DR: Utilities (Expenditure)

CR: Accounts Payable Control (Liability)

Creditor balance is increasing as well as utilities

Cheque to creditor to pay gas account invoice

Yes DR: Accounts Payable Control (Liability)

CR: Official Account (Asset)

Bank is reduced as well as liability to creditor

Purchase Order for Class Requisites supplied by ABC Supplies

No N/A This document is generated by the school and not by a creditor. It is an official intent to purchase items.

Invoice for Class Requisites from ABC Supplies

Yes DR: Class Requisites

CR: Accounts Payable Control (Liability)

Creditor balance is increasing as well as class requisites

Invoice to YMCA for hire of school facilities

Yes DR: Sundry Debtors (Asset)

CR: Hire of Facilities (Revenue)

Revenue is recognised as earned when invoice is processed

Statement from Bank* Sometimes Statement is a summary of transactions but could include new revenue or expense items eg interest, bank charges etc for processing on CASES21 Finance

Credit Note from ABC Supplies received

Yes DR: Accounts Payable Control (ABC Supplies)

CR: Class Requisites

Correction to prior invoice that affects creditor balance and class requisites


Exercise 3:List some examples of assets, liabilities, revenue and expenses

in your school.

Exercise 4:Classify the following list as either an Asset (A), Liability (L),

Accumulated Equity (AE), Expense (E) or Revenue (R) and indicate

whether the USUAL balance is a debit (DR) or credit (CR)

Account Classification Debit (Dr) or

Credit (Cr)

Example Salaries E Dr

Grants

Bank

Advertising

Subject Contributions

Creditors

Debtors

Parent Refunds

Plant and Equipment

Motor Vehicle Leasing

Cooperative Loan

Purchases

Accumulated Funds



• Cash Flow Statement (GL21151)

The Cash Flow Statement comprises

an opening balance that has receipts

(monthly and YTD) added to it

and payments (monthly and YTD)

subtracted from it to determine a YTD

closing bank balance. This report can

be run by separate bank account or

for all bank accounts combined.

The Cash Flow Statement is an

indicator of ‘liquidity’ (ability of the

school to meet short term debts as

they become due). This statement

will assist schools in monitoring their

cash position, and to help determine

the cash component of the school’s

net surplus/deficit from the Operating

Statement described above.

For more information refer to the

publication “Financial Reporting for

Schools” on the School Financial

Management website:


management/financial/cases21.htm

• Bank Account Movements

(GL21152/S) This report lists the opening balance and cash movements activity (receipts and payments) by date and document number for a specified bank account or for all bank accounts. A running balance is calculated per line and the final line totals all receipts and payments for the date range selected. A closing balance is also determined.

For more information refer to the publication “Financial Reporting for Schools” on the School Financial Management website: http://www.education.vic.gov.au/management/financial/cases21.htm

Introduction to CASES21 Finance Reports

Financial StatementsAs emphasised throughout this

publication, the major difference

between cash and accrual accounting

is evident in the reporting aspect

of financial data. Reports comprise

a varied collection of transaction,

budget, YTD expenditure and

exception reports by general ledger

account, program, sub programs

and initiative. High level CASES21

Finance reports will become the key

management tools for school councils,

principals and business managers to

use to assist with resource planning

and decision making purposes. Some

key reports that schools should use

are outlined below:

• Operating Statement – Detailed

(GL21150)

A performance report that identifies

all recurrent actual and budgeted

revenue and expenditure by general

ledger account code. The expenditure

data is subtracted from the revenue

data to determine the overall net

operating surplus/deficit figure for the

current month and year to date. This

operating surplus/deficit figure does

not represent the cash at bank balance

(refer to Cash Flow Statement below)

but is a combination of cash (grants)

and invoices/charges transactions.

Equivalent budget data that has been

entered against each general ledger

account code indicates a variance

for monitoring and decision making

purposes.

The balance of Outstanding Purchase

Orders is shown separately below

the net operating surplus/deficit to

indicate possible future commitments.

Also below the operating surplus/

deficit is information relating to

capital expenditure (assets) in the

form of actual expenditure, budgeted

expenditure and variance data for

tracking purposes.


publication “Operating Statement

– A Practical Example and

Explanation” available on the School

Financial Management website:



• Balance Sheet (GL21160S)

The Balance Sheet summarises the

financial position of the school as at

a particular date. It is regarded as a

static report because it is a snapshot

of the current financial position and

changes on a daily basis due to

movements in assets and liabilities.

As the bank account figures in the

balance sheet include unpresented

cheques (unlike a Bank Statement),

it is regarded as a better indicator of

a school’s cash position.

For more information, refer to the

publication “The Balance Sheet – A

Practical Example and Explanation”

available on the School Financial

Management website:



http://www.education.vic.gov.au/management/financial/cases21.htm









It also incorporates outstanding

orders, resulting in an uncommitted

balance figure for the sub program.

An equivalent report is available for

programs (Annual Program Budget

Variance Report KGLPROG21003).




Management website:



Matching Revenue and Expenses This is an important concept and

one of the cornerstones of accrual

accounting. Under a cash system,

revenue and expenditure is only

recognised when cash is received

and an expense is paid. There is

no consideration of the time period

that the revenue/expenditure

relates.

