Accrual Accounting Reminders

[Business Affairs News]

Good morning,

The Business Affairs Financial Services Department would like to remind University of Oregon (UO) personnel of important accrual accounting procedures regarding prepaid expense, payables, accounts receivable, unearned revenue, and undistributed revenue.

According to Generally Accepted Accounting Principles (GAAP), accrual accounting requires expense and revenue to be recorded in the fiscal year and period in which goods or services are received or provided. The timing of the payment and the availability of budget or cash is irrelevant to which period transactions are recorded in.

General ledger account codes are used to perform accrual accounting entries. Department personnel should maintain detailed lists of transactions (subsidiary ledgers) for each of the general ledger account codes they use, which reconcile to Banner FIS. It is important that balances in general ledger account codes are reviewed and adjusted as appropriate throughout the year and prior to fiscal year-end. To review these account codes, use Banner forms FGITBAL/FGIGLAC or FWIGLDD.


Prepaid Expense

Invoices and other purchases, such as Concur or Duck Depot transactions, for $5,000 or more for goods or services that will be received (partially or entirely) in a future fiscal year should be allocated to the appropriate prepaid expense account code. To remove the prepaid and recognize the expense, post a reversing journal voucher (JV) with a transaction date in the fiscal year and period that the goods or services are to be provided. This JV may be processed ahead of time if the future period is open. Purchases of less than $5,000 are not amortized over future fiscal years; they are expensed in the current fiscal year.

For the accuracy of UO's tax reporting, tax reportable expenses must first be coded to an expense account code when processing an invoice. Non-tax reportable expenses may be coded directly to a prepaid expense account code on an invoice. For a list of 1099 tax reportable account codes, please see the following website: https://fpm.uoregon.edu/accountcodesearch.

Assuming an invoice has already been posted to expense ($5,000 or greater), input a JV to reverse the expense and record prepaid expense in the current fiscal year for any amount being deferred to a future period:

Debit                      Department Index               Prepaid Expense Account Code
Credit                     Department Index               Expense Account Code

To reverse the prepaid and recognize the expense with a transaction date in the future period or fiscal year:

Debit                      Department Index               Expense Account Code
Credit                     Department Index               Prepaid Expense Account Code

Common prepaid expense account codes:

Account Code
Title
A5019
Prepaid Services & Supplies
A5020
Prepaid Travel
A5021
Prepaid Subscriptions & Memberships
A5022
Prepaid Capital Assets
A5023
Prepaid Software Expenditures
A5030
Prepaid Misc Expense


Payables

When inputting Banner invoices, please pay careful attention during the first five business days of the month, while the prior fiscal period is still open. When possible, Banner invoices should be back dated to the prior period if the goods or services were received in that period.

If an invoice is paid with a transaction date in the new fiscal period that should have been back dated, input a JV to record the expense and payable in the prior period, as follows:

To record the expense and payable in the period the goods or services were received:

Debit                      Departmental Index            Expense Account Code
Credit                     Departmental Index            B0190 - Received Items Payable

To reverse the accrual in the period in which the invoice was paid:

Debit                      Departmental Index            B0190 - Received Items Payable
Credit                     Departmental Index            Expense Account Code


Accounts Receivable

Departments that sell products or provide services should post revenue and receivables based on when the product or services are provided, not when the payment is received.  Departments should accrue amounts owed to them by customers external to the UO.

To record revenue and a receivable when the goods or services are provided:
Debit                      Department Index               A3103 - Misc A/R
Credit                     Department Index               Revenue Account Code

To reduce the receivable, deposit the payment utilizing TWADEPO:

Debit (CASH, CHEK, CARD, or BANK depending on how the revenue was received)
Credit (MISC)        Department Index               A3103 - Misc A/R


Additional requirements at year-end include analysis of accounts for uncollectable amounts and preparation of a detailed accounts receivable aging list reconciled to the general ledger.


Unearned Revenue

Unearned revenue is a liability recorded for payments received for goods or services which have not yet been provided. A JV needs to be processed in the future period or year that the goods or services are to be provided.

To deposit payment through TWADEPO when it is received:

Debit (CASH, CHEK, CARD, or BANK depending how payment was received)
Credit (MISC)        Department Index               Unearned Revenue Account Code

To recognize the revenue in a future period or fiscal year:

Debit                      Department Index               Unearned Revenue Account Code
Credit                     Department Index               Revenue Account Code

Common unearned revenue account codes:

Account Code
Account Code Title
B5120
Prepaid Tuition & Fees
B5802
Unearned Revenue
B5817
Unredeemed Gift Cards/Certificates


Undistributed Revenue

Revenue earned for goods or services that is accumulated in the liability account code B5801 until distributed as revenue. Undistributed revenue balances should be cleared to zero each period, and must be cleared at year-end.


If you have any questions, please contact us or visit our Fiscal Procedures webpage at https://ba.uoregon.edu/finance-and-accounting/fiscal-procedures.

Thank you,

Business Affairs Financial Services Department

Phil Davis, 6-3524, pdavis at uoregon.edu<mailto:pdavis at uoregon.edu>
Jill Ritz, 6-1256, jritz at uoregon.edu<mailto:jritz at uoregon.edu>
Robbin Howard, 6-1115, rchoward at uoregon.edu<mailto:rchoward at uoregon.edu>

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.uoregon.edu/pipermail/ba-news/attachments/20240105/b24e6f97/attachment-0001.html>