Lesson: Governmental Accounting Journal Entries

Instructor: Nick Palazzolo

In this lesson, explore the nuances of journal entries in a government context as Nick Palazzolo, CPA, breaks down the procedure for recording various fiscal transactions. The session begins with the accrual of real property taxes, showing the similarities and differences to corporate accounting, and explains what it means for taxes to be levied. Also detailed is how to account for the estimated uncollectible amounts in a way unique to governmental entities, emphasizing the concepts of 'measurable' and 'available' revenues. Through examples, grasp how actual property tax collections are recorded, the process of reclassifying property taxes from current to delinquent, and adjusting revenues for the true uncollectible amounts, highlighting a simpler approach than the corporate method but with distinct steps for public sector accounting.

Updated: Oct. 20, 2021 Create an account

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Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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Alright. Some common journal entries for governmental accounting and these really are not too different from corporate accounting. Yes, the wording is going to be different for sure, but in terms of what they are actually doing, it's not too different. So journal entry to record the accrual of real property taxes. Real meaning like real estate, real property tax is levied and what taxes levied mean.

This is essentially when it would be like if you send a purchase order or an invoice. This is when you, as the government, tell citizens they owe them the money when they're levied, when it's announced, when they are given the bill and provide the estimated amount of uncollectible accounts. Well, think about it. When you send the invoice, when you're dealing with customers, you debit receivables and in this case it's property tax receivable. Just like accounts receivable, you're going to credit revenues if you complete your end of the bargain.

Right? Just like in corporate accounting, revenue is the credit and then we have allowance for doubtful, right? That is also something we could see if we have that threat of not receiving all of our money in corporate accounting. So these numbers are made up, right. But the question could ask you and kind of tell you what the numbers are, how much you expect to receive, what percentage is uncollectible.

Pretty standard. Nice looking journal entry there. And remember, measurable and available, you recognize revenue when it's measurable, when you can estimate the dollar amount. Right? So in this case, obviously, we're able to estimate the dollar amount as 3.6 million.

And available just means that it's during the year or two months after. So this 3.6 million is likely for the year as well as next January and February. That's what

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Governmental Accounting: Part 1

Module: 3 Concepts, 29 Lessons

Governmental Assets, Liabilities, Revenues & Expenses Overview and Objectives

1:32

Governmental Fund Structure

1:12

Governmental Revenues - General Fund

1:31

Governmental Expenditures - General Fund