This is not a suitable basis for

easuring the performance of an

entity as it does not match

revenues and expenses for the

same point in time e.g hire of

school facilities revenue may be

received in advance for the next

12 months; if paid to the school in

March and the reporting period is

January to December, a cash system

will overstate the revenue by 3

months, whereas an accrual system

can allow the user to allocate 9

months of the receipt as revenue

• Annual Sub Program Budget Report

(GL21157

This report lists each sub program

and compares the annual budget

allocated per sub program against

YTD actual details (cash and accrual)

for revenue and expenditure. There

is also provision to compare the

current year with the previous year,

as well as calculations for percentage

budget received and expended. The

expenditure section also includes

outstanding orders and uncommitted

balance per sub program. Note that

outstanding orders are included

as a separate column confirming

that while purchase orders do not

trigger an accounting transaction,

it is important to be aware of the

value of purchase orders processed

in terms of possible future financial

obligations. For program monitoring,

a similar report is available (Annual

Program Budget Report GL21158).




Management website:



• Annual Sub Program Budget Variance

Report (KGLSUB21003)

While the Annual Sub Program Budget

Report outlined above provides

information on the ‘bottom line’ of

each sub program, the Annual Sub

Program Budget Variance Report

provides a detailed breakdown by

individual sub program of all budgeted

and actual sub program information

for Coordinators/KLA’s to monitor.

(Mar to Dec), and 3 months as a

prepayment (Jan to Mar).

Similarly, expenses can and should be

‘matched’ so that the amount incurred

is consistent with the amount paid.

Exercise 5:Identify which month/s portion of

the following will be considered

revenues and expenses in

the reporting period (January

– December) following the

‘matching’ process.

Advertising revenue recorded in

May for the next 12 months?

Camps revenue recorded in

November for camp in March of

the following year?

Deposit paid in October to secure

a school camp booking for the

following year?

Monthly telephone account paid

in June?

The above exercise highlights

the need for adjusting certain

revenues and expenses as part of

the end of year/period reporting

process. These adjustments are

commonly referred to as “Balance

Day Adjustments”. Unlike the

majority of transactions that

originate from a document e.g a

tax invoice, receipt, credit note,

these adjustments are entered

into the financial records via

Journal entries.






• Prepaid Camp Expenses by the school

in 2007 for a camp conducted in 2008

These journal entries must be

‘reversed’ by further journals in the

year to which the revenue or expenses

actually relate so as to return the

revenue and/or expense back to the

original account/s.

Journal GeneratorThe Journal Generator Tool was

developed to assist schools to

formulate journals prior to data entry

on CASES21 Finance. All the above

examples of transfers, corrections

and adjustments used in schools

have been incorporated into the

Journal Generator tool. The tool can

be accessed on School Financial

Management website at:



Journals in the Accounting ProcessA journal is an accounting entry

used to adjust or correct a previous

accounting entry or make a future

provision. A journal must have a debit

and a corresponding credit equal to

the same dollar value.

Journal entries can be processed at any

time during the year, however, certain

journals are only processed at the

end of a period (usually the end of the

year). These entries are called “Balance

Day Adjustments”. As the effect of a

journal entry impacts on key reports

(Operating Statement and possibly

also the Balance Sheet), the principal

needs to be aware of, and approve, all

monthly journal batches by signing

a copy the CASES21 Finance Journal

Report (GL21006). This report should

then be tabled at the next school

finance committee meeting.

There are two types of journals that

exist in CASES21 Finance:

• Automated Journals e.g EMA Journal

is system-generated from data input

and requires no operator entries

• Manual Journals e.g GST Journal is

operator reliant to determine the

accounts, amounts, programs,

sub programs and initiatives affected.

As well as being used for adjusting

and correcting entries, a journal

can also be used for program/

sub program/initiative transfers

of both revenue (if applicable)

and expenditure to ensure accurate

reporting. More information on the

use of journals can be found in section

5 – General Ledger of the CASES21

Finance Process Guide. The most

common reasons for each type of

journal are summarised below:

Correcting Entries• Miscoding of revenue or expenditure

• Incorrect sub program or initiative

used

• Incorrect GST code used. Eg. GST

exclusive used instead of GST

inclusive.

Once completed, these journal entries

require no further work.

Adjusting Entries• Subject Contributions balance needs

to be adjusted to reflect a realistic

collection amount. This is commonly

referred to as a Provision for

Non Recoverable Subject

Contributions journal.

Once completed, this journal entry

may need further adjustment

throughout the year to increase

or decrease the balance. For more

information refer to section 1 –

Families of the CASES21 Finance

Process Guide.

Balance Day Adjustments • Subject Contributions revenue

received in the year preceding that

to which the contributions relate

(in 2007 for contributions relating

to 2008)




Examples of Correcting JournalsIn order to correct a transaction that has been incorrectly entered,into CASES21 Finance, it is necessary to ascertain

the system generated debit and credit of the original transaction. The original batch audit trail is the best source

of this information.

Consider the following examples:

1. A creditor invoice for $150.00 (ex GST) has been incorrectly coded to Class Materials 86104 rather than Class Sets 86202.

The correct sub program has been used – 4101 English.

The Journal Generator entries would be as follows:

Note: In “Transaction Type” above, Creditor Invoice has been selected, however, selecting GL Payment would also produce the same result.

