Chapter Six ACCOUNT GROUP

6.1. General Fixed Assets Account Group (GFAAG)

General fixed assets are accounts are memorandum accounts used to record General Fixed
Assets not recorded a fund. The property, plant and equipment acquired by General,
Special Revenue and Capital Projects fund are brought under accounting control by the
creation of the GFAAG. General fixed assets may be thought of as those not used
exclusively in the operations of anyone fund nor belonging to anyone fund.
The General fixed asset account group is only an Accounting Entity, not a Fiscal Entity.
In other words, it is not capable of entering into transactions, only of recording,
classifying, summarizing, reporting etc. When fixed assets are recorded, the entry is
normally a debit to the fixed asset account and the offsetting credit will be an account
indicating the source from which the fixed assets were financed.- Investment in General
Fixed Asset-CPF- General Obligation bonds or Investment in GFA- GF- Revenues are
examples of these types of accounts. Since the GFAAG is not a fiscal entity, entries do not
originate in it. Entries in the GFAAG therefore affect more than one set of books, the
GFAAG itself, plus the fund, which originates the entry. The exception to this rule is
Depreciation.
6.1.1 Accounting Procedures and Issues related to the GFAAG
Illustration:- Below are a number of related and unrelated transactions which affect the
records of GFAAG or GLTDAG. None of the transactions so far have been recorded in
those groups or the related funds.
1. The equipment has been purchased from the GF at 100,000. The source of financing
was revenues of general fund
GF (after passing of reversing the related encumbrance)
Expenditure 100,000
Vouchers.Payable 100,000
GFAAG
Equipment 100,000
Investment in GFA-GF-Revenue 100,000
2. A Building is acquired from the resources of the CPF at 100,000,000 which has been
financed half of which by issuance of bonds and the remainder by grant.
GFAAG
Building 100,000,000
Investment in GFA- CPF- Bonds 50,000,000
Investment in GFA- CPF- Grants 50,000,000

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3. Assume that at year-end of construction of a building in a CPF, the progress till that
date shows a total construction cost of 2,000,000 that has incurred. The project was being
financed by the Federal Grant.
GFAAG
Construction Work in Progress 2,000,000
InvestmentinGFA-CPF-FederalGrant 2,000,000
4. Assume that the construction of the Asset is completed in the next year, entailed
additional expenditures of 1,000,000 also provided by the Federal Grant.

GFAAG
Building 3,000,000
Constructionworkinprogress 2,000,000
Investment in GFA-CPF-Federal Grant 1,000,000
5. A building carried on the books of Water Utility Fund (WUF- a type of Proprietary
Fund) at a cost of 2,000,000 is permanently surrendered to the GF after being used
till halfway of its useful life.(assume SLM).
Water Utility Fund
Accumulated Provision for Depreciation 1,000,000
Loss on Disposal of Equipment 1,000,000
Building 2,000,000
GFAAG
Building 1,000,000
Investment in GFA- WUF-WUF Revenues 1,000,000

6. A building is retired and demolished after it is heavily damaged by an earthquake.

The building was originally funded by a Federal Grant at a cost of 10,000,000. It has been
in service for 15 years out of its expected 20 years life. The 10,000 was paid for the
removal of the rubble.
GF
Expenditure 10,000
Cash 10,000
GFAAG
Investment in GFA- CPF- Federal Grant 2,500,000
Accumulated Depreciation 7,500,000
Building 10,000,000

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The balance sheet is also called the statement of General fixed Asset. The balance sheet
shows asset cost for each category of fixed assets (land, building, equipment, etc and the
amount financed from each source.
 Examples of both the Statements of General Fixed Assets and Statement of
Changes in General Fixed Assets appear below;
City of X
Statement of General Fixed Assets - By Source
December 31, 20x4
General Fixed Assets:
Land 2,000,000
Buildings 3,000,000
Equipment 2,500,000
Total General Fixed Assets 7,500,000
Investment in General Fixed Assets From:
Capital Projects Fund
Tax Supported Bonds 1,500,000
Federal Grants 1,000,000
State Grants 100,000
General fund Revenues 4,700,000
Special Revenue Funds Revenue 200,000
Total Investments in General fixed Assets 7,500,000
Town of X
Statement of Changes in General Fixed Assets
For the Year Ending December 31, 20x4

