Should Government Report Their Capital Projects And Debt Services Activities?

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Inventory expenditures may be recognized using either purchase method or consumption basis. The consumption method is a method of accounting for inventories and prepaid costs, such as rent, insurance, materials and supplies, in which goods or services are recorded as expenditures or expenses when used rather than when purchased. Some accountant believe that the year-end inventory should be offset with a fund balance which is non-spendable when no comparable balance is required for cash, taxes receivable, or other assets, and this paper is going to address why some accountant believe in that and how should government report their capital projects and debt services activities in the government-wide statement. Some Accountant’s Belief in…show more content…
If accountants are using the purchase method, they will record the purchase of the inventory as expenditure. The record will show debit supplies expenditure, credit accounts payable. This method will help accountants to show that governments can account for the full amount of the inventory acquired as expenditure by recording the inventory as an asset, offset by a fund balance-non-spendable. Accordning to Granof & Khumwala (2013), it has no impact on either expenditures or unassigned fund balance because the year-end entry increases reported assets and increases the non-spendable fund balance. If accountants are using the consumption method, a government will account for inventory the same as businesses do, with no additional features the designation on an amount equal to the inventory balance as non-spendable, as opposed to spendable (Granof & Khumwala, 2013). When it acquired inventory, accountants will record it as an asset, and when it uses inventory, it will be recorded an expenditure and reduce the balance in the inventory account. The Inventory accounting consumption method – perpetual system shown below: Inventory accounting consumption method-periodic system is shown below: The difference between consumption and purchase method is that under consumption method, balance in account reported as an asset, but under purchase method balance is not reported as an asset since amount has already been charged to
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