By outlining the details of the original transaction the Journal Generator Tool displays the debit and credit that

are required to be processed in CASES21 Finance to ensure the expenditure is allocated against the correct expenditure

account. In the example above the debit and credit to use in the General Ledger Journal (GL31081S) would be as follows:

Sub Program GL Initiative Debit Credit

4104 86202 0 150.00

4104 86104 0 150.00


General Ledger Operating Statement (GL21150) - Detail for the period ending 31 January 2008

GL Code Account Title Actual

Current Month

Budget Variance Actual

Year to Date

Budget Variance Annual BudgetLast Year

Actual

REVENUE

Dep’t Grants

70001 Cash Grant 65,000 – 65,000 65,000 65,000 0 260,000 257,000

65,000 0 65,000 65,000 65,000 0 260,000 257,000

Locally Raised Funds

74001 Subject Contributions 200 – 200 200 5,000 -4,800 9,000 8,650

74201 Hire School Facilities/Equip 13,620 – 13,620 13,620 22,000 -8,380 22,000 20,280

74301 Camps/Excursions/Activities 1,560 – 1,560 1,560 1,560 0 19,500 18,550

15,380 0 15,380 15,380 28,560 -13,180 50,500 47,480

80,380 0 80,380 80,380 93,560 -13,180 310,500 304,480

EXPENDITURE

Consumables

86104 Class Materials 150 – 150 150 500 -350 12,000 13,500

150 0 150 150 500 -350 12,000 13,500

Books and Publications

86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500

Miscoding of Invoice

Sample Operating Statement

The before and after effects of this journal on the CASES21 Finance Operating Statement would be as follows:




Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 65,000 – 65,000 65,000 65,000 0 260,000 257,000

65,000 0 65,000 65,000 65,000 0 260,000 257,000





15,380 0 15,380 15,380 28,560 -13,180 50,500 47,480

80,380 0 80,380 80,380 93,560 -13,180 310,500 304,480

EXPENDITURE

Consumables

86104 Class Materials – – – – 500 -500 12,000 13,500

0 0 0 0 500 -500 12,000 13,500


86202 Class Sets <$1000 150 – 150 150 1,000 -850 18,000 16,500


Correct Coding of Invoice


General Ledger Annual Subprogram Budget Report (GL21157)

From Sub Program 1001 to 9599 Recurrent and Capital

EXPENDITURE

Sub Prog. Title Last Year Actual

Last Year Budget

Annual Budget

YTD % Budget Expended

Outstanding Orders

Uncommitted Balance

4002 Ceramics 1,600 1,400 1,500 3,200 213.33% -1,700

4003 Dance 980 1,000 1,000 925 92.50% 75

4005 Drama 950 950 1,000 1,678 167.80% -678

4015 Classroom Music 1,950 2,100 2,000 1,035 51.75% 965

4016 Instrumental Music 1,490 1,500 1,500 440 29.33% 1,060

2. Printing (86103) for $50.00 (ex GST) for sub program 4005 Drama was incorrectly applied to sub program 4003 Dance

The Journal Generator entries would be:

The before and after effects of this journal on the CASES21 Finance Annual Sub program Budget Report would be as follows:

Incorrect sub program

Sample Annual Subprogram Budget Report


General Ledger Annual Subprogram Budget Report (GL21157)

From Sub Program 1001 to 9599 Recurrent and Capital

EXPENDITURE

Sub Prog. Title Last Year Actual

Last Year Budget

Annual Budget

YTD % Budget Expended

Outstanding Orders

Uncommitted Balance

4002 Ceramics 1,600 1,400 1,500 3,200 213.33% -1,700

4003 Dance 980 1,000 1,000 875 87.50% 125

4005 Drama 950 950 1,000 1,728 172.80% -728

4015 Classroom Music 1,950 2,100 2,000 1,035 51.75% 965

4016 Instrumental Music 1,490 1,500 1,500 440 29.33% 1,060

Correct sub program

Sample Annual Subprogram Budget Report


3. A DEECD grant (70080) of $6,000 (GST Inclusive) for sub program 9001 Curriculum Services was incorrectly taxed as NS6

when it should have been G01

The Journal Generator would be:

Note: In the corrected journal entry above, one Debit in line 1 of $6,000 is balanced by two Credits in line 2 of $5,434.55 and $545.45 equalling $6,000.

Use these figures to process the General Ledger Journal (GL31081S) in CASES21 Finance.




Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 65,000 – 65,000 65,000 65,000 0 260,000 257,000

70080 Other Dep’t Grants 6,000 – 6,000 6,000 35,000 -29,000 50,000 48,956

71,000 0 71,000 71,000 100,000 -29,000 310,000 305,956





15,380 0 15,380 15,380 28,560 -13,180 50,500 47,480

86,380 0 86,380 86,380 128,560 -42,180 360,500 353,436

EXPENDITURE

Consumables

86104 Class Materials 150 – 150 150 500 -350 12,000 13,500

150 0 150 150 500 -350 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500

Incorrect Amount





Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 65,000 – 65,000 65,000 65,000 0 260,000 257,000

70080 Other Dep’t Grants 5,455 – 5,455 5,455 35,000 -29,545 50,000 48,956

70,455 0 70,455 70,455 100,000 -29,545 310,000 305,956





15,380 0 15,380 15,380 28,560 -13,180 50,500 47,480

85,835 0 85,835 85,835 128,560 -42,725 360,500 353,436

EXPENDITURE

Consumables

86104 Class Materials 150 – 150 150 500 -350 12,000 13,500

150 0 150 150 500 -350 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500

Correct Amount



Consider the following example:

Example Secondary College family

charges at the beginning of the school

year for subject contributions amount to

$20,000 (100%). Based on its historical

collection the school estimates that

it will collect 85% of these charges,

or $17,000 and has budgeted for this

amount. The school wishes to reflect

this on CASES21 Finance.

Example Secondary College needs to

subtract $17,000 (estimated collection

rate) from $20,000 (total of subject

contributions charges). The $3,000

result equals the amount of the

provision for non-recoverable subject

contributions (negative asset) that the

school needs to process.

