Managerial Accounting Journal Example Essay

Custom Student Mr. Teacher ENG 1001-04 7 June 2016

Managerial Accounting Journal Example

The Board of Aldermen of the Hayville approved the Appropriations budget for its General Fund for the year ending December 31 as shown below.

1) Explain the legal significance of an appropriation and why auditors engaged for a financial and compliance audit need to know the meaning of the term.

An appropriation is an authorization for administrators to incur on behalf of the governmental unit liabilities in the amounts specified in the appropriation ordinance or statute, for the purposes set forth in that ordinance or statute, during the period of time specified. The auditor must attempt to ascertain that there were no material expenditures in violation of the appropriation ordinance or resolution.

2) It is illegal for a governmental unit to spend money for any purpose unless a valid appropriation for that purpose exists. Does this legal rule assure good financial management for each governmental unit? Why or why not?

Not necessarily. If the appropriation budget is prepared mechanically (with very little thought as to what services should be rendered and how the services should be delivered) adhering to the budget may be poor financial management. On the other hand, if the budget relates input of resources to output of services, that have been well planned to meet clearly specified objectives, adhering to the budget should be good financial management.

4) Illustrate a form of Appropriations, Expenditures, and Encumbrances subsidiary ledger account that would provide the information needed by a government finance director to make sure legal requirements concerning appropriations are complied with.

Students should present a form similar to Illustration 3-7 (in the text) in answer to this requirement. (Wilson and Kattelus, 2003, p. 76)

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