Type of Beginning Additions Transfers Deletions Ending

Asset Balance Balance Balance Balance Balance

Land 2,000,000 - - 2,000,000 -

Building 1,800,000 900,000 300,000 2,400,000
Equipment 2,000,000 700,000 - (200,000) 2,500,000
Total 5,800,000 1,600,000 300,000 4,200,000 2,500,000
6.2. General Long Term Debt Account Group (GLTDAG)
The concept of GLTDAG has been revaluated during its life to keep up with the trends in
government financing. Current GAAP says that the GLTDAG should account for all long-
term debt not being secured by revenues of proprietary funds or a non-expendable trust

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fund. This includes General-special assessment debt, which previously does not have been
included.
Unlike Governmental Funds, an account group is an accounting entity not a fiscal entity.
This can be understood to mean that it cannot enter into transaction outside itself. This
also means that it will not have Revenues or Expenditures. Like funds however, the
GLTDAG will be self balancing- in other words; its debits will equal its credits. Liabilities
offcourse normally will have credit balances. It is therefore necessary to create a debit
account to balance the account group in much the same manner as GFAAG is balanced by
the “Investment in ...” There are two categories of these debit accounts.
1. Amounts which have been accumulated in the DSF for repayment of General Long
Term Debt, that is, the amount that the entity has,
2. Amounts that must be provided in future years for the repayment of long-term debt
accounted by the GLATAG, that is, the amount that the entity still needs
6.2.1. Accounting Procedures and Issues related to GLTDAG
Illustration:
1. Regular Serial bonds of 10,000,000 have been issued at par to finance the construction
of a building in CPF
Entry on CPF
Cash 10,000,000
OFS-Bond precedes 10,000,000
GLTDAG
Amount to be provided for the payment of-
Regular Serial Bonds 10,000,000
Regular Serial Bonds Payable 10,000,000
2. The DSF had Revenues/Transfers of 220,000 and 120,000 of that amount went to
pay interest
GLTDAG
Amount Available in DSF- for payment of Term bond 100,000
Amount to Be Provided- for Payment of Term Bond 100,000
When a combination of events take place, a schedule detailing changes in long term debt
is desirable. Required disclosures for long-term debt:
1) Description of individual bond issues and leases outstanding.
2) Changes in General Long Term Debt
3) Summary of Debt service requirements to maturity
4) Disclosure of legal debt margin
5) Bonds authorized but unissued
6) Synopsis of Revenue bond covenants

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 Town of X
Statement of General Long Term Debt
December 31, 20y4
Amount Available and to be provided for Payment of General Long Term Debt
Regular serial bonds:
Amount to be provided 1,500,000
Amount available in DSF 600,000
Total Regular Serial Bonds 2,100,000
Term Bonds:
Amount Available in DSF 80,000
Amount to be provided 1,200,000
Total Term bonds 1,280,000
Total available and to be provided 3,380,000
General Long Term Debt Payable
Regular Serial Bonds 2,100,000
Term Bonds 1,280,000
Total General Long Term Debt Payable 3,380,000
Town of X
Schedules of Change in Tong Term Debt
As of December 31, year 6
Beginning Additions Payments Ending
Balance Balance
General Long Term Debt:
Term Bonds:
7%, 20 year general 500,000 500,000
Obligation Bonds due on
July 1, year 25

Serial Bonds:
10%, 10 year General
Obligation Bonds, final 10,000 .
10,000
instalment due,
January 1, Year 6
Total GLTD 10,000 500,000 10,000 500,000