The accounting entries for the journal

adjustment would be as follows:

Example of Adjusting Entry: Provision for Non-Recoverable Subject ContributionsTo ensure that the school’s key

management reports, the Operating

Statement and Balance Sheet,

accurately reflect the revenue projected

to be collected from families for subject

contributions, schools can process a

‘Provision for Non-Recoverable Subject

Contributions’ journal.

The amount to be journalled as part

of the provision should be the amount

of subject contributions that a school

expects not to collect for the current

school year. This amount can be

calculated by subtracting the estimated

(budgeted) Subject Contributions

revenue from the total charges to

families for 74001 Subject Contribution.

Account Debit Credit

Subject Contributions Revenue 74001 $3000

Provision for Non-Recoverable Subject Contribution 12004 $3000


If the Journal Generator was utilised to confirm the journal the screen would appear as follows:

This journal entry would then be processed on CASES21 Finance. Note that there is an equal debit and credit amount.

Hint: To make it easier to refer back to this journal at a later date, process only one journal as part of the batch.


General Ledger Operating Statement (GL21150) - Detail

for the period ending 31 March 2008


Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 65,000 – 65,000 65,000 65,000 0 260,000 257,000

65,000 0 65,000 65,000 65,000 0 260,000 257,000


74001 Subject Contributions – – – 20,000 17,000 3,000 17,000 18,500

74201 Hire School Facilities/Equip – – – 13,620 22,000 -8,380 22,000 20,280

74301 Camps/Excursions/Activities – – – 1,560 1,560 0 19,500 18,550

0 0 0 35,180 40,560 -5,380 58,500 57,330

65,000 0 65,000 100,180 105,560 -5,380 318,500 314,330

EXPENDITURE

Consumables

86104 Class Materials 150 – 150 150 500 -350 12,000 13,500

150 0 150 150 500 -350 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500


Before journal entry




for the period ending 31 March 2008


Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 65,000 – 65,000 65,000 65,000 0 260,000 257,000

65,000 0 65,000 65,000 65,000 0 260,000 257,000


74001 Subject Contributions – – – 17,000 17,000 0 17,000 18,500


74301 Camps/Excursions/Activities – – – 1,560 1,560 0 19,500 18,550

0 0 0 32,180 40,560 -8,380 58,500 57,330

65,000 0 65,000 97,180 105,560 -8,380 318,500 314,330

EXPENDITURE

Consumables

86104 Class Materials 150 – 150 150 500 -350 12,000 13,500

150 0 150 150 500 -350 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500

After $3000 adjusting

journal entry



General Ledger Balance Sheet (GL21160S)

As at 31 March 2007

Accumulated Funds Current Last Year

Accumulated Funds -283,224.49 -269,063.27

Total Funds -283,224.49 -269,063.27

Represented by:

Non Current Assets Computers/IT equipment >$1000 3,000.00 3,000.00

Musical Equipment >$1000 3,000.00 3,000.00

Other Assets >$1000 7,506.36 7,506.36

13,506.36 13,506.36

Current Assets High Yield Investment Account 108,000.00 95,000.00

Official Account 98,000.00 25,000.00

Accounts Receivable Control 20,000.00 650.00

Sundry Debtors 50,000.00 150.00

GST Purchases (Reclaimable) 1,243.10 1,180.95

277,243.10 121,980.95

Total Assets 290,749.46 135,487.31

Current Liabilities Group Tax Clearing Acc -1,126.97 -1,070.62

Accounts Payable Control -5,312.00 -65.00

GST on Sales -1,086.00 230.00

-7,524.97 -905.62

Non Current Liabilies

Total Liabilities -7,524.97 -905.62

Net Assets 283,224.49 134,581.68

Sample Balance Sheet

Outstanding

family balances



As at 31 March 2007



Total Funds -280,224.49 -266,213.27

Represented by:



Other Assets >$1000 7,506.36 7,506.36

13,506.36 13,506.36






Prov for Non-Recov Subj Con -3,000.00 0.00

274,243.10 121,980.95

Total Assets 287,749.46 135,487.31



GST on Sales -1,086.00 230.00

-7,524.97 -905.62



Net Assets 280,224.49 134,581.68


Offset to show net $17,000

expected collections

What about the impact at a Sub program level?

Revenue Control Sub program (9499)* will be affected by a reduction of $3,000 actual revenue, however, the reduced net amount of

$17,000 accurately matches the budget for Subject Contributions as confirmed in the Operating Statement – Detailed (GL21150).

*Best practice recommends the use of sub program 9499 for all curriculum-related revenue budget entries

What if the school’s estimated collection rate decreases to 80% later in the year (from 85%)?

This will require an increase in the provision of 5%. Another journal entry ‘topping up’ the provision by 5% can be processed.

This is calculated as 5% of $20,000 = $1,000.


The accounting entries for the CASES21 Finance General Ledger Journal (GL31081S) adjustment would be as follows:


Subject Contributions Revenue 74001 $1,000

Provision for Non-Recoverable Subj Cont 12004 $1,000


What if the school’s estimated collection rate increases by 5%?

The balance of the Provision should now be $4,000 ($3,000 + $1,000). This requires a decrease (reversal) in the Provision of

$1,000 or the opposite of the above:


Provision for Non-Recoverable Subj Cont 12004 $1,000




Note: In instances when a previous provision is reversed (that is, the amount collected increases, rather than decreases, use the lower half of the Journal Generator labelled: Non-recoverable Subject Contributions Reversal.

