VPRS 15236 Balance Books and Annual Statements of Accounts

Full description

This series comprises records that belonged to a municipal accounting system. An explanation of the types of funds managed by municipalities and the types of records found within accounting systems follows.

Municipal Accounting Funds
Municipal accounting has been subject to the provisions of the Local Government Act 1874 and subsequent local government legislation and to the Municipal Accounting Regulations. Under these provisions the income and expenditure of Victorian municipal councils is segregated into Municipal Funds, Loan Funds and a Country Roads Board Fund.

The Municipal Funds are further broken down into the following three types of funds:
* General Fund
* Undertakings such as abattoirs, electricity supply etc
* Private Street Construction, Separate Rate and Special Improvement Charges.

Municipalities are required to credit ordinary revenue to the Municipal Funds. Ordinary revenue is comprised of rates, tolls and rent of tolls, grants and all other moneys not being the proceeds of a loan. The General Fund is the principal fund of the council and its accounts show the main items of municipal income and expenditure.

The Municipal Accounting Regulations require separate accounting records to be kept for the three types of Municipal Funds.

Accounting Records
Accounting systems comprise a structured collection of records which together document financial transactions. At the most basic level the flow of information between the integral components, or records, within the system was as follows.

From source documents (such as invoices and receipts), income and expenditure were recorded in cash books and journals.

From cash books and journals, sub-totals for expenditure and revenue were consolidated into subsidiary ledgers. Figures in subsidiary ledgers were used to compile totals of income and expenditure that were recorded in the general ledger. Categories of income and expenditure were then aggregated under account segments for use in financial statements.

The flow of information, however, is not always this straightforward.

Source Documents
Examples include receipt books, cheque butts, vouchers etc. Information is extracted from these documents and entered chronologically, in full or summary form, into cash books or journals. This process is called journalising.

Cash Books
A cash book is a combination of a book of original entry (ie. a journal) and the ledger account for cash (often including the bank account). As a book of original entry it is used to record receipt and payment transactions in chronological order. Following a standard format, cash (and cheque) receipts are entered on the left hand side of the book, and cash (and cheque payments) are recorded on the right hand side. These amounts are then posted to the relevant ledger accounts which are identified either by ledger folio numbers or account numbers. As the cash book is also a replacement of the ledger account for cash, it is balanced at regular intervals.

Journals (Specific and General)
The prime function of a journal is to facilitate the posting of credit and debit transactions into the appropriate ledger accounts. Like the cash book the journal is a book of original entry which records transactions in chronological order. Specific journals are often maintained to summarise information about similar types of transactions, including cash transactions, eg. cash receipts journal, wages and stores journal. General journals, on the other hand, provide a convenient record of other transactions, including adjustments to ledger accounts (to correct errors for example) and the sale or purchase of assets.

Journals may also be used to record the posting of amounts from one account to another (particularly common at the end of a financial year). The relevant accounts are identified either by the ledger folio number or an account number.

Ledgers (Subsidiary and General)
Ledgers comprise a record of changes (debit and credit transactions) concerning one or more accounts. The make up (classification) of accounts is arbitrary and usually depends on the functions of the agency and the regulations governing its financial reporting requirements. Transactions are posted to the ledger accounts from the cash books and journals. The source of the posting is usually indicated by a combination of folio numbers and an abbreviation of the source record eg. C or CB= Cash Book, J = Journal, PC = Petty Cash Book etc.

Subsidiary ledgers are often maintained to facilitate a division of responsibilities within a large account, or to provide a separate record of a particular account.

A general ledger, however, comprises all accounts necessary for the compilation of the finance statements required by the agency. If subsidiary ledgers are used it is common for a general ledger to include a single account which represents the totals of the transactions of the accounts in each of the subsidiary ledgers. This device is called a control account.

Finance Statements
Examples include Statements of Operations, Balance Sheets, Profit and Loss Statements.

Finance statements provide the final summary of the agency's financial situation at a particular point in time. They are usually compiled once a year and published with an annual report, although they may be compiled at more regular intervals. The types of statements and their format are generally determined by legislative requirements, and these in turn determine the nature of the accounts required to be maintained.

Balance Books and Annual Statements of Accounts serve the same purpose. They summarise the financial activities of the municipality on an annual basis.