Basic Accounting Concepts - PowerPoint Presentation

1. Basic Accounting Concepts

2. AgendaBudgetGuiding PrinciplesVoucherJournal Masks / EntriesAccrual AccountingUCO Resources2

3. BudgetManaging and Checking BudgetsIncurred ExpensesRSADefinitions

4. The Data Flow4

5. Managing Our BudgetCommitment control is used two waysExpenses are budgeted for all funding sourcesTracking with budgetFull budget controlBudget is released to specific chart field stringsA chart field is a way to tag a transactionChart fields are grouped together as a chart field string to direct how the accounting entry is recorded and reportedAlso used for revenue tracking in auxiliary funds5

6. When does USF budget check?Budget checking is initiated when:A requisition is submittedA purchase order is createdA change order is submittedAn invoice is paidAn expenditure transfer is submittedAn interdepartmental billing is submittedTravel authorization is submittedTravel expense report is submittedPCard expense is postedA customer billing is createdA deposit is recorded by a cashierDuring automated nightly processingOn demand by authorized users6

7. How does USF incur expense?7Expense MethodBudget ImpactSalaryNot encumbered; RSA is reduced when salary is postedTravel AuthorizationEncumbered when the travel authorization is created; reduces RSATravel Expense ReportNot encumbered; RSA is reduced when the expense is postedPCard PurchasesNot encumbered; RSA is reduced when the expense is postedExpense ActionBudget ImpactItem purchased with a purchase orderEncumbered when the requisition is createdInterdepartmental buying; departments sell to each otherNot encumbered; RSA is reduced when the journal entry is posted in general ledgerExpenditure transfersNot encumbered; RSA is reduced on the new chart field string and increased on the old chart field string when the transaction is posted in general ledger

8. RSA – Remaining Spending Authority8

9. How does USF account for Funds?9USF practices fund accountingFunds are categorized in a fund groupWithin the fund groups, there are individual fund IDsAll are subject to budget checkingFund accounting helps ensure proper use of funds; accountability is the key

10. DefinitionsPublic purposeGeneral revenue (often referred to as E&G)State funds allocated by the legislature to USF each fiscal year; derived from sales tax collectionsThese funds begin with a “1”Carry-forward fundsUnspent general revenue funding from the prior fiscal yearThese funds begin with a “1”; normally 10009Auxiliary fundsAuxiliaries require an EBA approved by USF Controller’s Office to conduct commercial business activities with customers outside USFAuxiliaries at USFSP begin with a “07”; at USFSM with a “06”10

11. DefinitionsSpecial purposeSponsored research fundsAllocated by a federal, state or private agency to USF with a PI (project investigator) identified with a specific line item budgetRIA - research initiative may includeF&A recovery and residuals from fixed price contractsFaculty startupInternal awardsThese funds begin with “183”These funds are subject to full budget controlStudent feesTuition and fees paid to USF by the students to be used only for student support11

12. DefinitionsNot USF moneyStudent financial aidMay be received from federal, state, or private sourcesMay involve a transfer from the USF FoundationAgency fundsFor example sales tax collected from commercial sales of services to customers outside of USFConvenience fundsReimbursement received from a DSO - for example UMSA receiving funds in acknowledgement of effort expended by USF staff in support of the USF College of Medicine clinics12

13. EBA – Educational Business ActivityAn EBA is a revenue-raising activity that supports the overall mission of USF. Departments and units submit the request to the Controller’s Office for authorization to conduct a businessFind information and forms on the University Controller’s WebsiteSubmit a request to create a new EBA or to update an existing EBAInclude in the requestEBA Request FormEBA Business PlanEBA Schedule13

14. Guiding PrinciplesState FundsAuxiliary FundsResearch

15. Guiding Principles – State FundsConceptsState appropriations must be expended in accordance with the State Department of Financial Services, Division of Accounting and AuditingIn general moneys may only be expended for reasonable and appropriate goods or services necessary to accomplish the mission of the University (teaching, research, and public service)Generally spending is allowed from any of the expense account code categories unless specifically addressed in Florida Statute or USF guidelinesState and USF negotiated contracts with vendors must be observedRestrictionsIf the item for payment is generally used solely for the personal convenience of employees and which generally are not necessary in order for the University to carry out its statutory duties, the unit must provide justification for the purchase of these items or perquisite approval by an appropriate officialE&G moneys cannot be expended to satisfy the personal preference of employeesFor example, cannot be used forPortable heaters, fans, refrigerators, stoves, microwaves, coffee pots or supplies, picture frames, wall hangings, decorations, etc.15

16. Guiding Principles – State Funds (continued)More specific restrictionsExpenditures from state funds for the following items are prohibited unless “expressly provided by law”Congratulatory telegramsFlowers and/or telegraphic condolencesPresentment of plaques for outstanding serviceRefreshments such as coffee or doughnutsDecorative items (artwork, plants, etc.)Greeting cards16