It is advisable that schools view an Operating Statement and Balance Sheet before and after the journal entry creating

the Provision for Non recoverable Subject Contributions is processed to compare the difference between the two reports

and confirm the accuracy of the entries. It is also best practice to ‘write off’ the balance of Subject Contributions prior to

completing CASES21 Finance End of Year procedures.


Examples of Balance Day Adjustment – Revenue in Advance:A Balance Day Adjustment for Revenue

in Advance will need to be processed

where family charges or sundry

debtor invoices are raised in the year

preceding that in which the service

will be provided, (for example, 2008

subject contributions charges that are

raised in 2007).

The amount of the family charge or

sundry debtor invoice that relates to the

next year will need to be separated from

the current year component of the charge

and journalled to the next school year.

Processing this journal will ensure that

key management reports accurately

reflect the revenue earned for the current year and for the next year.

Section 10 – Balance Day Adjustments,

of the CASES21 Finance Business

Process Guide has detailed information

on Balance Day Adjustments.

Consider the following example: Example Primary School creates

families charges totalling $15,000

in November 2007 for subject

contributions that relate to classes to

be provided in the next year (2008).

This amount is automatically recorded in 2007 as revenue earned when it is entered in CASES21 Finance.

However, as this amount actually relates to a future period – 2008 – it needs to be journalled as Revenue in Advance. This will ensure that the Subject Contributions revenue is correctly recognised in the year that

it applies to.

The accounting entries for the balance

day adjustment would be as follows,

using the CASES21 General Ledger

Journal (GL31081S) format:



Revenue In Advance 38002 $15,000


It is advisable that schools view an Operating Statement and Balance Sheet before and after the journal entry creating Revenue

in Advance liability account is processed to compare the difference between the two reports and confirm the accuracy of the

entries.

*Note: The balance day adjustment for Revenue in Advance is required to be reversed in the new year AFTER CASES21 Finance End of Year Procedures to ensure that the revenue is correctly recognised in 2008.


The accounting entries that would be required to reverse the original Revenue in Advance balance day adjustment would be as

follows using the CASES21 General Ledger Journal (GL31081S) format:


Revenue In Advance 38002 $15,000


If the Journal Generator was utilised to confirm the journal to reverse the original Revenue in Advance balance day adjustment

journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the journal entry reversing the

Revenue in Advance liability account is processed to compare the difference between the two reports and confirm the accuracy

of the entries.


General Ledger Operating Statement (GL21150) - Detail for the period ending 30 November 2008


Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant – – – 260,000 260,000 0 260,000 257,000

0 0 0 260,000 260,000 0 260,000 257,000


74001 Subject Contributions 15,000 – 15,000 65,000 50,000 15,000 50,000 49,500


74301 Camps/Excursions/Activities 5,500 5,450 50 19,450 19,500 -50 19,500 18,550

20,500 5,450 15,050 104,450 91,500 12,950 91,500 88,330

20,500 5,450 15,050 364,450 351,500 12,950 351,500 345,330

EXPENDITURE

Consumables

86104 Class Materials – – – 12,500 12,000 500 12,000 13,500

0 0 0 12,500 12,000 500 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500




General Ledger Operating Statement (GL21150) - Detail for the period ending 30 November 2008


Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant – – – 260,000 260,000 0 260,000 257,000

0 0 0 260,000 260,000 0 260,000 257,000




74301 Camps/Excursions/Activities 5,500 5,450 50 19,450 19,500 -50 19,500 18,550

5,500 5,450 50 89,450 91,500 -2,050 91,500 88,330

5,500 5,450 50 349,450 351,500 -2,050 351,500 345,330

EXPENDITURE

Consumables

86104 Class Materials – – – 12,500 12,000 500 12,000 13,500

0 0 0 12,500 12,000 500 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500

After journal entry





As at 31 October 2007


Accumulated Funds -283,224.49 0.00

Total Funds -283,224.49 0.00

Represented by:

Non Current Assets Computers/IT equipment >$1000 3,000.00 0.00

Musical Equipment >$1000 3,000.00 0.00

Other Assets >$1000 7,506.36 0.00

13,506.36 0.00

Current Assets High Yield Investment Account 108,000.00 0.00

Official Account 98,000.00 0.00



GST Purchases (Reclaimable) 1,243.10 0.00

277,243.10 0.00

Total Assets 290,749.46 0.00

Current Liabilities Group Tax Clearing Acc -1,126.97 0.00

Accounts Payable Control -5,312.00 0.00

GST on Sales -1,086.00 0.00

-7,524.97 0.00


Total Liabilities -7,524.97 0.00

Net Assets 283,224.49 0.00

Family balances

include $15,000

of next year revenue







Total Funds -268,224.49 0.00

Represented by:



Other Assets >$1000 7,506.36 0.00

13,506.36 0.00






277,243.10 0.00

Total Assets 290,749.46 0.00



GST on Sales -1,086.00 0.00

Revenue in Advance -15,000.00 0.00

-22,524.97 0.00



Net Assets 268,224.49 0.00

Revenue in Advance

now shows, and can be

compared to the Accounts

Receivable figure


Let’s consider another example:

Xyz PS will conduct a Grade 6 camp in

February 2008.

The school needs to charge $80 (ex GST)

per student to cover costs, and raises

charges for 26 families of all Grade 6

students in October 2007.

Note: if any component of the cost incurs GST eg food, the GST component applicable to food would need to be subtracted first to determine the journal entry amount.

