Classification of Appropriations and Expenditures in Governmental Accounting

Classification of Appropriations and Expenditures

Appropriation: Legal authorization to expend cash or other financial resources for goods, services and facilities to be used for specified purposed in amounts not to exceed those authorized for each purpose.

When liabilities authorized by an appropriation have been incurred, the appropriation is said to be expended. (estimated expenditures)

Classification of Expenditures

1. Fund

2. Function -- group related activities or Program -- group activities for specific purpose

3. Organization Unit -- essential to management control (Example: Police Department; Public Works Department; City Clerk)

4. Activity -- specific and distinguishable line of work performed by an organization unit (Example: Solid Waste -- residential; Solid Waste -- commercial or Police Department -- Investigations; Police Department -- Traffic)

5. Character -- based on fiscal period that benefits from a particular expenditure (Current expenditures; Capital outlays; Debt service)

6. Object -- of an expenditure is the thing for which the expenditure was made -- subdivision of character classifications (personal services, supplies, other services & charges)

Classification of Estimated Revenues and Revenues

* Primary classification of governmental revenue is by FUND

* Within each fund, major classification by SOURCE

* Within each source, desirable to have as many secondary classes as need to facilitate revenue budgeting and accounting

Major revenue source classes: Taxes Charges for Services

Special Assessments Fines & Forfeits

Licenses and Permits Intergovernmental Revenues

Miscellaneous Revenues

General Fund of most governments will have all 7 classes

Taxes: Ad valorem property taxes are mainstay of local governments. Other types of taxes include sales taxes, income taxes, gift taxes and interest and penalties on delinquent taxes.

Tax rate is set by 1) government...