17. Guiding Principles – Auxiliary FundsConceptAuxiliary moneys may be expended for any goods or services necessary to fulfill the mission and programmatic needs for which the auxiliary was established under the USF authorized EBAFind more information by searching for EBA on Business ProcessesGenerally spending is allowed from any of the expense account code categories unless specifically addressed in Florida Statute or USF guidelines17

18. Guiding Principles - ResearchConceptThese funds are much more restrictive in that expenditures must meet the specific budgetary requirements of the project as specified in the Notice of Award.Some projects may also specify expenditures that would otherwise not be allowedExamples are payments to research participants and certain items of a personal nature that are necessary as part of the sponsored project (example: food or clothing items)Sponsored ResearchFederal research governed by OMB circulars A-21, A-110 and A-133; there are also specific Cost Accounting Standards that applyState agencies and private foundations also have specific guidelinesUSF Internal Awards ProgramThe mission of the Internal Awards Program is to foster excellence in research and scholarship by USF faculty and support activities aimed at securing extramural fundingConsult USF Research for more details 18

19. VoucherWhat is a Voucher?Voucher Accounting EntryVoucher Information

20. What is a Voucher?A voucher can be defined as a document used in an internal control system to contain and verify all information about a bill to be processed or paidVouchers are recorded in the Accounts Payable module and are managed by UCO Accounts PayableVouchers have unique identifying numbersAt USF, voucher ID’s are eight digit beginning with a zero20

21. The Voucher Accounting EntryVouchers are producedAfter receiving the vendor invoiceAfter matching occurs (matching the PO, vendor invoice, and receiving document)After the bank bills USF for PCard activityAn accounting entry is createdRecording the expense (a debit to expense)Recording a liability to the vendor (a credit to liability)A typical voucher accounting entry would look like the below:21

22. The Voucher InformationRemember the USF chart of account codesLiability accounts begin with a “2”Vendor expense accounts begin with a “5” or “6”A voucher is packed with vendor and payment informationFind voucher information in the accounts payable module of FAST22

23. Journal Masks / EntriesWhat is a Journal?Journal MaskJournal EntriesHow to submit a Journal EntriesDeadlines for Journal EntriesWhere to send Journal Entries

24. What is a Journal?Most transactions are created in various modules (aka subsidiary ledgers)Transactions that are similar in nature are batched into journalsThe journals are posted to the general ledgerThe general ledger displays high level summary of accounting transactions based on chart fields and accounting periodsJournals have unique identifying numbersThe numbering scheme for journals isLetters (usually three); called a journal maskSeven digits automatically assigned by the system in sequenceThe journal ID is uniqueThe journal mask (the letters) identifies either the character of the transactions or the source of the transactionsTo understand journal masks, use the University Controller’s Office Website – Internal Accounting Services24

25. Sample of Common Journal Masks25Journal MasksDefinitionAPAaccounts payable accrual (vouchering)APPaccounts payable payments to vendorsBNRtransactions originating in Banner/OASISTAStelephone billings from USF ITEXAtravel expense accrualEXPtravel expense reimbursementsARBaccounts receivable billings to customersETRnon-payroll expenditure transfer

26. Journal EntriesJournal entries are balanced accounting transactions posted directly to the general ledgerJournal entries may need to be createdResulting from discovery during reconciliationTo initiate an expenditure correctionTo initiate a cash correctionTo initiate an interdepartmental billingAll journal entries are budget checkedIncluding expenditure transfersIncluding interdepartmental billings*Choose the right journal mask26

27. Journal Entries can be delayedBudget issuesInsufficient RSA (remaining spending authority)Chart field string never had budget releasedIf a grant, the transaction date is out of boundsAccounting codingAn invalid chart field is being usedAn invalid chart field string is being used (combination edit)A sponsored project may have passed it’s ending date27

28. How to submit Journal EntriesJournal entries need supporting documentation for audit purposes - this provides a sound audit trailJournal entries may beNon-payroll expenditure transfersPayroll expenditure transfers (may be referred to as RETS)Interdepartmental billingsUse the journal entry templateIt is in the format of an Excel spreadsheetFind it on the Controller’s Office Website - Journal Entry Template Attach to the journal spreadsheetAn image of the invoiceAn image of the finance mart page illustrating the original expense posting28

29. Deadline for Journal EntriesRETS should be prepared promptly after the error occurs but no later than 90 days following the date of the occurrence unless a longer period is approved in advanceCost transfers for expenditures being removed from sponsored research projects to a non-project related account due to clerical or bookkeeping errors should occur as soon as the error is detected regardless when the error occurredAll FWS RETS need to be submitted within 30 days and should be sent to Student Financial Services for secondary approval.29

30. Where to send Journal Entries30Expenditure TransfersRNSexpt@usf.edu Cash Receipt CorrectionsRNSinterdept@usf.edu Departmental BillingsRNSinterdept@usf.edu

31. Accrual AccountingWhat is Accrual Accounting?Illustration of Expense and Vendor PaymentsIllustration of Revenue and Customer PaymentsAccounting Periods