Total charges for the Grade 6 camp in

2007 would be $2,080 (26 x $80)

As the revenue is recognised as earned

in 2007, instead of 2008, a General

Ledger Journal (GL31081S) entry

for revenue in advance will need to

processed to ensure to revenue is not

incorrectly recognised in 2007:


Camps/Excursions 74301 $2,080

Revenue in Advance 38002 $2,080

If the Journal Generator was utilised to confirm the balance day adjustment journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the balance day adjustment

journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.



General Ledger Operating Statement (GL21150) - Detail for the period ending 31 October 2008


Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 60,000 60,000 – 260,000 260,000 0 260,000 257,000

60,000 60,000 0 260,000 260,000 0 260,000 257,000



74201 Hire School Facilities/Equip 1,000 1,000 – 20,000 22,000 -2,000 22,000 20,280

74301 Camps/Excursions/Activities 2,080 – 2,080 10,670 15,000 -4,330 18,000 18,550

3,080 1,000 2,080 80,670 87,000 -6,330 90,000 88,330

63,080 61,000 2,080 340,670 347,000 -6,330 350,000 345,330

EXPENDITURE

Consumables

86104 Class Materials – – – 12,500 12,000 500 12,000 13,500

0 0 0 12,500 12,000 500 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500





Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 60,000 60,000 – 260,000 260,000 0 260,000 257,000

60,000 60,000 0 260,000 260,000 0 260,000 257,000



74201 Hire School Facilities/Equip 1,000 1,000 – 20,000 22,000 -2,000 22,000 20,280

74301 Camps/Excursions/Activities – – – 8,590 15,000 -6,410 18,000 18,550

1,000 1,000 0 78,590 87,000 -8,410 90,000 88,330

61,000 61,000 0 338,590 347,000 -8,410 350,000 345,330

EXPENDITURE

Consumables

86104 Class Materials – – – 12,500 12,000 500 12,000 13,500

0 0 0 12,500 12,000 500 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500

After journal entry








Total Funds -281,144.49 0.00

Represented by:



Other Assets >$1000 7,506.36 0.00

13,506.36 0.00






277,243.10 0.00

Total Assets 290,749.46 0.00



GST on Sales -1,086.00 0.00


-9604.97 0.00


Total Liabilities -9604.97 0.00

Net Assets 281,144.49 0.00

Liability created by journal

entry


For this reason, it is recommended that

this journal is done as late as possible

or as part of CASES21 Finance End of

Year Procedures.

Reversal of the balance day adjustment

journal for the camp and excursion

charges is also required in 2008,

following CASES21 Finance End of Year

procedures. This is required to ensure

that the camp revenue is recognised

in 2008. The following General Ledger

Journal (GL31081S) entry would be

required (based on 26 families charged

$80 each as per the original balance day

adjustment journal first scenario).

What if some parents paid the $80

camp charge in 2007?

Does this affect the journal entry

calculation?

Answer: This has no effect on the

journal entry amount calculated in the

previous slide.

What if a Grade 6 child exited the

school in December and a credit note

was issued to the family?

Answer: This will affect the journal entry

amount and $80 would be deducted

from the total, leaving $2,000 for the

Revenue in Advance journal entry.


Revenue in Advance 38002 $2,080

Camps/Excursions 74301 $2,080

If the Journal Generator was utilised to confirm the balance day adjustment reversal journal the screen would appear as follows:

A sample Balance Sheet demonstrating the impact of the reversal entry can be seen below:



As at 15 January 2008



Total Funds -221,786.36 -218,147.49

Represented by:



Other Assets >$1000 7,506.36 7,506.36

13,506.36 13,506.36



Accounts Receivable Control 350.00 500.00

Sundry Debtors 930.00 1200.00

GST Purchases (Reclaimable) 15.00 1234.10

208,445.00 208,934.10

Total Assets 221,951.36 222,440.46

Current Liabilities Group Tax Clearing Acc 0.00 -1,126.97

Accounts Payable Control -165.00 0.00

GST on Sales 0.00 -1,086.00

Revenue in Advance 0.00 -2,080.00

-165.00 -4292.97


Total Liabilities -165.00 -4292.97

Net Assets -221,786.36 218,147.49


Note new year date

Liability removed


Example of Balance Day Adjustment – Prepaid Expenditure:A Balance Day Adjustment for Prepaid

Expenditure will need to be processed

where expenditure is incurred in

the year preceding that in which the

expenditure relates for example part

payments for a camp in 2007 that will

be held in 2008.

The amount of the expenditure that

relates to the next year will need to

be separated from the current year

component of the expenditure and

journalled to the next school year.

Processing this journal will ensure that

key management reports accurately

reflect the expenditure incurred for the

current year and for the next year.


To secure the Grade 6 Camp booking

for 2008, Xyz PS forwarded the “Kids

Camps Company” a $200 payment in

October 2007.

Without a General Ledger Journal

(GL31081S) entry to transfer this

amount to 2008, the school’s reports

will incorrectly reflect the expenditure

as being incurred in 2007.

The journal entry required to ensure

that the expenditure is recognised in

the correct year (2008) would be as

follows:


Prepaid Expenses 12005 $200

Camps/Excursions 89302 $200



journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.




Current Month


Year to Date


Actual

EXPENDITURE

Miscellaneous

89302 Camps/Excursions/Activities 200 – 200 12,200 15,000 -2,800 18,000 16,500




Current Month


Year to Date


Actual

EXPENDITURE

Miscellaneous

89302 Camps/Excursions/Activities – – – 12,000 15,000 -3,000 18,000 16,500

After journal entry








Total Funds -268,424.49 0.00

Represented by:



Other Assets >$1000 7,506.36 0.00

13,506.36 0.00






Prepaid Expenses 200.00 0.00

277,443.10 0.00

Total Assets 290,949.46 0.00



GST on Sales -1,086.00 0.00


-22,524.97 0.00



Net Assets 268,424.49 0.00

Asset created by

journal entry



As was the case with the Revenue in Advance balance day adjustment, a reversal entry of the General Ledger Journal is

required in 2008 following CASES21 Finance End Of Year procedures.

The following General Ledger Journal (GL31081S) entry would be required to do this:


Camps/Excursions 89302 $200

Prepaid Expenses 12005 $200



reversing journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.



Current Month Year to Date Annual Budget Last Year Actual

GL Code Account Title Actual Budget Variance Actual Budget Variance

EXPENDITURE

Miscellaneous

89302 Camps/Excursions/Activities 200 14,500 -14,300 200 14,500 -14,300 14,500 14,800

Next year date



As at 31 January 2008



Total Funds -221,786.36 -218,347.49

Represented by:



Other Assets >$1000 7,506.36 7,506.36

13,506.36 13,506.36



Accounts Receivable Control 350.00 500.00

Sundry Debtors 930.00 1,200.00

GST Purchases (Reclaimable) 15.00 1,234.10

Prepaid Expenses 0.00 200.00

208,445.00 209,134.10

Total Assets 221,951.36 222,640.46

Current Liabilities Group Tax Clearing Acc 0.00 -1,126.97

Accounts Payable Control -165.00 0.00

GST on Sales 0.00 -1,086.00

Revenue in Advance 0.00 -2,080.00

-165.00 -4,292.97


Total Liabilities -165.00 -4,292.97

Net Assets 221,786.36 218,347.49


Reversing journal

returns asset balance

to zero


Example of Adjusting Entry – Provision for Doubtful Debts:

A provision for Doubtful Debts may need

to be created by schools to account for

the possible non-collection of revenue

from sundry debtors.

The amount that needs to be provided

for will be calculated by estimating the

percentage of sundry debtor revenue

that will remain uncollected. Making

a provision for this amount will ensure

that a school’s revenue and assets are

not overstated on the Operating

Statement, Balance Sheet and Sub

program reports.

The creation of this type of provision

account relates to Sundry Debtors only.

It is not to be used for non-recoverable

subject contributions by families (refer

to Provision for Non-Recoverable

Subject Contributions above).


Victory SC hires out the school hall

to the local scout group for monthly

meetings at an annual charge of

$120 (GST inclusive) and the scout

group is billed in January each year

In June 2007, the scout group manager

advises the school that due to

merging with another group of scouts,

an alternative venue may result in

discontinuing use of the school hall

from July. This represents $60, or 50%

of balance owing.

The accounts that will be impacted

in making a provision for this possible

non-collection of revenue are as

follows, using the General Ledger

Journal (GL31081S) format:


Hire of Facilities (revenue) 72401 $60

Provision for Doubtful Debts (negative asset) 12003 $60

If the Journal Generator was utilised to confirm the provision journal the screen would appear as follows:


reversing journal entry is processed to compare the difference between the two reports and confirm the accuracy of the entries.




for the period ending 30 June 2007


Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 60,000 60,000 – 260,000 260,000 0 260,000 257,000

60,000 60,000 0 260,000 260,000 0 260,000 257,000



74201 Hire School Facilities/Equip – – – 120 120 0 120 400


2,080 0 2,080 60,790 65,120 -4,330 68,120 68,450

62,080 60,000 2,080 320,790 325,120 -4,330 328,120 325,450

EXPENDITURE

Consumables

86104 Class Materials – – – 12,500 12,000 500 12,000 13,500

0 0 0 12,500 12,000 500 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500




for the period ending 30 June 2007


Current Month


Year to Date


Actual

REVENUE

Dep’t Grants

70001 Cash Grant 60,000 60,000 – 260,000 260,000 0 260,000 257,000

60,000 60,000 0 260,000 260,000 0 260,000 257,000



74201 Hire School Facilities/Equip -60 – -60 60 120 -60 120 400


2,020 0 2,020 60,730 65,120 -4,390 68,120 68,450

62,020 60,000 2,020 320,730 325,120 -4,390 328,120 325,450

EXPENDITURE

Consumables

86104 Class Materials – – – 12,500 12,000 500 12,000 13,500

0 0 0 12,500 12,000 500 12,000 13,500


86202 Class Sets <$1000 – – – – 1,000 -1,000 18,000 16,500


After journal entry


Note: No reversing entry applies in the next year. An adjusting entry may be necessary though if the doubtful debts balance changes.


As at 1 July 2007



Total Funds -248,164.49 -235,756.27

Represented by:



Other Assets >$1000 7,506.36 7,506.36

13,506.36 13,506.36






Prov for Doubtful Debts -60.00 0.00

242,183.10 121,980.95

Total Assets 255,689.46 135,487.31



GST on Sales 1,086.00 230.00

-7,524.97 -905.62



Net Assets 248,164.49 134,581.68


Provision can be

offset against

sundry debtors


Example of Adjusting Entry – Provision for Long Service Leave:A provision for Long Service Leave

to ensure that long service leave

entitlements and subsequent future

debt for school level payroll employees

is recognised by the school.

The amount that needs to be provided

for will be calculated by using the EFT

salary by entitlement divided by number

of calendar days/hours service e.g Full

time canteen attendant is employed

at $26,700 pa and is entitled to 65

calendar days LSL after 7 years.