32. Accrual AccountingTwo primary methods of accounting areCash basisAccrual basisUSF uses a modified accrual methodAccrual is all about timingFor instance the timing ofWhen an expense is recognizedExpense is recognized when it occurs, not when it is paidWhen revenue is recognizedRevenue is recognized when it is earned, not when it is collectedIt leads to a more accurate reporting of our financial condition32

33. Accrual Accounting (continued)Accrual expense entriesExpense is recorded subsequent to the voucher being createdThis is the point when the vendor debt is acknowledgedEven though actual payment may not be paid for several daysThe accounting entry created by the voucher isAccrual revenue entriesRevenue is recorded when it is earnedRevenue is earned when the customer is invoicedCustomer invoicing is created in the billing moduleThe accounting entry created by the customer invoice is33A debit to expenseAccount beginning with 5 or 6A credit to accounts payableAccount beginning with code 20000A debit to accounts receivableAccount 12010A credit to revenueAccount code beginning with 4

34. Illustration of Expense and Vendor Payment34Recognize Expense and Vendor DebtAmountOper. UnitFundGL Acct.Dept.ProductInitiativeDebit $ 3,000.00 TPA1000053600020600PFS0010000000Credit $ (3,000.00)TPA1000020000Record Vendor Payment and Clear Vendor DebtAmountOper. UnitFundGL Acct.Dept.ProductInitiativeDebit $ 3,000.00 TPA1000020000Credit $ (3,000.00)TPA1000010031

35. Look at it from a different viewThis illustration may helpIn the accounting world a “ T “ account is sometimes employed to work through an accounting issueThe left side of the “ T “ is for the debit or positive entryThe right side of the “ T “ is for the credit or negative entry35

36. Look at it from a different view (continued)Record expense and accounts payable after the voucher is created; the accounting entry appears in yellowPay the vendor and clear the account receivable; the accounting entry appears in orange36

37. Illustration of Revenue and Customer Payment37Recognize RevenueAmountOper. UnitFundGL Acct.Dept.ProductInitiativeDebit $ 500.00 TPA0360012010Credit $ (500.00)TPA03600440000427000000000000000Record Customer PaymentAmountOper. UnitFundGL Acct.Dept.ProductInitiativeDebit $ 500.00 TPA0360010011Credit $ (500.00)TPA0360012010

38. Look at is from a different viewAn Auxiliary makes a sale; this accounting entry in green records the revenue of the sale and the account receivableWhen the customer pays USF, the blue entry records the cash deposit and clears accounts receivable38

39. Accounting – Things to look forAll accounting entries have a signDebit is the term for a positive entry amountCredit is the term for a negative entry amountAll accounting entries must balanceThe credits (negatives) must balance to the debits (positives)An accounting entry will not post to general ledger unless it is in balanceGL account codes that naturally have a debit balanceExpenses (beginning with 5, 6, or 75)Assets (beginning with a 1)GL account codes that naturally have a credit balanceRevenue (beginning with a 4 or 74)Liabilities (beginning with a 2)39

40. Accounting – Things to look forExpenses and AssetsIncrease with a debit (plus value)Decrease with a credit (negative value)Revenue and LiabilitiesIncrease with a credit (negative value)Decrease with a debit (plus value)40

41. Accounting PeriodsThe USF fiscal year is July 1 through June 30Our accounting periodsPeriods 1 through 12 represent July through JunePeriod 998 is the adjustment periodPeriod 0 represents balance sheet account balances brought forward from prior fiscal year to next fiscal year41

42. University Controller’s Office ResourcesContactsAdditional Information

43. 43Helpful ResourcesEmailDepartmentaphelp@usf.edu Accounts Payable HelpAsset-help@usf.eduAsset Management Helpbillingarhelp@usf.eduBilling and AR Helpcashiers@usf.edu Cashiers Office HelpElectronic-media-disposal@usf.eduElectronic Mediafinancemart@usf.edu Finance Mart Questionspayrollhelpdesk@usf.edu Payroll Questionspcard@usf.eduPCARD Questionstravelhelp@usf.eduTravel Questionsusfpurchasing@usf.eduPurchasing Help

44. 44Online Business ProcessesThe address is www.usf.edu/businessprocesses Allows for keyword search or category searchYou may pose questionsLook for information onAccounting practicesHR-payrollPurchasingResearchThe USF FoundationAnd many other subject areasLook for the TRAINThe Research Administration Improvement Networkwww.research.usf.edu/trainThe GoalsBuilding the knowledge base of research administratorsEnhancing professional competenciesImproving business processes and reporting

45. 45University Controller’s Office (UCO)http://www.usf.edu/business-finance/controllerUCO Administrative Services, Accounting & Reporting, Student Services, Travel & Accounts Payable, Payroll & Tax Services, and Procurement.Important ListServ accounts:FAST ListServVisit http://listserv.usf.edu/scripts/wa.exe?A0=FAST-LIST to subscribe; click Get PasswordTravel ListServTravel home page to subscribePayroll ListServLook on the Payroll Overview page to subscribePurchasing ListServ