$26,700* x 65 calendar days** ÷ 7 years

= $679 LSL expense pa

365.25 calendar days**

*Annual rate varies from year to year – refer HRWeb for

the current annual rate.

**May need to be calculated on an hourly basis in some

instances

The creation of this type of provision

account ensures that expenditure

incurred by the school recognises and

includes future obligations to staff for

long service leave even if not yet paid.

The accounts that will be impacted in

making a provision for long service

leave using the General Ledger Journal

(GL31081S) format are as follows:

The affected accounts are:

Long Service Leave Expense code 81002

(expense)

Provision


Long Service Leave Expense 81002 $679

Provision-Long Service Leave /Annual (Liability 38004 $679

If the Journal Generator was utilised to confirm the provision journal the screen would appear as follows:

It is advisable that schools view an Operating Statement and Balance Sheet before and after the provision account is created

to compare the difference between the two reports and confirm the accuracy of the entries.




Current Month


Year to Date


Actual

EXPENDITURE

Salaries and Allowances

81002 Long Service Leave – – – – 679 -679 679 590

Before provision journal entry





Current Month


Year to Date


Actual

EXPENDITURE

Miscellaneous

81002 Long Service Leave 679 – 679 679 679 – 679 590

After provision journal entry




Note: This journal is not reversed in the new year. The provision accumulates over the years until the LSL is claimed by the school level payroll employee. When a person

takes LSL, the net effect of the payroll transactions will be to reduce the LSL provision liability by the value of the leave that has been taken.

More information on creating a provision recognising long service leave entitlements and making long service leave payments

to school level payroll employees can be found in the CASES21 Finance Process Guide Leave module (Section 7 – Payroll).





Total Funds -282,545.49 0.00

Represented by:



Other Assets >$1000 7,506.36 0.00

13,506.36 0.00






277,243.10 0.00

Total Assets 290,749.46 0.00



GST on Sales 1,086.00 0.00

Leave Provision - LSL/Annual -679.00 0.00

-8,203.97 0.00



Net Assets 282,545.49 0.00

Provision journal

creates a liability


GlossaryAccrual Accounting

An accounting approach which identifies and

records revenue and expenses in the period

to which they relate, rather than the period in

which they are paid or received. For example,

revenue is recognised when there is an

obligation for someone to pay the school while

expenditure is recognised when the school has

an obligation to pay a creditor.

Accumulated Equity

Represents the net assets of the organisation.

It is normally represented by the equation:

accumulated equity = assets (what is owned)

minus liabilities (what is owed). It should be

remembered though that CASES21 Finance

does not include depreciation in the calculation

of its asset amounts.

Assets

Items of value owned or controlled by the

organisation classified as current assets

(cash, debtors, inventories, short term

investments) and non current assets

(plant, equipment, buildings)

Balance Day Adjustments

Sometimes known as end-of-period

adjustments. Common adjustments include

revenue in advance and prepaid expenses.

Cash Accounting

A process that generates an accounting

record only when cash is actually received

or paid out.

Chart of Accounts

A list of all account titles in a sequential

order arranged in categories. These also

correspond to their arrangement in various

accounting reports.

Control Accounts

Accounts set up to aggregate items of

the same nature e.g 100 debtors can be

represented by a single General Ledger

account called Accounts Receivable Control.

This eliminates a bulky General Ledger listing,

however, there must be a subsidiary ledger

operating to maintain individual details of

each item in the Control account, whether

it be debtors, creditors, stock etc.

Credit (CR)

The entry of a financial transaction to

observe the fundamental rules of accounting

e.g liabilities, income/revenue and

accumulated equity increase when entered

as a credit (system generated).

Debit (DR)

The entry of a financial transaction to observe

the fundamental rules of accounting ie assets,

expenses, increase when entered as a debit

(system generated).

Expenditure

An outflow of resources in exchange for

services or products. Recurrent expenditures

produce benefits not extending beyond

the accounting period (expenses); capital

expenditures provide value extending into

future accounting periods (asset purchases).

General Ledger (GL)

Accounting data is accumulated in accounts.

The collection of all the individual accounts

is referred to as the general ledger.

Income/Revenue

An inflow of resources resulting from the

provision of services, trading and investing

operations, property rentals etc.

Journal

A transaction that involves the manual

entry of debits and credits.

Liabilities

Amounts owing by the organisation to

external parties classified as current

liabilities (amounts owing to creditors

and expected to be paid in the accounting

period) and non current liabilities (deferred

commitments expected to be met in a future

accounting period).

Matching

A concept that refers to the matching of

costs and income in an accounting period

to determine a surplus or deficit. Accrual

accounting matches total costs and total

revenue. Cash accounting matches cash

paid out and cash received.

Subsidiary Ledgers

Debtors and creditors details where the

balances equal the aggregate balances

in the Accounts Receivable Control and

Accounts Payable Control accounts

respectively. Use of subsidiary ledgers

eliminates the bulk of general ledger

entries. Subsidiary ledgers are based on

single entry and are system-generated.

Trial Balance

A list of ledger balances extracted at a given

date in the order they appear in the Chart of

Accounts. The purpose of a trial balance is to

test the arithmetical accuracy of the ledgers,

i.e. that the debits are equal to the credits.

Trial Balances do NOT test the correctness

of the accounting, for example, errors of

omission, compensating errors, postings to

an incorrect amount or account, will not be

disclosed by a Trial Balance.

Variance

Difference between actual and budget data.

Year to Date (YTD)

Data accumulation from start of reporting

year (January 1) to present.

Financial Services Division




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